Can my employer stand me down?

Stand down – what does the Fair Work Act say?

As a result of the current circumstances, a seldom regarded section of the Fair Work Act 2009 (the Act), is getting a lot of attention. Specifically, Part 3-5 of the Act gives an employer the ability to ‘stand down’ employees, without pay, in certain circumstances.

Despite its promises, Part 3-5 is not a silver bullet for employers who might be looking for ways to reduce their labour costs during this period.

Indeed, employers who rush to stand down employees, without giving proper consideration to their ability to do so, risk exposing themselves to claims for:

• redundancy payments;
• back payment of wages not paid during the course of the stand down;
• breach of consultation provisions; and
• potential civil penalties for contraventions of the Act.

What should be considered before stand downs?

Prior to standing down an employee, an employer should consider whether there are terms in an applicable enterprise agreement, award or the contract of employment, that deal with the circumstances in which an employee can be stood down.

If your award, enterprise agreement or contract is silent on the question of stand downs (or you are not covered by an award or enterprise agreement, and/or don’t have a contract), then the provisions in the Act will set the limits for what your employer can (and cannot) do in the circumstances.

The relevant provision is as follows:

s.524 Employer may stand down employees in certain circumstances

(1) An employer may, under this subsection, stand down an employee during a period in which the employee cannot usefully be employed because of one of the following circumstances:

a)  industrial action (other than industrial action organised or engaged in by the employer);
b)  a breakdown of machinery or equipment, if the employer can not reasonably be held responsible for the breakdown;
c)  a stoppage of work for any cause for which the employer can not reasonably be held responsible.
…

(3) If an employer stands down an employee during a period under subsection (1), the employer is not required to make payments to the employee for that period.

Stoppage of work

For the purpose of this article, we have only considered the impact of s.524(1)(c), which allows an employer to stand down an employee, where the employee cannot usefully be employed, because of a stoppage of work for any cause for which the employer cannot reasonably be held responsible.

The current coronavirus pandemic potentially falls into this category for many employers.

Stoppage of work v slowing of work

Of critical importance is the fact that the employer’s ability to rely on s.524(1)(c) of the Act, requires work to have stopped and the employee must not be able to be ‘usefully employed’ by the employer.

A scenario where work has slowed down to the point where the employer only requires three employees, out of the four employees that it employs, may not fall within the scope of the stand down provisions in the Act, by reason of there not being a ‘stoppage’ of work’. Each case will be determined according to the applicable facts at the time.  

If there has not been a stoppage, then the employer cannot stand down the employee under s.524(1)(c) of the Act, even if they are surplus to the business’s requirements. In such circumstances, it may be appropriate to consider whether the position performed by the employee is redundant, due to a change in the operational requirements of the employer’s enterprise. In such circumstances, an employee may then be eligible for redundancy entitlements.

Government coronavirus responses have seen some confusion regarding stand downs

When considering the different measures enacted by the Federal and/or State governments in response to the coronavirus, it is easy to see where the confusion arises.

These measures have resulted in the total or near total shut down of certain business and severely limited the operations of others. Many more businesses are dealing with the secondary effects of the shutdowns, including decreased work/revenue.

The following examples may help illustrate when s.524 of the Act is likely to come into play.

Scenarios where stand downs may be possible

Example 1

Following the government shut down of gyms together with cinemas and nightclubs, employers in these industries would almost certainly be permitted to stand down their employees under the Act (assuming there was no other useful work that they could perform).  

This is because the work that these employees would otherwise perform has stopped completely, as a result of the government’s direction that these businesses must close. If the employer is ‘directed to close’, then the resultant stoppage is for a reason for which the employer cannot reasonably be held responsible.

Example 2

A café that is only permitted to serve take away coffee or food and can no longer offer sit-down meals, as a result of the government restricting the sale of food and drinks to takeaway only, may be able to stand down its wait staff. Arguably, however, they would not be allowed to stand down their second barista, despite there not being sufficient work to justify the ongoing employment of two baristas.

It may, however, be able to lawfully terminate the employment of the second barista due to redundancy. Again, redundancy entitlements may be payable, depending on the status of the employee and employer at the time of termination.

