Can employers stand down employees during the Coronavirus (COVID-19) outbreak?

The Coronavirus (COVID-19) outbreak has caused uncertainty, not least when it comes to people’s employment.

One of the current issues for employers is, how do they continue to pay employees, whether that may be by way of:

normal pay;

annual leave;

personal leave; or

long service leave,

in circumstances where the business is not generating sufficient income to meet liabilities.

Can employers ‘stand down’ and not pay their employees because of the Coronavirus (COVID-19)?

The answer is yes, but only in particular circumstances. However, getting it wrong could expose the employer to proceedings in the Fair Work Commission if key requirements under the Fair Work Act 2009 (Cth)(“the Act”) are not considered.

When can employees be asked to ‘stand down’?

An employer may stand down an employee if the employee cannot usefully be employed because of one of the following circumstances:

industrial action (other than industrial action organised or engaged in by the employer);

a breakdown of machinery or equipment, if the employer cannot reasonably be held responsible for the breakdown; or

a stoppage of work for any cause for which the employer cannot reasonably be held responsible.[1]

If an employer stands down employees, then they are not required to pay those employees.

How does the Coronavirus (COVID-19) affect the standing down of employees?

Whether the option of standing down employees is available in circumstances relating to the Coronavirus (COVID-19) is a case by case assessment of the relevant facts, and an employer should exercise the option cautiously.

An employee may only be stood down if they “cannot be usefully employed” because of the stoppage.[2]

This means that employees should:

be given the opportunity to perform any work that is available; and
be given work that they are capable of performing, even if it falls outside their usual duties,

before a decision is made to stand them down.

It is also important to remember that if an enterprise agreement or award applies, and either document contains a stand down provision, any decision to stand down employees must meet the standards set by those agreements.[3]

What are the alternative options to a ‘stand down’?

Stand down should be an option of last resort.

Employers should consider whether employees could be given an ex gratia payment or a form of “subsistence pay”, although there is no legal obligation to do so when employees have been stood down.[4]

Other options that an employer may consider instead of a stand down, include:

seeking employees’ agreement to take paid (or unpaid) leave for a period. Where paid leave, this at least has the benefit of reducing the debts of the business that will need to be paid out if the employee’s employment has to be terminated;

in limited circumstances, directing employees to take paid annual leave;

in limited circumstances, negotiating with employees to change regular rosters or hours of work; or
terminating the employment of the employees, in which case the employer may have to provide redundancy pay and pay out leave entitlements.

Importantly, if an employer simply faces a reduction in trade volumes or it is uneconomical to continue to employ staff (even if that reduction in trade can be traced back to the Coronavirus (COVID-19), it is unlikely this will be considered a “stoppage” of work for the purposes of the legislation.[5]

Finally, section 524 of the Act is intended to relieve an employer of the obligation to pay wages to employees who cannot be usefully employed in limited circumstances. This limitation is founded on the reality that the consequences of a stand down can have a severe impact on an employee and their family, as the employee may be deprived of wages for a significant period.

How can DSA Law help?

If you have an employment law enquiry, please Contact Us or one of the Employment Lawyers at DSA Law on (03) 8595 9580 so we can assist you.

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

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

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

[4] Coronavirus and Australian Work Place Laws, Fair Work Ombudsman (Webpage, 2020)

[5] Australian Federation of Air Pilots v Bristow Helicopters Australia Pty Ltd [2016] FWC 8515.