As the economic impact of Covid-19 continues to affect businesses around the country, many employers, large and small, are forced to temporarily close their doors and stand down employees. A number of recent cases have questioned the legality of businesses standing down their employees due to changes cause by Covid-19. There are very specific circumstances where businesses in the National System can stand down employees. Businesses that do not comply with stand down provisions under the Fair Work Act 2009 (Cth) (FW Act) may be faced with underpayment claims or fines for breaching parts of the FW Act.
When an employer can stand down their employees
Section 524(1) of the FW Act provides that an employer can stand down an employee during a period, because of one of the following circumstances:
- Industrial Action (other than Industrial Action organised or engaged in by the employer);
- A breakdown in machinery and equipment, if the employer cannot reasonably be held responsible for the breakdown;
- A stoppage of work for any cause for which the employer cannot reasonably be held responsible.
In addition, employers need to ensure that employees cannot be usefully employed in the business. In a case in 2011 that found the employer unlawful stood down employees because they could be usefully employed, the FW Act explanatory memorandum was referenced stating “If the employer is able to obtain some benefit or value for the work that could be performed by an employee then the employer would not be able to stand down the employee.” Employers are required to look for alternative work for affected employees, or where appropriate provide training or other professional development opportunities. Where employees can be usefully employed elsewhere, they cannot be stood down.
Where an Enterprise Agreement or Contract of Employment include stand down provisions, those will apply in lieu of s524(1).
IMPORTANT: Employers should seek advice before standing down employees due to changes cause by Covid-19.
Paying employees during stand down
Stand down under the FW Act is unpaid, however employers should always check industrial instruments that apply to their employees, such as a Modern Award or Enterprise Agreement, as these instruments may stipulate payment for stand down periods. Similarly, if a Contract of Employment provides for paid stand down then the employer is obligated to comply with these more beneficial provisions.
Employee entitlements during stand down
Employees are entitled to apply to use accrued leave entitlements (such as annual leave and long service leave) during a stand down period provided they meet the eligibility criteria for the relevant entitlement and comply with notice and evidence requirements under the FW Act and any company policies and procedures.
In a recent case involving airline giants Qantas, a federal court has found employees are not permitted to access paid personal (sick) leave, carers’ leave and compassionate leave whilst stood down under the FW Act. The judge found these leave entitlements are a form of income protection and whilst stood down, employees are not in receipt of an income. The judge said there is “no income and no protection against that which has not been lost” and therefore an employee stood down is not entitled to access paid personal (sick) leave, carers’ leave and compassionate leave.
Where an employee is on paid or unpaid leave, or any other absence approved by the employer, the employee is not taken to be stood down during the period of authorised absence. For example, if an employer and employee agree for the employee to take annual leave instead of being stood down, then the employee will be taken to be on annual leave and not stood down.
Jobkeeper enabling stand downs
On 9 April 2020 legislation dealing with JobKeeper enabling stand down was passed. The new part, Part 6-4C – Coronavirus economic response, inserted in to the FW Act applies to employers and employees who become entitled to JobKeeper. The purpose of the new part is to provide more flexibility for employers to keep employees in their jobs.
Specifically, the new part enables an employer to direct employees to:
(i) not work on a day or days on which the employee would usually work; or
(ii) work for a lesser period than the period which the employee would ordinarily work on a particular day or days; or
(iii) work a reduced number of hours (compared with the employee’s ordinary hours of work);
The direction is lawful provided the employee cannot be usefully employed for the employee’s normal days or hours during the JobKeeper enabling stand down period because of changes to business attributable to:
(i) the COVID-19 pandemic; or
(ii) government initiatives to slow the transmission of COVID-19
The Schedule also provide some scope to temporarily alter duties of work, location of work and days of work. Notice and consultation provisions must be complied with prior to given any direction under the new part, including a JobKeeper enabling stand down.
Employers wanting to utilise any of these provision are strongly encouraged to contact CCIWA’s Employee Relations Advice Centre team on 9365 7660 or email email@example.com for further information.