27 Mar Fair Work – When can employees be stood down without pay?
During these unprecedented times, many businesses will be faced with difficult staffing decisions that may be due to government restrictions or operational challenges. Many employees will be stood down during this period, meaning they will remain employed without pay.
Under the Fair Work Act, an employee can only be stood down without pay if they cannot be usefully employed because of a stoppage of work for any cause for which the employer cannot reasonably be held responsible.
Whether the option of standing down employees is available in circumstances relating to coronavirus is very fact dependent and an employer should exercise the option cautiously. The employer must be able to demonstrate that:
- there is a stoppage of work
- the employees to be stood down cannot be usefully employed (which is not limited to the work an employee usually performs)
- the cause of the stoppage must also be one that the employer cannot reasonably be held responsible for.
If an employer unlawfully stands down employees without pay, the employees will likely be able to recover unpaid wages.
Employers cannot generally stand down employees simply because of a deterioration of business conditions or because an employee has coronavirus.
WHEN CAN EMPLOYEES BE STOOD DOWN?
Some examples of when employers may be able to stand down employees include:
- if there was an enforceable government direction requiring the business to close (which means there is no work at all for the employees to do, even from another location)
- if a large proportion of the workforce was required to self-quarantine with the result that the remaining employees/workforce cannot usefully be employed
- if there was a stoppage of work due to lack of supply for which the employer could not be held responsible.
This is not an exhaustive list.
Enterprise agreements and employment contracts can have different or extra rules about when an employer can stand down an employee without pay, for example, a requirement to notify or consult. Employers should consider whether their obligations are impacted by any applicable enterprise agreement, award, employees’ employment contracts or workplace policies.
Employers are not required to make payments to employees for the period of a stand down but may choose to pay their employees. Employees accrue leave as normal for the duration of the stand down.
An employee is not taken to be stood down during a period when the employee is taking paid or unpaid leave that is authorised by the employer or the employee is otherwise authorised to be absent.
The stand down provisions in the Fair Work Act, enterprise agreements or contracts of employment are not usually relied on for casual employees. See What about casual employees and independent contractors?
Other options that an employer may consider instead of stand down include:
- seeking employees’ agreement to take paid (or unpaid) leave for a period
- in limited circumstances, directing employees to take paid annual leave
- in limited circumstances, negotiating with employees to change regular rosters or hours of work
- terminating the employment of the employees, in which case the employer may have to provide redundancy pay. See What if an employer needs to let employees go?
If an employee is stood down, they may be able to take up other employment for the duration of the stand down. Employees usually need their employer’s agreement first. Employees should also consider if they have other limits on the work they can do for another employer (for example, their employment contract or a workplace policy may prevent them working for a competitor).
The Fair Work Act includes requirements that employers have to meet before they can terminate an employee’s employment, such as providing notice of termination. An employee is also protected from being dismissed because of discrimination, a reason that is harsh, unjust or unreasonable or another protected right. Employers are prohibited from exerting undue influence or undue pressure on employees in relation to making certain agreements or arrangements.
Example: Lack of vital supply – Stand down
Sally’s company operates a business that imports and sells electrical goods which are manufactured in China. The factory in China ceases to operate as a result of coronavirus and announces that it will not be exporting any goods for a period of at least 3 months.
Sally explores other options but is unable to identify any alternative work of any value for her 20 permanent employees to do.
Sally closes her shop and regrettably informs her employees that they are to be stood down without pay. Sally explains that they are entitled to take any accrued paid leave during the period as an alternative to being stood down without pay.
Example: Non-essential services – stand down of employees
Gemma is a part-time employee at a cinema complex in Melbourne’s CBD. The cinema employs 10 permanent employees and 15 casual employees. The Victorian Government issued an enforceable government direction that requires certain non-essential services to shut down because of coronavirus.
Gemma’s manager calls her to explain that the cinema is closed for the duration of the Government’s direction and that cinema management will need to stand all permanent employees down without pay, as they can’t be usefully employed.
