The Fair Work Act (Act) recognises that, in certain circumstances, an employer has the right to stand down employees without pay. Modern awards, enterprise agreements or employment contracts may also contain stand down provisions and generally, such periods are unpaid, where certain circumstances are met.
What are those circumstances, and does the COVID19 epidemic give employers the right to stand down their employees without pay?
To lawfully stand-down, the employer needs to demonstrate:
- A stoppage of work,
- Leading to the employee being unable be usefully employed by the employer (which is not limited to the work an employee usually performs), and
- That the employer cannot be held responsible for the stoppage.
It is important to understand that employers cannot generally stand down employees simply because of a deterioration of business conditions or because an employee has coronavirus. And if an employer is not the subject of a stoppage of work, standing down its employees could be deemed unlawful (and consequently the employer might be in the position where it is pursued to backpay wages over that period, even though the employees weren’t working). So it is extremely important to get this right.
Leading By Example
Perhaps the best way to explain how the Act works is by example.
Consider the likely impact of the Federal Government’s order that restaurants must not provide table service, but may still provide food for customers to take away, or for home-delivery.
Can the restaurant owner stand down his staff? What about the cleaning company that cleans the restaurant, or the merchant of foodstuffs that supplies the raw ingredients to the restaurant?
The First Hurdle: An employee must not be stood down unless they cannot be usefully employed by the employer.
At the restaurant, the Government’s order has a clear and direct effect. Without table services, staff are no longer needed to wait on tables. However, some of those affected staff could be used in other ways. Perhaps they could clean the restaurant, or assist in the kitchen, or delivery food. The employer must consult with the affected staff if other work is available. There is no requirement the alternative work needs to fall within the normal duties of the affected staff. Sadly, despite best intentions, not all of the affected staff can be usefully re-deployed within the restaurant. Some of the affected staff cannot be usefully employed and will pass the first hurdle.
Compare these to the kitchen staff, who are unaffected by the order and can go on preparing food, albeit for home-delivery and take-away customers. They will not pass the first hurdle.
The Second Hurdle: The circumstances preventing the employee from performing the useful work.
The Act lists out 3 circumstances which might lead to an employer gaining stand-down rights.
- Industrial action, except when caused by the employer
- Breakdown of plant or equipment, for which the employer cannot reasonably be held responsible
- A stoppage of work for any cause which the employer cannot reasonably be held responsible.
There Act makes clear that the employer must have ‘clean hands’ (no pun intended) and must not be responsible for the circumstances they will later rely upon to stand down employees.
Options 1 and 2 do not, for the most part, apply to this example we are using. However, option 3 extends to any ‘stoppage of work’, the cause of which is something the ‘employer cannot reasonably be held responsible’.
An enforceable directive by the Government, preventing all or part of a business to cease, would likely fall into option 3, passing the second hurdle.
To Stand-Down or not to Stand-Down
So far as the restaurant’s staff are concerned only the table staff are affected. Their work cannot be performed as a direct consequence of the Government order. The kitchen staff are unaffected and do not pass the first hurdle. Clearly, the Government order is outside the reasonable control and responsibility of the employer. It follows that the affected staff who cannot be ‘usefully employed’ in other duties at the restaurant can be lawfully stood down, without pay.
Over at the cleaning company and the foodstuffs merchants, it is a different story.
The indirect effect of the Government Order is that restaurant will consuming less products and services. This means a reduction in business for vertical business (such as the foodstuff merchants) and horizontal business (such as the cleaning company), leaving them with less work.
It is important to distinguish that the Government order on restaurants has not led to a ‘stoppage of work’ for either the cleaning company or the foodstuff merchant. Even though each are likely to see less work as a consequence, the Fair Work Ombudsman has made clear ‘employees can’t be stood down just because there is not enough work’.
Arguably, the cleaning company and the foodstuff merchant are each free to look for other customers for their products and services (although admittedly, there may be few to find). Notwithstanding, it is unlikely that staff left idle in these businesses can be lawfully stood down.
Importantly, an employee that is unlawfully stood down is in a position to make a claim for unpaid wages for the period of time they were told not to come to work by their employer. Thus, employers must carefully consider whether they meet
the criteria, lest they face an expensive claim for unpaid wages by employees who were unlawfully stood down.
What if COVID19 Escalates?
Should a significant portion of the population self-quarantine, or fall ill, the impact would be widely felt. In the circumstances, the ‘stoppage of work’ is likely to have a very real and direct impact on all types of business.
However, not all businesses will be affected equally nor to the same degree. Consideration needs to be given as to whether the business can operate if key staff, or many staff, are unable to be on-site, and whether off-site staff are able to be ‘usefully employed’ in the business.
For a business that cannot carry on without staff being on-site, where a significant portion of the workforce finds themselves unable to be on-site it is more likely that the standing-down of the remaining employees tends towards being lawful, in the circumstances.
Conversely, if self-quarantined staff can be ‘usefully employed’ and work from home, it is less likely the remaining on-site staff could be lawfully stood down, since the business can continue to operate despite some staff not being on-site.
The Act recognises that Enterprise Agreements may also give employers the right to stand-down employers, and may define circumstances more broadly that the Act sets out. If an employer has an enterprise agreement, they should review any standing-down provisions there. If absent, the Act’s provisions would apply.
Employers affected by the COVID19 epidemic must carefully consider the facts as applied to their own situation, since slightly different facts may affect whether it is lawful to stand down employees or not. To lawfully stand-down, the employer needs to demonstrate there was:
- A stoppage of work
- Leading to the employee being unable be usefully employed by the employer, and
- The employer cannot be held responsible for the stoppage.
Don’t hesitate to contact our legal team if you have any questions in relation to stand downs or any other legal questions that are arising. Our legal team is highly experienced in all of these areas, and are ready to help.
Other relevant articles:
- Coronavirus: Implications on commercial contracts and force majeure clauses
- Coronavirus Employment Law Update – Leave and Stand Downs
- Coronavirus: Workplace Health and Safety Considerations
- Coronavirus: Working From Home Considerations
Relevant Podcast Episode:
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