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Employer and Employee Rights in a Time of Crisis

Employer and Employee Rights in a Time of Crisis

Tue, 31st Mar 2020

So much has changed in Australia – and the world – since the start of March that it’s quite the task just to keep up and adjust. Businesses are being forced into temporary or sadly, even permanent closure, with workers’ hours are being reduced or paused. Almost every facet of the economy is being or will be affected.

Naturally, employees want to reman employed. Employers also want to understand the law around “standing down” versus “redundancy”.  Also, people need to know what rights employees have to access leave entitlements.

None of this is what employers want to deal with – but Coronavirus has thrust this on many of us in the business community whether we like it or not.

A common question is, “can an employer stand down and not pay their employees because of COVID-19”?

Generally, an employer would not be able to “stand down” an employee without pay just because there was a downturn in business caused by COVID-19. However if the Government ordered a business not to open (and the employees could not be given any other meaningful work), this may well give rise to a right to stand-down.

The Fair Work Act 2009 (Commonwealth) contains provisions that allow an employer to stand down employees in certain circumstances and without being required to pay them, if ‘the employee cannot usefully be employed’, and standing them down is ‘because of…a stoppage of work for any cause for which the employer cannot reasonably be held responsible.’

The employee remains employed, just without the right to work and be paid.

They do, however, continue to accrue entitlements (annual leave, long service leave, etc) during a period of stand down.

There is no legal obligation for employers to offer employees who have been stood down access to their leave entitlements. You should also note that an employee on authorised leave, (i.e. annual leave) cannot be stood down during that period. Of course an employee that has been stood down, particularly those with valuable accrued entitlements, may prefer to cash these out in the current situation, and look for work elsewhere.

So, firstly, can causation be established? As in, is the reason for the stoppage of work (coronavirus infection/potential infection/the pandemic more broadly/government advice or direction) the real reason employees are being stood down? i.e. there is no other issue that the employee might allege to be the “real” reason they have been stood down.

Secondly, has there actually been a stoppage of work? It is not sufficient that there be merely a downturn in bookings. For example, bookings may have decreased significantly but there is work available, that is not a stoppage and the stand down provisions will not be available.

In regard to relying on the “stand down” provisions of the Fair Work Act, you need to ask yourself:

  • Is there a stoppage of work?
  • Is it for a reason reasonably outside your control?
  • Can the affected employees be employed to perform useful work?

So, has there been a “stoppage of work” caused by a “reason outside of your control” in your business? The question (that remains unanswered) is whether the government’s directive to the population that they stay at home unless it is absolutely necessary to go outside and avoid contact with other people (stay at least 1.5m from others) constitutes a sufficient reason outside of your control that has caused a stoppage of work.

It is arguable that anything other than a government directed shutdown of your business would not satisfy the stand down provisions. If that was held to be the case, then any employees “let go” until that time may be entitled to a redundancy.

You might consider openly discussing ways to mitigate redundancy if possible, for example, seeking expressions of interest from employees who might agree to temporarily reduce hours, take annual leave or leave without pay where possible.

With things moving so quickly, and the unprecedented nature of these current events, it is difficult to provide a definitive response that applies to all businesses.

We can look to recent examples to inform our view, such as the fact that QANTAS stood down a large part of its workforce on what was, at the time, a government recommendation to the public to limit travel. That decision remains unchallenged for the time being.

Finally, employers should be aware that the decision to stand down an employee may be challenged by way of Application to the Fair Work Commission. The onus of proof would fall on you to show that the unpaid stand down was legitimate. The situation is unique and as far as we can determine has not been tested in the Courts and so it is difficult to determine how the stand down laws will be applied if challenged, hopefully common sense prevails.

Thankfully, at the time of writing this, both the state and federal governments have announced initiatives which help many businesses avoid redundancies: a national $1,500-a-fortnight 'job-keeper' payment to employers, and a $500 million Business Support Fund to help small businesses survive the impacts of the coronavirus (COVID-19) pandemic and keep people in work.

Details and eligibility requirements of the Victorian initiative here with more details to come with the federal announcement.

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