Gemma and her colleagues are advised that permanent employees can take any accrued annual leave they have instead of being stood down without pay. However, casual employees are not entitled to be paid while the business is closed.
Example: Non-essential services – no stand down of employees
Teddy is a part-time food and beverage attendant in a Sydney restaurant. The New South Wales Government issued an enforceable government direction that certain non-essential services must shut down because of coronavirus.
Teddy’s employer contacts him to let him know that the restaurant has closed its dining service immediately for the duration of the direction. The restaurant will continue offering its take away and delivery service. Teddy’s employer lets him know that instead of carrying out his usual waiting duties at the restaurant, he and the other waiting staff will be needed to help with receiving, packing and delivering orders.
This is not a stand down because Teddy can still be usefully employed, so he’ll continue to be paid.
Example: Small business owner – stand down of employee
Tom is a hairdresser who runs a hairdressing business in Adelaide. Tom’s only employee is a part-time hairdressing assistant, James, who washes clients’ hair and cleans the shop.
Tom needs to self-quarantine for 14 days because of an enforceable government direction.
Tom calls James to let him know that he needs to close the business while he’s in quarantine. He also explains that he will need to stand down James without pay while the business is closed, as James can’t be usefully employed. Tom lets James know that as a permanent employee he can take accrued annual leave instead of being stood down without pay.
Example: Small business owner – no stand down of employees
Mary runs a painting business in Brisbane. She employs three full-time painters.
Mary needs to self-quarantine for 14 days as a result of an enforceable government direction.
Mary calls her employees to let them know that she won’t be able to come into work while she’s in quarantine. She explains the painting jobs the business has coming up and explains over the phone how to carry out that work. Because there hasn’t been a stoppage of work and her employees can still be usefully employed while Mary isn’t at work, Mary can’t stand them down without pay.
Example: Large proportion of workforce required to self-quarantine – remaining employees stood down
Waterpurr Corporation operates a business that manufactures water purifying machines. It employs 12 employees in its manufacturing division.
9 of the employees in Waterpurr’s manufacturing division need to self-quarantine for 14 days because of an enforceable government direction.
Waterpurr can’t identify any other way to keep the manufacturing work going. This means that for those 14 days, the remaining 3 manufacturing employees aren’t able to continue manufacturing water purifying machines, because they don’t have enough manufacturing employees on site to safely operate the machinery. There isn’t any useful work for these employees to perform during those 14 days.
Waterpurr stands down the 3 remaining manufacturing employees without pay for 14 days (until the 9 self-quarantined employees can return to work) as they can’t be usefully employed.
Example: Large proportion of workforce required to self-quarantine – remaining employees not stood down
Screen Go Corporation operates a business that manufactures and distributes computer screens. It employs 8 full-time employees in its manufacturing division.
5 of the employees in Screen Go’s manufacturing division need to self-quarantine for 14 days because of an enforceable government direction.
This means that for those 14 days, the remaining 3 employees can’t continue manufacturing computer screens, because they don’t have enough manufacturing employees on site to safely operate the machinery.
However, they can be re-assigned to help Screen Go’s packaging division pack and distribute computer screens.
As these manufacturing employees can be usefully employed, Screen Go cannot stand them down without pay.
Example: Businesses who service non-essential businesses which have closed down – employees stood down
Anica owns a business called Gym Fix, which provides repair services for gym equipment onsite at two large fitness centres in Victoria. Gym Fix employs 3 full-time technicians to perform this work.
Gym Fix’s two fitness centre clients contact Anica and say they have closed because of the Victorian Government’s enforceable government direction. Anica asks the fitness centres if her business can continue repair work while the centres are closed. The centres say that no repair work can be performed during this period as they will be completely closed and it’s not possible for equipment to be moved offsite for this purpose.
Anica calls the 3 technicians and explains that they cannot be usefully employed as their repair work at the fitness centres has stopped, and there is no other useful work for them to do.
Anica informs the technicians that they are stood down without pay for the period that the fitness centres are closed, and that they can take any accrued annual leave if they prefer.