Standing down employees – when can it be done?

Standing down employees without pay would seem a logical response to the current COVID-19 crisis.  Employers must first recognise that during the COVID-19 public health pandemic normal workplace laws continue to apply.

Standing down employees without pay is not generally available due to a deterioration of business conditions or because an employee has coronavirus.  Without a Mandatory Government Health Directive impacting directly on your business or a complete failure of your business model (for example not having.  access to site or no material supply) stand down without pay is not recommended and is high risk.  If the stand down is outside the provisions of the Act employers may face claims for ordinary pay for the full period.

The Fair Work Act 2009 (Cth) (Act) contains certain ‘stand down’ provisions regulating when an employer may stand down employees without pay.   Section 524 of the Act permits employers to stand down an employee without pay if the employee ‘cannot usefully be employed’ in accordance with a circumstance prescribed by the Act.

What precisely does it mean to “stand a person down?”

‘Stand down’ refers to a temporary work stoppage or lay off of an employee.   In this context, stand down should not be confused with any disciplinary actions being taken by an employer; for example, the investigation of misconduct authorised under an employment contract.

In Manthos v Dental Health Services Victoria [2013] FWC 6218, confusion arose after an employee was ‘stood down’.   Manthos was notified of a stand down from duty pending an investigation into concerns that she had breached the Code of Conduct for Victorian Public Sector Employees.   Manthos was offered full pay and was advised not to attend the workplace or undertake any duties.   In that case, the employer had not intended to exercise their right under the stand down provisions in the Act and withdrew the letter which used the ‘stand down’ terminology.   Accordingly, the Court found that Manthos was asked to no longer attend work during an investigation process and ordered the employer to use different terminology.

When can employees be stood down?

According to section 524(1) an employee must only be stood down if they ‘cannot be usefully employed’ because of one of the following circumstances:

  • industrial action;
  • a breakdown of machinery or equipment, if the employer cannot be held responsible; or
  • a stoppage of work for any cause which the employer cannot be held responsible.

This may include work stoppages caused by a mandatory government health directive, natural disasters or emergencies, such as bushfires or floods.   Most importantly, an employer may not be required to pay employees for the period of a stand down after having regard for the fairness principles[1], medium or large employers should choose to allow their employees to access paid leave entitlements subject to the availability of cash in the business and the normal forms or requirements.   An employee may apply for paid leave during the period for which they would otherwise be stood down pursuant to section 524(1).[2]

Stand downs must meet fairness test?

The Fair Work Commission (FWC) has sought to draw a line over when workers can be stood down without pay, a senior member ruling that the statutory provision for “fairness” can outweigh an employer’s strict adherence to the law.  Under section 526 of the Fair Work Act 2009 (Cth), the tribunal is required to take into account fairness between the parties and if it is unfair as it is of an ongoing and indeterminate nature or excessive.

If an employer has the capacity (cash at bank) to provide access to paid leave entitlements, a fair outcome involves some or both parties feeling that they are required to bear a burden that is not their responsibility.  Stand down must be in writing to each employee confirming the reason for stand down and the period of stand down.

The Act does not provide a definition for the term ‘usefully employ’, however, case law has determined that before applying the provisions, employees should be given the opportunity to perform any work the employer is able to obtain some benefit from even if it is outside their usual duties.

The Act recognises a period of stand down as ‘service’ and therefore, employees who are stood down should still accrue leave and other entitlements in accordance with the National Employment Standards.  Full-time and part-time employees on stand down are entitled to be paid on a public holiday that falls on any day during the stand down period, provided the employee would normally have ordinary hours of work rostered on that day.  Employees are entitled to remain on any pre-approved leave, including annual leave (e.g.  Easter 2020), personal leave, sick leave, workers compensation, public holidays or paid leave approved before the stand down commenced.

Can employees be stood down in the event of a downturn in business?

Typically, section 524(1)(c) will apply in situations where natural disasters have destroyed business premises or made it unsafe and dangerous for employees to come to work.   It will also apply to situations of government-issued directive forcing a complete failure of your business model, which are not at the discretion of the employer.

However, a downturn in business is not one of the prescribed circumstances for the stand down provisions to be used.   Therefore, where an employer simply faces a slow-down in business 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 Act.   This can be a fine line, so it is important for employers to take care and seek advice in determining whether to enact their rights under the stand down provisions, to avoid any adverse action claims or ordinary time claims by employees.

Case law on stoppages of work for which the employer cannot be held responsible

In the case of Ball v Thomas Foods International Murray Bridge Pty Ltd [2018] FWC 2483, a catastrophic fire occurred which destroyed the employer’s onsite production facilities.   As a result, a laboratory technician was stood down.   The fire was caused accidentally as a result of welding activities onsite.