Example 3

A bakery that is not subject to any direct restrictions on operations may be permitted to stand down its counter staff in circumstances where its bakers have come into contact with a person diagnosed with COVID-19, and are required by the government to isolate for 14 days.

In such circumstances, work has stopped (albeit temporarily – while the bakers isolate) and the counter staff cannot be usefully employed without fresh baked goods to sell.

Example 4

An accounting firm that continues to operate as normal, with its employees working from home where possible, would not be permitted to stand down staff under the Act due to a decrease in work associated with a number of clients deferring the completion of their tax returns, in order to take advantage of the government’s decision to extend the deadline in this space.

In this scenario, work has not stopped but the reduction in work may cause the firm to look at making some staff redundant.

Your rights and entitlements during a stand down

If you are stood down by your employer, your rights and entitlements as an employee will continue, with the exception of your right to be paid. If you have been stood down, and your employer is eligible, you may be able to access JobKeeper payments. In this scenario, different provisions apply in relation to stand down.

Importantly, in the event of s s.524 stand down, your length of service will not be broken and you will continue to accrue leave over the period you are stood down. You also have the right to be paid for leave that is taken during the stand down, such as annual leave, long service leave and/or personal leave, contingent on you being eligible to take that leave. For completeness, we note that the issue of the right of an employee to take personal leave is currently the subject of Federal Court litigation, which will likely have something to say about this issue.

Further, it is arguable that s.525 of the Act requires employers to pay employees for public holidays that fall during the course of the stand down, as a public holiday would likely fall within the definition of an ‘authorised absence’ for the purpose of s.525(b) of the Act. This section provides:

s.525 Employee not stood down during a period of authorised leave or absence

An employee is not taken to be stood down under subsection 524(1) during a period when the employee:

a)  is taking paid or unpaid leave that is authorised by the employer; or
b)  is otherwise authorised to be absent from his or her employment.

How long can I be stood down for?

There are two factors to consider in determining the length of a valid stand down/

Firstly, is the stoppage of work still in effect and secondly, can the employee be usefully employed; i.e., does the employer have useful work for the employee to perform?

Assuming that the government restrictions that led to the stand down continue for the foreseeable future, the question as to whether an employee can be usefully employed is a question that needs to be asked – and answered – on a daily basis.

In one of the few judgments dealing with stand downs (RE Carpenters and Joiners Award 1967 [1971] CthArbRp 479), the Full Court of the Federal Court said:

“It cannot be said that an employee cannot be usefully employed on a particular day if there is a day’s work available for him which if performed on that day, will, having regard to the probable course of the employer’s business, contribute beneficially to the reasonable and efficient conduct thereof.”

It follows that, if the employee can be usefully employed on a particular day, the employer is not entitled to stand the employee down on that day.

Disputing a stand down

In the event that a dispute arises as to whether a stand down under s.524 of the Act is valid, the Fair Work Commission has the power to deal with the dispute, on application by the affected employee or their union representative.

The Commission may deal with the dispute by convening a mediation or conciliation, making a recommendation or expressing an opinion as to the validity of the stand down or by arbitrating the dispute.

If the stand down is not valid, then the employee will likely be entitled to recover the wages that they would have otherwise earned over the period that they were purportedly stood down. The employer may also find themselves liable for penalties associated with not having paid wages over this period.

Before you decide to challenge a stand down, we recommend seeking legal advice about your specific circumstances. The relatively small number of decisions dealing with this area of law means that there is a high degree of uncertainty as to how the Commission and the Courts will interpret these provisions of the Act.

Legal advice and assistance during COVID-19

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Our team is fully equipped to work remotely whilst still delivering high-quality legal services.

We are working closely with the courts and our colleagues to ensure services to all new and existing clients are delivered efficiently and with as little disruption as possible.

You can contact us by phone or email to arrange a telephone or videoconference consultation.

Phone: 1800 659 114

Email: general@hallpayne.com.au

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Looking for more information about your employment rights during COVID-19?

You may find the following articles interesting or useful.

• The JobKeeper scheme: employee entitlements and employer responsibilities
• Implications of Coronavirus for your Employment
• Are you safe at work during the COVID-19 pandemic? WHS rights and entitlements
• Employment rights and obligations while working from home during COVID-19
• COVID-19 and Workers’ Compensation