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Given the current COVID-19 pandemic, the Government has begun imposing mandatory lockdowns and/or closures in some businesses. We have received queries from clients whether, if this were to happen to their business, there would still be an obligation to pay employees.  
 
Stand Down Under section 524 of the Fair Work Act 2009 (Cth) (“FW Act”), an employer may ‘stand down’ employees without pay in certain circumstances. If the employee’s enterprise agreement or contract of employment provides the employer an ability to stand down, the specific stand down provisions in the enterprise agreement or contract will apply and the FW Act will not apply to that employee.1 Therefore, employers should consider their employees’ contracts and any applicable enterprise agreements so that they are aware of those provisions.

Under the FW Act, an employer may stand down an employee without pay if the employee cannot usefully be employed because of one of the following circumstances:2

(a) industrial action (other than industrial action organized or engaged in by the employer);
(b) 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.

Where the Government imposes some form of quarantine, mandatory lockdown or closure in a business, sub-section (c) may become relevant for employers, because (depending on the specific circumstances) it may result in there being an actual stoppage of work for which the employer itself cannot reasonably be held responsible. In some cases, this could also arise from critical parts or services in the supply chain being disrupted leading to a stoppage. The onus is on the employer to demonstrate that the employees cannot be usefully employed, and this is an objective test, not a mere employer preference.

Employers should also consider whether they have any relevant policies or procedures and the individual circumstances of each employee, for example, where there may still be useful employment for some or all of the employees to do. Similarly, once useful employment becomes available, relevant employees would likely need to be recalled to work.
Consultation Obligations

If one of the above situations arises that may lead to a stand down, employers should check any applicable awards, enterprise agreements, contracts of employment, and policies or procedures to see what consultation obligations they have. Depending on the circumstances and terms of that instrument, the employer may or may not need to consult with employees before initiating a stand down.

Even where there is no requirement to consult under a modern award or enterprise agreement, we recommend employers engage in some form of consultation with their employees to maintain a good employment relationship and provide support to their employees.

Risks

Standing down an employee inconsistently with the requirements of the FW Act or the applicable industrial instrument may create a liability for underpayment or breach of contract but could also be a breach of the FW Act, an applicable award or enterprise agreement, depending on the specific words of that instrument.

We recommend that employers seek specific advice prior to considering any stand down to assess its capacity to do so, and to ensure that any documentation supplied to employees about the stand down conditions is lawful.

Require further information/assistance? If you require further information or advice, please contact one of our consultants.
1 Fair Work Act 2009 (Cth) s 524(2).
2 Fair Work Act 2009 (Cth) s 524(1). Note that a period of stand down counts as service for the purposes of the Act.

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