Across Australia, many businesses have been forced to shut their doors due to public health orders in response to ongoing Delta outbreaks. However other businesses have been able to remain open despite experiencing a downturn in trade. The ordinary principle is that when an employee is ready willing and able to work, they must be paid irrespective of whether or not the employer is able to provide them with work. However, the Fair Work Act 2009 (Cth) (FWA) stand down provisions enable employer to direct employees to take unpaid leave in limited circumstances. In some instances, stand down may also be possible under the provisions contained in a modern award or enterprise agreement.
During 2020, businesses that qualified for the JobKeeper financial subsidy scheme were also provided with flexibility to direct employees to not work on particular days, to work reduced hours or to not work at all. The Fair Work Commission also made temporary amendments to several modern awards which provided greater flexibilities. However, with the JobKeeper scheme having ended in late March 2021 and businesses unable to rely upon JobKeeper enabling directions, to direct employees away from the workplace without pay, employers are left with the stand down provision under s 524 of the FWA which many will not qualify for if they are still operating their business to some extent.
Under the FWA, the stand down provisions provide that an employer may stand down an employee without being required to pay them, if:
(a) “the employee cannot usefully be employed” and
(b) standing them down is “because of…a stoppage of work for any cause for which the employer cannot reasonably be held responsible.”
An enterprise agreement or a contract of employment may also include terms that impose additional requirements that an employer must meet before standing down an employee (for example requirements relating to consultation or notice).
Where a business has been forced to close because of government enforced restrictions and employees cannot be “usefully employed” in their normal duties or performing alternative duties that would have a benefit for the employer, the business can look to stand down its employees without pay. During a stand down employees can still access any accrued leave annual or long service leave entitlements but cannot take personal/carers leave. It is also important to note that during a stand down, employees will continue to accrue their leave entitlements based on their contracted hours of work.
Where however a business may be able to continue trading, but only with a limited service or product offerings, with limited customer demand, or with some employees performing their work from home to a limited extent, it is more challenging to stand down employees without pay in the absence of JobKeeper enabling directions. It is generally not possible to selectively stand down some employees but not others, or to unilaterally reduce hours when the business is still continuing, despite experiencing a deterioration in business conditions, or operating at a reduced capacity.
It may be, however, that employees who work within a distinct area or business activity within the business, may be able to be stood down because they cannot be usefully employed due to a stoppage of work within that defined business activity, whereas in other areas of the business employees cannot be stood down because there has not been a complete stoppage and they can still be usefully employed.
If employers do not satisfy the stand down requirements outlined above, they may be exposed to a dispute application under section 526 of the FWA. If a dispute arises, the Fair Work Commission is required to take into account fairness between the parties concerned. An employer must not only establish the requisite stoppage of work but also that the implementation of the stand down does not lead to unfairness to affected employees. As a matter of fairness before standing down an employee without pay, the employer should explore what alternative arrangements might be entered into. Further, where some employees are selected for stand down and not others, the employer needs to demonstrate that the process of selection was fair on an objectively verifiable basis.
If an employer unlawfully stands down employees without pay, their employees may be able to recover unpaid wages. The employer may also be liable for penalties of up to $66,600 per breach personal penalties for individual officers or owners of the business of up to $13,320 per breach.
For businesses that continue to operate but experience a reduction in trade, they may wish to:
- consult with their employees to determine whether they are prepared to use paid or unpaid leave entitlements to take time off;
- ascertain whether employees are covered by an award or agreement that entitles them to take unpaid pandemic leave;
- cancel scheduled shifts of their casual employees; or
- come to an agreement with their employees to temporary reduce their hours.
The Fair Work Commission have also compiled a list of options it suggests employers consider before making the decision to stand down employees (Stand downs – Fair Work Commission).
If all options have been exhausted, redundancies may be the only remaining option to reduce the workforce in response to a downturn in trade. Ultimately businesses will need to be vigilant when reducing hours or enacting the stand down provisions to ensure compliance and avoid penalties.
If you have any questions regarding your entitlements to stand down staff, or what alternative measures are available to manage your workforce during these challenging times, please get in touch with McCabe Curwood’s Employment Group.