Employment Update – What is Stand Down?

With COVID-19 control measures being escalated, the effect on many workplaces creates a lot of questions around how senior managers will manage the downturn and how they will handle their staff. The situation is changing everyday and it is important to understand what the effect of government decisions have on the operation of your organisation.

It is apparent from media coverage that there are employers who are taking steps to reduce their wage expenses without understanding the repercussions of their decisions. It is critical that employers get advice that is specific to their circumstances before taking steps to stand down employees.

Fair Work Act

The Fair Work Act 2009 (Cth) (the Act) sets out the minimum standards for employment for employers functioning in the federal jurisdiction and for the purpose of this article, we will focus on that jurisdiction.

Section 524 (1)(c) of the Fair Work Act, provides that an employer may stand an employee down during a period that an employee cannot be usefully employed, because of a stoppage of work for any cause that the employer cannot reasonably be held responsible.

Section 524(3) provides that if an employer stands down an employee during a period described in s524(1), the employer is not required to make payments to the employee for that period.

Whilst you may think that a downturn in income streams, because of COVID, is something that is beyond your control and you can stand your employees down, it is unlikely to be the case. The view of the Fair Work Ombudsman (FWO) is that employers cannot generally stand down employees simply because of a reduction of organizational income or because an employee has coronavirus.

If an employer unlawfully stands down employees without pay, the employees may be able to recover unpaid wages for the period of the stand down.

Whether you have the option of standing down employees in the current coronavirus related circumstances is entirely reliant on the facts of your situation and you should exercise the option cautiously. You must be able to demonstrate that:

  • there is a stoppage of work;
  • the employees to be stood down cannot be usefully employed (which is not limited to the work an employee usually performs); and
  • you cannot reasonably be held responsible for the cause of the stoppage.

The FWO encourages employers and employees to work together to find appropriate solutions that suit the needs of individual workplaces and staff. Employees who are stood down without pay remain employed for the period of the stand down and continue to accrue their entitlements during a stand down period because their employment remans operative.

When can you stand down employees?

The FWO has provided some examples of when they consider employers may be able to stand down employees, which include:

  • if there was an enforceable government direction requiring the organisation to close (which means there is no work at all for the employees to do, even from another location)
  • if a large proportion of the workforce was required to self-quarantine with the result that the remaining employees/workforce cannot usefully be employed
  • if there was a stoppage of work due to lack of supply for which the employer could not be held responsible.

You must remember that enterprise agreements and employment contracts can have different or extra rules about when you can stand an employee down without pay, for example, a requirement to notify or consult. You should review the relevant awards, agreements, contracts and workplace policies to ensure that what you propose to do can be legitimately done.

If you can stand down employees, you are not required to make payments to them for the stand down period. However, it is at your discretion to do so if you would like to.

Stand down is not effective if employees are taking paid or unpaid leave that is authorised by the employer, or the employee is otherwise authorised to be absent. You will be required to pay them under the normal leave provisions for that period.

Stand down provisions do not apply to casual employees because they have no guarantee of hours and so no guarantee of income.

Alternatives to stand down

If you cannot legitimately stand your employees down or would prefer not to for as long as possible, you may consider:

  • seeking employees’ agreement to take paid (annual or long service) leave for a period;
  • in very limited circumstances, directing employees to take paid annual leave;
  • subject to consultation and notice provisions, negotiating with employees to change regular rosters or hours of work; or
  • terminating the employment of the employees, in which case the you may have to provide redundancy pay.

Recently, we have seen emergency changes to some modern awards that vary the restrictions around rosters, flexibility and directions to take annual leave, so current advice before you make a decision is important.

If you stand down your employees, they can take up other employment for the duration of the stand down but that may be subject to contractual obligations or prior agreement with you.

Termination of employment

The Fair Work Act includes requirements that employers have to meet before they can terminate an employee’s employment, such as providing notice of termination or payment in lieu. Unless the employee is legitimately dismissed because they have failed to meet the reasonable requirements resulting from a performance management process, you may also have to pay redundancy. Before you consider terminating someone’s employment in the current circumstances, you should get professional legal advice.

You must always remember that an employee is protected from being dismissed because of discrimination, a reason that is harsh, unjust or unreasonable or another protected right. Breaching those requirements can lead to expensive claims against your organisation. Additionally, employers are prohibited from exerting undue influence or pressure on employees in relation to making certain agreements or arrangements relating to their employment.

Examples of proposed stand downs

The FWO has recently released some example of situations relating to stand down to assist employers to understand the provision. They are set out below.

Example: Lack of vital supply – Stand down

Sally’s company operates a business that imports and sells electrical goods which are manufactured in China. The factory in China ceases to operate as a result of coronavirus and announces that it will not be exporting any goods for a period of at least 3 months.

Sally explores other options but is unable to identify any alternative work of any value for her 20 permanent employees to do.

Sally closes her shop and regrettably informs her employees that they are to be stood down without pay. Sally explains that they are entitled to take any accrued paid leave during the period as an alternative to being stood down without pay.

Example: Non-essential services – stand down of employees

Gemma is a part-time employee at a cinema complex in Brisbane’s CBD. The cinema employs 10 permanent employees and 15 casual employees. The Prime Minister has issued an enforceable government direction under emergency powers that certain non-essential services must shut down because of coronavirus.

Gemma’s manager calls her to explain that the cinema is closed for the duration of the Government’s direction and that cinema management will need to stand all employees down without pay, as they can’t be usefully employed.

Gemma and her colleagues are advised that permanent employees can take any accrued annual leave they have as an alternative to being stood down without pay. However, casual employees are not entitled to be paid while the business is closed.

Example: Non-essential services – no stand down of employees

Teddy is a part-time food and beverage attendant in a Sydney restaurant. The New South Wales Government issued an enforceable government direction under the Public Health Act 2010 (NSW) that certain non-essential services must shut down because of coronavirus.

Teddy’s employer contacts him to let him know that the restaurant has closed its dining service immediately for the duration of the direction. The restaurant will continue offering its takeaway and delivery service. Teddy’s employer lets him know that instead of carrying out his usual waiting duties at the restaurant, he and the other waiting staff will be needed to help with receiving, packing and delivering orders.

This is not a stand down because Teddy can still be usefully employed, so he’ll continue to be paid. 

Conclusion

As you can see, stand down of employees is a very limited provision that turns entirely on the facts of your situation. Even a small change in how you organise your business can change the effect of the provision.

If you think that you may need to stand down your employees or that you need to take other related steps in the current circumstances, seek advice before you make a decision. Our team can provide advice and draft documents to help ensure that you remain compliant with your obligations.

You can contact us on (07) 3160 0010 or at michelle.cowan@nfplawyers.com.au


Disclaimer – Reliance on Content
The material distributed is general information only. The information supplied is not and is not intended to be, legal or other professional advice, nor should it be relied upon as such. You should seek legal or professional advice in relation to your specific situation.