Covid-19 and its impact on employers and employees - an FAQ Covid-19 and its impact on employers and employees - an FAQ

Covid-19 and its impact on employers and employees - an FAQ

23 March 2020 | Employer's Liability

Social distancing and working from home are new norms for many in Australia. With closures of non-essential services, the prospect of a prolonged significant economic downturn as share markets drop dramatically across the world has become all too real. We have already seen substantial job losses foreshadowed among airlines, union calls for paid coronavirus leave and submissions from employers’ associations for a delay to any minimum wage increase. Unsurprisingly the SME market has and will continue to be hit particularly hard by the economic downturn.

As the COVID-19 situation continues to deteriorate, many businesses are preparing for an economic downturn in various ways, including making changes to labour arrangements and reducing their labour costs. Both are difficult decisions to make and endure, especially without any legal know-how. To assist, we've provided answers to some frequently asked questions for both employers and employees:

Can I stand down my employees?

The stand down provisions in section 524(1)(c)of the Fair Work Act 2009 provide that an employer may stand down an employee without being required to pay them, 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’. This provision is intended to be temporary in nature and in effect to ‘freeze’ the employment relationship as an alternative to termination.

Importantly, the term ‘usefully employed’ and ‘stoppage of work’ is not defined. However, a directive by the Government to cease operations (for example, as required by nightclubs, gyms, pubs and cinemas) will no doubt satisfy the definition. However, an employer cannot generally stand down employees simply because of a downturn of business conditions (even where that downturn is a result of circumstances outside of the employer’s control).  

Employers must also consider whether there are any applicable provisions contained in a modern award or enterprise agreement.

What is ‘Useful Employment’?

An employer that seeks to stand down employees, must demonstrate that there is no useful employment that the employees can perform.

The fundamental principles in determining whether or not an employee can be usefully employed are:

  1. if they can undertake work activities which are within the terms of their employment contract, even if they do not normally complete that kind of work
  2. if there is work for some but not all of the employees, you cannot validly stand down the entire workforce, and
  3. you cannot stand down the entire workforce only because using some workers during a stand-down period will reduce the workload when normal work resumes.

Employers must consider whether work from home or other alternative duties are available.

Can I stand down only some employees and not others?

The answer is no, as that would suggest that there is still some work for certain employees (even if not all). If you would like to stand down some but not all employees, you may be required to look at making positions redundant. In this case, you can engage in negotiations with your employees regarding alternatives to a redundancy.

Other options that you may consider instead of stand down include:

  1. seeking employees’ agreement to take paid or unpaid leave for a  period of time
  2. directing employees to take paid annual leave (in certain circumstances)
  3. negotiating a reduction of work hours (in certain circumstances), or
  4. making your employee’s position redundant.

Do employees still accrue leave during stand down?

The Fair Work Act recognises a period of stand down as ‘service’, meaning an employee will continue to accrue entitlements to annual leave and personal/carer’s leave under the National Employment Standards (NES), and will also continue to have the benefit of a public holiday that falls on a day the employee has ordinary hours of work.

What happens if I need to make positions redundant?

If redundancies are required, it's important to remember there are three requirements for a redundancy to be genuine:

  1. the business must no longer require the person's job to be performed by anyone because of changes in operational requirements (for example, a restructure due to a significant downturn in business)
  2. the business must consult with any employees who are covered by a modern award or enterprise agreement (in accordance with the relevant consultation provision). Please note that there are very specific consultation requirements in respective modern awards and enterprise agreements, and
  3. it must not have been reasonable in all the circumstances for the person to be redeployed within the business or an associated entity or that business, even in a position with less hours and reduced pay.

Failure to properly consider and adhere to the above steps may result in an Unfair Dismissal application in the Fair Work Commission.

What are my redundancy obligations?

If redundancies are made, you must consider your obligation to provide:

  1. redundancy pay (if any)
  2. notice of termination (or payment in lieu), and
  3. other statutory or contractual entitlements (including accrued but untaken annual leave, long service leave and/or unpaid wages).

Can I direct employees to take leave?

Employers can direct an employee to take annual leave, but only when an award or registered agreement allows it and that requirement is reasonable. While there is no definition of what is ‘reasonable’, relevant considerations include:

  1. the needs of the employee and employer’s business
  2. timing and direction to take leave, and
  3. the reasonableness of the period of notice.

Can I still make my employees redundant after standing them down?

The stand down provisions are not intended to apply indefinitely. If, after consideration of your business needs you are still experiencing a significant downturn of business or cash flow issues, redundancies may still occur, provided that they satisfy the redundancy requirements (set out above).

What if an employee cannot attend work because their child’s school has closed?

If an employee is unable to come to work because they need to care for a child whose school has closed, paid leave may be taken. Paid carer’s leave is available to permanent employees to look after a family member or member of their household who requires care and support because of a personal illness or unexpected emergency. The Fair Work Ombudsman has released information indicating it believes school closures due to the pandemic will constitute an unexpected emergency and attract paid carers leave. Casual employees are entitled to 2 days of unpaid carers leave per occasions. Permanent employees can take unpaid carer’s leave if they have no paid sick or carer’s leave left.

Can I change my employee’s hours or work given a downturn in business?

Employers need to consult with employees about a change to their regular roster or ordinary hours under their modern award or their enterprise agreement. In particular, employees have to:

  • provide information about the change
  • invite employees to give their views about the impact of the change (for example, any impact in relation to their family obligations), and
  • consider the employees views about the impact of the change.

Reducing a permanent employee’s ordinary hours will require their agreement and consent.

To discuss your particular circumstances, contact Laura Sowden or Corrina Dowling.

Corrina Dowling

Corrina Dowling

Special Counsel

Laura Sowden

Laura Sowden

Special Counsel