Ordinarily, a fire might be considered a ‘stoppage for which the employer cannot be reasonably held responsible’.   However, Mr Ball relied on principles of tort law in his submission that the employer had control and responsibility of the site, and therefore, the employer had failed to provide a safe system of work.   Accordingly, it could not be said that the stoppage or breakdown on which the stand down was founded was a circumstance for which the employer could not reasonably be held responsible.

Case law on standing down in the event of industrial action

In the case of CEPU & Anor v FMP Group (Australia) Pty Ltd [2013] FWC 2554, FMP Group stood down 31 maintenance employees after they gave notice of an intention to claim action in the form of ‘an indefinite ban on filling in paperwork, excluding health and safety matters’.   Before the commencement of industrial action, the company advised that anyone who participated would be stood down without pay.   FMP Group submitted it was entitled to stand down the employees under section 524(1)(c) being ‘a stoppage of work for any cause which the employer could not be held responsible’.

The FWC held that the employer did not have a proper basis to stand down the employees, and ordered the stand down be ceased.   The Commission found that the stoppage was not caused by industrial action in accordance with section 524(1)(a), because the said industrial action had not yet commenced at the time the employees were stood down.

The case highlights that in order for an employer to validly exercise its right under section 524(1), the employee must already be engaging in industrial action at the time of being stood down, which causes the unavailability of useful employment.   FMP Group was unable to cite industrial action as the reason for the stoppage of work, whilst relying on section 524(1)(c) as this would have been caught by section 524(1)(a).

When are stand down provisions unavailable?

There are circumstances where an employer may not stand down an employee in accordance with subsection (1), including:

  • where an enterprise agreement or employment contract applies; and
  • the agreement or contract provides for the employer to stand down the employee during that period.[3]

If this is the case, an employee may only be stood down under the enterprise agreement or employment contract, but not in accordance with section 524(1).   This means the employer will also have to adhere to any terms or requirements under the agreement or contract that they must meet before standing down an employee.   Employers need to be consulting with employees now, in writing as required under a Modern Award or enterprise agreement with all available options, including leave, redundancy, reduced hours, leave (paid or unpaid) or stand down.  Business needs to resist using stand down provisions before they are required.

Takeaways

Employers may only stand down employees in accordance with the circumstances prescribed by section 524 of the Act subject to the fairness principles.  Employers cannot stand an employee down just because the business is quiet, or there isn’t enough work.

Employers need to be consulting with employees now, in writing as required under a Modern Award or enterprise agreement with all available options, including redundancy, reduced hours, leave (paid or unpaid) or stand down.  Business needs to resist using stand down provisions before they are required.

Where there is an existing enterprise agreement or employment contract, employers must comply with any stand down provisions or requirements.  Before standing down an employee, employers should also consider whether an alternative arrangement might be appropriate, including agreements surrounding reduced hours or leave arrangements.

It is a challenging time for the Fair Work Act 2009 (Cth), and we anticipate various employer or union applicants to the FWC for variations to Modern Awards or Enterprise Agreements.   We note an application is currently before the FWC regarding the Clerks—Private Sector Award 2010.

Cases

CEPU & Anor v FMP Group (Australia) Pty Ltd [2013] FWC 2554

Manthos v Dental Health Services Victoria [2013] FWC 6218

Further information

If you need advice on whether or not you can stand down your employees in the present COVID-19 Health Crisis, please telephone either Malcolm Burrows or Dean Cameron for an obligation free and confidential discussion.

Malcolm Burrows B.Bus.,MBA.,LL.B.,LL.M.,MQLS.
Legal Practice Director
Dundas Lawyers
Telephone: (07) 3221 0013 | Mobile: 0419 726 535
e: mburrows@dundaslawyers.com.au
Dean Cameron B.Com (IR/HR),LL.B.,MQLS.MIRSQ
Legal Practice Director
Workforce Advisory Lawyers
Telephone: (07) 3607 6850 | Mobile: 0417 622 178
e: dean.cameron@workforceadvisory.com.au
https://www.workforceadvisory.com.au/

Disclaimer

This article contains general commentary only.   You should not rely on the commentary as legal advice.   Specific legal advice should be obtained to ascertain how the law applies to your particular circumstances.

[1] Fair Work Act 2009 (Cth) s 524.

[2] Fair Work Act 2009 (Cth) s 525.

[3] Fair Work Act 2009 (Cth) s 524(2).

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