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COVID-19 Pandemic: What Are the Options for Employers?

With Government shutdowns of business likely, employers now face difficult decisions regarding their employees to ensure the survival of their businesses.

The options available to an employer depend on the employer’s particular circumstances; and range from agreed outcomes with employees to stand downs (without pay) and redundancies.

STANDING DOWN WITHOUT PAY

In the current circumstances, employers need to consider whether they can stand down employees without being required to pay them.  The relevant stand down provision in the Fair Work Act is section 524(1)(c).

The section provides that an employer may stand down an employee if “the employee cannot usefully be employed” and standing them down is “because of … a stoppage of work for any cause for which the employer cannot reasonably be held responsible”.  In these circumstances, an employee may be stood down without pay, however the employee remains in the employ of the employer and continues to accrue sick leave, annual leave and long service leave.

To be able to stand down an employee, an employer must be able to demonstrate:

  1. That there has been an actual stoppage of work and not merely a downturn. Examples of a stoppage of work include:
    • If there is enforceable government direction requiring the business to close and there is no work at all for the employees (even from home);
    • If a large proportion of the workforce is required to self-quarantine with the result that the remaining workforce cannot be usefully employed; and
    • If there is a stoppage of work due to a lack of supply.
  1. There must be no opportunity for the employee to be usefully employed in the business. Employers need to exhaust all other options such as working in some other way (for example, in an alternative role) before they seek to stand down an employee.
  1. That the cause of the stoppage is one for which the employer cannot reasonably be held responsible.

Where there has been only a downturn of work for a business, but it is possible for an employer to demonstrate that there has been a stoppage of work for a department/team or a particular employee, it may be possible for the employer to stand down the employee/s for whom work has stopped (provided the employee/s cannot be employed elsewhere in the business).

Care must be taken before standing down an employee. If an employer unlawfully stands down an employee, the employer may face a claim from the employee in the Fair Work Commission for unpaid wages. Legal advice should be obtained regarding an employer’s particular circumstances before an employer stands-down an employee. 

An employee who has been stood down without pay is able to access income support from the Government through its Jobseeker Payment scheme.

Agreed Outcomes 

An employer may look to reach agreement with an employee for alternative work arrangements such as:

  1. the employee taking paid annual or long service leave;
  2. the employee taking unpaid leave;
  3. the employee working reduced hours;
  4. a combination of the above.

To achieve such agreement usually requires open and honest communication by the employer regarding its financial situation and the challenges it is facing.

Redundancy 

If standing down an employee is not an option and a mutually suitable agreement for alternative working arrangement cannot be reached with an employee, the employer may wish to consider making the employee redundant.

For a redundancy to be an option, the role of the employee must be obsolete and there must be no other position of employment in the business available to the employee.

If an employee is made redundant, the employee’s employment is terminated. Upon termination the employer must pay the employee its accrued entitlements (annual leave and long service leave) and a redundancy payment which will vary depending on the employee’s length of service (the minimum redundancy payment is 4 weeks’ base pay for an employee of one year’s employment and the maximum redundancy payment is 12 weeks’ base pay).

In making an employee redundant there is the risk that the employee makes a claim against the employer for unfair or unlawful dismissal. It is therefore important the employer obtain legal advice before making any decisions in this regard.

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