COVID-19: Stand Down Provisions – Application of Fair Work Act

Business COVID-19 Updates Government

Updated April 6th 2020

The pending shut downs of non-essential services across parts of Australia may trigger conditions in the Fair Work Act that will allow employers to stand employees down without pay.

In a Government imposed closure of a workplace, employers may be in a position to stand staff down without pay if those employees are unable to be usefully deployed in other parts of the business. Where there is a critical reduction in business, be it an essential or non-essential service, the ability to stand down employees becomes a difficult question.

Here Ronelle Wilson Partner Business Advisory provides advice for employers should a shut down occur.

This is an incredibly confusing time for employers. The conversation has evolved so drastically in the past few weeks and business owners are finding it hard to keep up. Many have gone from talking self isolation and remote working to complete workplace shut downs and the entitlements that apply in all of those scenarios are complex.

Employers are doing their best to meet an unprecedented challenge. There is a significant amount of financial pressure on many businesses, as well the need to consider looking after their employees and the related legal obligations they must fulfil.

If a business is ordered by the Government to fully shut down, and the employees can’t reasonably work elsewhere, the employer in a position to stand them down without pay. However, if the level of business has declined to a critical point, without the directive to close the doors, the application of the provisions becomes less clear.

However, prior to standing down an employee, an employer should consider any consultation and notice requirements, as well as their ability to offer reduced hours or payment of leave entitlements. The stand down provisions are considered the last resort where the business cash flow cannot sustain payment of full leave entitlements.

The employer needs to be able to show that there is a legitimate stoppage of work, and not just a downturn. The current impact of the COVID-19 virus appears to be a legitimate stoppage for many businesses, meaning that unpaid stand down provisions in the Fair Work Act may well apply given the circumstances. Given the rapidly evolving situation the application of the provisions is untested in the courts.

The requirements under the Fair Work Act mean that unpaid stand downs apply when an employee cannot usefully be employed. However, an employer must show that all steps were taken to find useful employment for the affected employees.

This doesn’t mean an employer is bound to place employees in positions that are drastically different to their contracted position or significantly change the way they operate the business.

Stand downs: 5 questions employers must ask

  • Are there stand down provisions in the Modern Award, Enterprise Agreement or Contract of Employment?
  • Can you establish the cause of the event? Is the Coronavirus (COVID-19) the real reason for the stoppage of work?
  • Has there actually been a stoppage of work? By definition, this must be more than a downturn.
  • Are there other opportunities for the employee to be usefully employed?
  • Is the Employee on a period of authorised leave (paid or unpaid)? If so, they are not taken to be stood down.

If an employer cannot satisfy these requirements, the decision to stand down employees may be challenged by way of Application to the Fair Work Commission. The onus of proof falls on an employer to show that the unpaid stand down was legitimate and they fulfilled each of the steps outlined above.

The below link gives the information by Fair Work Australia:

Stand Down v Leave Without Pay

If an employee is granted leave without pay

  • The employer and employee reach an agreement on the terms of the unpaid leave period. This option is less likely to result in any claims from employees..
  • As unpaid leave does not count as service, employees won’t accrue annual leave and long service leave during this time.

If an employee is stood down

  • No agreement is required from employees.
  • The stand down period does count for service period – accruing sick leave, annual leave etc.
  • Centrelink benefits are available and the employee is able to seek alternate employment during the stand down period

Below are links to current Centrelink information for individuals and businesses affected by the Coronavirus:

What remedies are available for unlawful stand down?

If an employer stands down an employee unlawfully, the employee may apply for arbitration to Fair Work Australia. Furthermore, an employee can also take action for breach of contract or enterprise agreement as alternative remedies.