Many businesses are struggling at present with the turndown in sales that are a consequence of the Government’s social distancing rules to help slow down the spread of COVID-19. Those businesses are seeking to minimise costs so as to be able to survive until the Coronavirus heath crisis ends, which appears to be at least 6 months away.
The 2 biggest expenses in business are generally rent and employee/payroll. In another blog post, we discuss how lessors and lessees can negotiate mutually beneficial but generally temporary changes to their commercial leases but in this post, we discuss employee issues.
Options for employers
It is always an option for employers and employees to agree on things such as:
- working remotely;
- reduced hours;
- reduced pay; or
- taking leave (either accrued or in advance).
Where a business is unable to agree with their staff as to such matters, or if the business needs to significantly and quickly reduce costs or go into hibernation and not just change the way it goes about its business, the first point of reference in relation to the employer/employee relationship is the Employment Contract, followed by any relevant Award. If an Enterprise Bargaining Agreement or EBA applies, then that is the place to look.
Casuals and those on probation are unfortunately the first to be let go as employers seek to minimise costs. This article assumes full time or part time employment.
Often, employment contracts have provisions that allow for the standing down of employees where there is not enough work to keep them engaged.
Assuming there is such a right, then if there is work they can do (even if not their normal role), they can be redeployed but if not, the standdown option generally would be available.
Standdowns are periods where the employment relationship is still in place but there is no payment made by the employer.
So as to keep paying employees at such a time when a standdown is warranted, a business could for example give notice of a requirement to take any accrued annual leave and possibly accrued long service leave. Taking leave in advance is also an option but it does not assist the business as it is still incurring the wage costs and the employees are then in debt to their employer for leave taken but not yet earned.
A benefit to the business of paying out leave entitlements is that this also reduces the businesses’ leave liability in its books (and the benefit to the employee is still getting paid). Note that the payment of leave loading (if leave loading is required by any Award or agreement) is also required when leave is being taken. There is generally no such payment of loading if leave is taken in advance).
Employment contracts or Awards may provided for a period of notice for a standdown but in the absence of that, reasonable notice should suffice.
Where it is not covered in any other document, s.524 of the Fair Work Act 2009 (Cth) can apply. It provides:
(1) An employer may … stand down an employee during a period in which the employee cannot usefully be employed because of one of the following circumstances:
(c) a stoppage of work for any cause for which the employer cannot reasonably be held responsible.
Where an employer simply faces a reduction in trade volumes or where it is merely uneconomical to continue to employ staff, it can be a grey area as to whether this is considered a “stoppage” of work for the purposes of the legislation however, where an industry has been shut down as a result of a ministerial direction or public health orders, it will generally be uncontested.
Whilst on stand down:
- annual leave, personal leave and long service continue to accrue;
- employees can access personal and carer’s leave (provided they comply with notice and evidence requirements); and
- employees must be paid for public holidays where it would ordinarily fall on a day they have been stood down.
The main thing to note is that on a standdown, the employees are not being terminated or made redundant – the role is still there, just they can’t be usefully engaged. It may be that termination or redundancy is still an option but it is generally a last resort.
NOTE: Since this blogpost, the Government has announced the JobKeeper subsidy.
For further information in relation to legal issues arising from Coronavirus or if you need to discuss how to best deal with employment issues in light of the current health crisis, please contact us on (02) 9521 2455 or email email@example.com.
This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your legal concerns or objectives.
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