We have been getting lots of questions recently about what rights employers have to stand down employees without pay and how things like redundancies work in light of the compulsory government shut downs and result in economic downturn.
This article provides some brief information in relation to these matters.
The piece of legislation that dictates the interaction between employers and employees in Australia is the Fair Work Act. Under the Fair Work Act an employer is permitted to stand down an employee without pay during any period in which the employee cannot usefully be employed in the business because of a number of circumstances including:
1. A stoppage of work for any cause for which the employer cannot reasonably be held responsible (for example restaurants, pubs and clubs in light of COVID-19).
2. A breakdown of machinery or equipment if the employer cannot reasonably be held responsible for the breakdown.
3. Industrial action.
Many businesses have justifiably stood down their employees as government lockdowns have caused the closures of restaurants, pubs, clubs, cafes and a range of other businesses. Naturally the result is a stoppage of work for which the employer cannot be held responsible.
An employer is not required to make payments to an employee during any stand down period. It may be possible for an employee to take annual leave during this period if it is commercially viable for the business to pay said leave during the shutdown period.
If an employee has an Enterprise Agreement or Contract of Employment and that Agreement deals with the issue of stand downs, then generally speaking the terms of the Employment Agreement will supersede the Fair Work Act.
An employee is not taken to be stood down during the period when the employee is taking paid or unpaid leave that is authorised by the employer (for example sick leave or existing annual leave commenced prior to the work stoppage/stand down) or is otherwise authorised to be absent from his or her employment.
Redundancy is different to a stand down. A stand down is a temporary measure that will come to an end whereby an employee’s employment will resume thereafter. A redundancy occurs when an employer determines that the employee’s role is no longer required in the business or if an employer becomes insolvent or bankrupt.
Redundancy can occur for a range of reasons including things like the introduction of new technology meaning a job has become automated and does not require human help, economic downturns (for example as a result of the COVID-19 epidemic), restructures or reorganisations with the business.
The Fair Work Act sets out notice periods that must be given to employees who are made redundant. Redundancy pay will only be payable to an employee who has been employed with the employer for a continuous period of more than one year and where the business has more than 15 employees. A business with less than 15 employees is generally exempt from making redundancy payments to redundant staff.
The Fair Work Act sets out how much redundancy pay is payable and the amount is linked to a person’s length of continued service to their employer.
A redundancy must be a “genuine” redundancy, that is the role needs to be entirely redundant to the effect that it does not need to be done by anyone. A dismissal would not be a genuine redundancy if the employer still needs the employee’s job to be done by someone (for example if they hire someone else to do the job) or if the employee could have reasonably been given another job within the business.
The Fair Work Act requires that employers consult with employees before making significant decisions about stand downs and redundancies. Most modern Awards also require consultancy between employer and employee as well.
Whether you are an employer or an employee, if you find yourself in a position whereby a compulsory stand down or redundancy is on the cards, try to adopt a cooperative approach to your discussions and make detailed notes that you can refer back to at a later date if a dispute arises in relation to the matter.
From an employment law prospective, the situation Australia currently faces is entirely unprecedented. Never in our Nation’s history has there been such widespread upheaval to the industrial relations landscape in the form of stand downs, redundancies and terminations.
It remains to be seen how the law evolves in the coming months and years in light of the COVID-19 epidemic.