COVID-19, Employment

Are your employees entitled to a pay rise from 1 November?

27 October, 2020

The Fair Work Commission has recently dealt with three disputes concerning employees who were stood down during the COVID-19 pandemic, either through the pre-existing provisions in the Fair Work Act or a Jobkeeper enabling stand down direction. Given all three decisions found in favour of the employee, employers should proceed with caution before directing any staff to stand down.

Standing down employees during COVID-19

Employers may stand employees down under the Fair Work Act 2009 (Cth) (FW Act) using the pre-existing stand down provisions or the temporary Jobkeeper enabling stand down directions. Applicable awards and enterprise agreements may also entitle employers to issue stand down directions. These stand down provisions have been used by many employers in recent months as they navigate through the financial effects of the COVID-19 pandemic. While stand downs can assist businesses in reducing their labour costs and, at least in the short term, prevent redundancies, three recent disputes in the Fair Work Commission demonstrate a trend of employers incorrectly applying their stand down powers.

General stand down provisions in the Fair Work Act

In ordinary circumstances, an employer may only stand down an employee during a period in which the employee cannot be usefully employed because one of the following circumstances:

(a)   industrial action

(b)   a breakdown of a breakdown of machinery or equipment, if the employer cannot reasonably be held responsible for the breakdown;

(c)   a stoppage of work for any cause for which the employer cannot reasonably be held responsible,

(see section 524 of the FW Act).

The provisions under s 524 of the FW Act set a high bar for employers to stand down employees, given that employees are not paid during a stand down period. Previous case law has made it clear that a ‘stoppage’ has to be more than a reduction in work.1

The Thomas Foods International decision2

In May 2020, Thomas Foods International stood down a clerk in its expert documentation team for an indefinite period, relying on there being a stoppage of work pursuant to s 524 of the FW Act. After five weeks of being stood down without pay, and with no indication of when the stand down period would end, the employee requested to be made redundant. Although the employer eventually agreed to the redundancy, the Fair Work Commission considered whether the employer had the right to stand the employee down for the period prior to termination.

While the Commission recognised that the demand for the level of work in the employee’s business unit reduced in response to the pandemic, it was not a stoppage of work within the meaning of s 524 of the FW Act. It further considered that although it was fair for Thomas Foods to reduce working hours in the export documentation team, it was unfair for the employer to impose the whole burden of reduction in hours on one employee (the clerk) whilst retaining full time employment amongst other members of the business unit.

In ultimately determining that the stand down was inconsistent with the FW Act, Deputy President Anderson said,

“A fair approach would have been for Thomas Foods to apply some apportionment to the reduction to comparable employees in the export documentation team, not singularly to [the clerk].”

The Ideal Acrylics decision3

In a similar decision this month, Deputy President Anderson again reiterated that the burden of reducing labour costs should not fall on one employee.

In April 2020, manufacturer Ideal Acrylics stood down a full-time machinist, also relying on there being a stoppage of work under s 524 of the FW Act. During the stand-down period, one of its directors filled the machinist’s duties.

The Commission found that although Ideal Acrylics had experienced a slowing of demand for orders due to the pandemic’s economic effect which did warrant a reduction in labour costs, the work of Ideal Acrylics did not stop. It therefore did not constitute a stoppage of work under s 524.

The Commission also found that the machinist could have been “usefully employed” during the stand down period, given that from time to time he performed fabrication work. The Deputy President considered it unfair that other fabricators in the business retained their full-time hours and income unchanged whilst the machinist was stood down for three months without pay. The Deputy President again noted,

 “A fair approach would have been for Ideal Acrylics to apply some apportionment to the reduction of labour between [the machinist] and other manufacturing employees performing work that he was also capable of performing.”

Temporary Jobkeeper enabling stand down directions

On 9 April 2020, the FW Act was amended to include additional provisions to allow employers to stand down employees, either partially or in full, during the COVID-19 pandemic if they meet the eligibility requirements for the Jobkeeper wage subsidy scheme (see our guide here for further information). These Jobkeeper enabling stand down directions will cease when the scheme ends but are broader in scope than the stand down powers under s 524.

