The outbreak of COVID-19 presents a unique and unprecedented challenge to Australian employers. While some employers are facing significant financial strain as a result of reduced trade, restricted business operations and government-imposed restrictions, others are facing shut down of their businesses entirely.
For many employers, it is not possible for existing staff members to continue in their normal capacity. As a result, many employers are facing the question of whether they can temporarily stand down their employees without pay.
The stand down of employees without pay is provided for in section 524 of the Fair Work Act 2009 (Cth) (FW Act). Section 524(1)(c) permits employers to stand down employees who cannot be usefully employed in circumstances where there is “a stoppage of work for any cause for which the employer cannot reasonably be held responsible“.
An employee must only be stood down if they “cannot be usefully employed” because of the stoppage.1 This means that employees should be given the opportunity to perform any work that is available and which they are capable of performing, even if it falls outside their usual duties, before a decision is made to stand them down.
It is also important to remember that where an enterprise agreement or award applies, and either document contains a stand down provision, any decision to stand down employees must meet the standards set by those agreements rather than those set by the FW Act.2
There are two key circumstances where employers may wish to stand down employees in the current environment: where COVID-19 has led to a significant reduction in business operations; and where COVID-19 causes a mandatory shut-down of workplaces entirely.
Typically, section 524(1)(c) has applied in situations where natural disasters have destroyed business premises or made it unsafe and dangerous for employees to come to work. However, taking a plain reading of the provision could see it apply to the two circumstances stated above given that the outbreak is due to no fault of employers.
However, where an employer simply faces a reduction in trade volumes or where it is merely uneconomical to continue to employ staff, it is unlikely this will be considered a “stoppage” of work for the purposes of the legislation.3
A stand down is more likely to be permissible where COVID-19, or related government directives, cause a stoppage of work entirely. This may be especially relevant to businesses whose facilities are required to close, such as airlines or businesses operating out of airports, or if there is a general lock down mandated by the government.
We note the most recent announcement by the federal cabinet, which set out that from midnight on Wednesday, 25 March 2020 all non-essential services were required to close until further notice. This includes registered and licensed clubs, licensed premises in hotels and pubs, entertainment venues, cinemas, casinos, gyms, community and recreation centres, real estate auctions and open house inspections, public swimming pools, museums, libraries, in-store beauty therapy and a number of other services. Businesses subject to this mandated shut down should be in the position to rely on section 524 to stand down employees.
By standing down employees businesses may expose themselves to the risk of proceedings brought by disgruntled employees. Given that the circumstances at hand are unprecedented, there is a lack of definitive case law indicating how courts might respond to such cases.
However, possible consequences of issuing an unlawful stand down directive are:
- A finding of a breach of the FW Act leading to the imposition of penalties; and/or
- Where employees are wrongfully stood down and were otherwise ready, willing and able to work, an order for back pay of wages owed to employees for the stand down period.
It is therefore important that any stand down decisions be implemented as fairly and reasonably as possible and that any affected staff be given as much notice as possible.
You will need to take into account the following when determining whether it would be appropriate to stand down an employee:
- Why your work has stopped; and
- If you could “reasonably be held responsible” for the work stopping.
Employers should also consider whether employees can work from home, from a different location or in an otherwise different capacity than usual before initiating a stand down. This would ensure they can establish that the relevant employee could not be usefully employed.
Alternatives to stand down
In cases where stand down is not available, some alternatives include:
- Mutually agreeing to reduced hours;
- Mutually agreeing to leave arrangements either with normal pay, reduced pay or without pay; and/or
Employees selected for stand down may alternatively be given the option of taking any accrued paid leave, such as annual leave or long service leave, in lieu of being stood down without pay.
Generally, you cannot direct employees to take annual leave or long service leave. However, employees may prefer to take paid leave where the alternative would be being stood down without pay.
Alternatively, employers may consult with employees to mutually agree to vary applicable contracts of employment to reduce working hours. Employees who are employed full-time may agree to work on a part-time basis for an interim period. Similarly, employees who are employed on a part-time basis may agree to a temporary reduction of their normal working hours.
This may spread the financial impact of COVID-19 across a larger number of employees, instead of standing down a limited group of employees without pay who would then be severely financially impacted.
In some instances, employers may also move to terminate employment on the grounds of genuine redundancy. This is only available where changes in the operational requirements of a business mean the employee’s role is no longer required and where the employee cannot be reasonably deployed in another role, including interstate or overseas.4
Leave entitlements and stand down periods
During periods of stand down, employees will continue to accrue annual and personal leave in the usual way.
Employees who contract COVID-19 must not attend the workplace for a period of time. Employers have a duty to prevent infected workers from attending the workplace in those circumstances under the Work Health and Safety Act 2011 (NSW).
Employees may also take any accrued paid carer’s leave to look after a family member or member of their household who is unwell with COVID-19.
Employers must direct employees who are sick with COVID-19 not to come to work and to obtain medical clearance from a doctor before returning to work.
If an employee who contracts COVID-19 does not have any sick leave accrued, or is employed on a casual basis, they are not entitled to paid leave and can be directed to take leave without pay.
What happens if an employee asks to stay home?
Employees may volunteer to take leave without pay in circumstances where they do not wish to attend work due to fears around COVID-19. Such an arrangement would need to be reached by mutual consent of the employer and employee.
In contrast to stand down provisions, employees voluntarily taking leave without pay will not accrue annual leave, personal leave or long service leave during this time.
There is no general right for an employer to direct an employee to take such leave, unless a specific award or enterprise agreement provides for it.
It is important to note that this is the state of the law at the time of writing. The government may seek to modify employers’ obligations given the unprecedented circumstances.
Additionally, the ability for an employer to lawfully stand down their employees will depend heavily on the individual circumstances of the employer. It is therefore valuable to obtain specific legal advice based on the unique characteristics of your workplace before determining what measures to take.
As the impact of COVID-19 on Australian workplaces continues to evolve, please do not hesitate to contact a member of our national group if you would like further advice on how you can respond over the coming weeks and months.
This article was written by Peta Tumpey, Partner, Sue Barnes, Special Counsel and Rachel McInerney, Graduate.
1. Fair Work Act 2009 (Cth) s 524(1).
2. Fair Work Act 2009 (Cth) s 524(2).
3. Australian Federation of Air Pilots v Bristow Helicopters Australia Pty Ltd  FWC 8515.
4. Fair Work Act 2009 (Cth) s 524(1)(c).