The challenging and evolving nature of the COVID-19 outbreak on businesses has brought to the forefront the provision of stand downs in employment. The media has shown us heartbreaking scenes of businesses forced to close due to government direction, airplanes grounded and people out of work lining the streets outside Centrelink some still wearing the uniforms they had shown up to work in. So what exactly is a stand down and when can it be executed? It’s not as simple as it might seem.
What is a stand down?
A stand down is when an employee still remains employed by a business but no longer completes work and therefore is no longer paid. An employee can generally access accrued annual leave and long service leave during a stand down and they continue to accrue entitlements.
Industrial Instruments, such as Modern Awards or Enterprise Agreements as well as contracts of employment, may contain provisions which allow stand downs and may prescribe when and how these can transpire. Where there is no provision, employers may utilise section 524 of the Fair Work Act.
In what instances can I stand down my employees?
The first step all employers need to take when considering a stand down is to understand the provisions of a contract of employment or industrial instrument. Where there is a provision outlined in these documents you must follow the process cautiously and in its entirety.
Where there is no provision, employers must follow the prescriptive process as outlined in the Fair Work Act. Employers need to be very aware that there are only limited situations in which you can stand down employees as a result of the COVID-19 outbreak. Some examples are outlined below:
- a business has closed because of an enforceable government direction relating to non-essential services (which means there is no work at all for employees to do even from another location)
- a large proportion of the workforce is in self-quarantine meaning the remaining employees cannot be usefully employed
- there’s a stoppage of work due to lack of supply for which the employer can’t be held responsible.
- there’s a stoppage of work for any cause which the employer cannot be reasonably held responsible
Each situation needs to be examined on a case by case basis and the requirement for the stand down needs to be clearly articulated and linked with the situation resulting in the stand down.
Employers need to carefully consider the following:
- Whether employees considered for stand down could be utilised elsewhere in a business and if redeployment opportunities exist
- If the stoppage of work is sufficient enough for an employer to not be reasonably held responsible. An example of this is where an enforceable government direction has resulted in the closure of a business. In this instance the situation in which the stoppage of work occurred was completely out of the hands of the employer.
When can’t I stand down employees?
There are very few situations where you can legally stand down employees. The only reasons to execute a stand down are outlined above.
While in the current COVID-19 crisis we are seeing businesses struggle, you cannot execute a stand down where the major issue is ‘less than ideal business circumstances’, which includes a reduction in work as a result of an economic downturn. Technically speaking while a business may be struggling financially there is no fundamental reason preventing the business from operating. Therefore, the Fair Work Act does not allow stand downs in these circumstances.
What do I need to be aware of?
There are significant risks involved in standing down employees if you do not execute the process properly or you unlawfully stand down employees.
As an employer, you face possible back payment of wages and annual leave and your employees may be directed to return to useful work within your business. An employer may also be liable for penalties.
We recommend that stand downs should be carefully examined and that you seek external advice prior to the execution of any process. There are other options available for you to consider and it is beneficial for you to understand all your options. Coming to an agreement with your employees on changes to their hours, benefits, etc. should all be considered before you look at stand downs. A stand down should be one of the last options you consider, not the first option.
For any help or general HR advice on how navigating this challenging time, please contact the team at Employee Matters on (02) 8021 4206 – or email us on email@example.com
By Tracey Black