In summary, a Jobkeeper enabling stand down direction allows employers to direct employees to reduce their days and hours of work, including reducing their hours to nil, if the employee cannot be usefully employed for their normal days or hours because of changes to the business attributable to the COVID-19 pandemic. An employee who is the subject of such a direction is not be paid for the hours they did not work, however the employee must still be paid the “minimum payment guarantee”.

The Live Events Australia decision4

In March 2020, Live Events Australia asked its staff (nationally) to agree to up to a 40% reduction in salary and subsequent working hours. All staff, other than one broadcast engineer, agreed to the reduction.

In June 2020, Live Events issued the broadcast engineer a Jobkeeper enabling stand down direction that his minimum hours of work be reduced from 80 to 48 hours per fortnight (a 40% reduction). The broadcast engineer challenged the stand down direction on the basis that the requirement that he “cannot usefully be employed” for his normal days or hours had not been met and that the direction contravened s 789GK of the FW Act because is was “unreasonable in all the circumstances”.

The Commission held that although the Live Events’ direction was authorised by the FW Act, the terms of the direction were unreasonable. This was because at the same time Live Events issued the Jobkeeper enabling stand down direction to the broadcast engineer, it lifted the 40% reduction imposed on other staff to a 20% reduction. Live Events advised its staff at the time that the 20% reduction more accurately reflected the then business circumstances.  Deputy President Anderson held that a direction on reasonable terms would have been for Live Events to reduce the broadcast engineer’s hours to up to 20%.

While the Commission varied the stand down direction to that effect, it noted:

“it would be inappropriate for Live Events to leave the Direction in place (even in its varied form) if, during the period of its operation, the employer generally lifted the 20% reduction for other employees and returned its workforce to 100% of hours and salary.”

Key takeaways

The current economic climate means that employees are now more likely than ever to challenge a stand down, which could well result in the Fair Work Commission finding in favour of the employee. Therefore, before issuing a stand down direction, employers should take note of the following:

  • An employee cannot be stood down under s 524 of FW Act where there has merely been a downturn of business activity, as many employers have experienced during the COVID-19 pandemic, as this does not amount to a “stoppage of work for which the employer cannot reasonably be held responsible”. That said, businesses affected by mandatory Government shutdowns would likely meet this requirement.
  • While the Fair Work Commission has recognised that it is reasonable for employers to consider options which avoid redundancies, the burden of reducing labour costs should be shared amongst employees. Like in the Thomas Foods and Ideal Acrylics decisions, singling out an employee to take the burden of reducing labour costs whilst other employees remain unaffected will likely be seen as unfair by the Commission.
  • Similarly, there needs to be an objective and fair basis for issuing a Jobkeeper enabling stand down direction. As seen in the Live Events decision, employers are not simply entitled to reduce an employee’s working hours to their liking, particularly if it is a disproportionate reduction to the rest of the workforce and not reflective of the business’ circumstances.
  • Employers should consider all other options available before directing employees to stand down. Options may include asking employees to take accrued or unpaid leave, exploring working from home arrangements if suitable to the nature of the business, and having employees temporarily agree to change their duties or hours of work.

Please note this information is a guide only and does not constitute legal advice. If you have any questions regarding your entitlements to stand down staff, please get in touch with McCabes Employment Group.

1 Bristow Helicopters Australia Pty Ltd v Australian Federation of Air Pilots [2017] FWCFB 487
2 Mr Ryan La Plume v Thomas Foods International Pty Limited T/A Thomas Foods International [2020] FWC 3690 (15 July 2020)
3 Kurt Stelzer v The Trustee for The Ideal Acrylics Unit Trust T/A Ideal Acrylics [2020] FWC 4129 (7 August 2020)
4 Allan Jones v Live Events Australia Pty Ltd [2020] FWC 3469 (3 July 2020)

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