Business guide to Coronavirus

Standing down employees: what does it really mean?

No matter the size of the organisation, the decision to stand down is never lightly taken and because of the COVID-19 pandemic, many businesses may soon need to make this decision quickly, if they have not already. 

There are a number of considerations employers should make before taking action. 

Firstly, does an employer have the right to stand down employees?

Usually, if a full-time or part-time employee has been asked by an employer not to work, they would be entitled to be paid. This is usually the case where there has been misconduct and a workplace investigation needs to take place. 

But under the Fair Work Act 2009, Employers can stand down employees without pay if there is a stoppage of work, which the employer cannot be reasonably held responsible for (e.g. a natural disaster), and the employee cannot be usefully employed.

Employees selected for stand down may be given the option of taking any accrued paid leave, such as annual leave or long service leave, in lieu of being stood down without pay. However, during a period of stand down where they do not take paid leave, they are otherwise taken to be stood down.

No modern award provides for a stand down, although an enterprise agreement or contract of employment may include terms that require an employer meet additional requirements before standing down an employee, e.g. requirements relating to consultation or notice.

Where a contract of employment or applicable enterprise agreement contains a stand down provision relating to the same circumstances as the Fair Work Act, then you must act in accordance with the contract of employment or enterprise agreement as the Fair Work Act stand down provisions will not apply.

How much notice does an employer need to provide if standing down?

The Fair Work Act doesn’t specify a timeframe. It is therefore important that any stand down decisions are implemented as fairly and reasonably as possible to ensure that any affected employees are given as much notice as possible.

Under what circumstances can an employer justify standing down an employee?

Under the Fair Work Act, an employer may stand down an employee during a period in which the employee cannot be usefully employed because of one of the following circumstances:

  • industrial action (other than industrial action organised or engaged in by the employer, e.g. a lockout by the employer)
  • a breakdown of machinery or equipment, if the employer cannot reasonably be held responsible for the breakdown
  • a stoppage of work for any cause for which the employer cannot reasonably be held responsible (floods, fire, power failure).

“A stoppage of work will only occur when the particular employees concerned have no work to do or are otherwise prevented from performing their work, due to causes that their employer cannot be held responsible for,” said Joe Murphy, Managing Director at Australian Business Lawyers & Advisors.  

“This means, a general downturn of work, or circumstances where a business is incurring losses, even substantial losses, does not automatically enliven the right to stand down.

“The ability to stand employees down is quite limited and the current circumstances of the COVID-19 pandemic do not automatically qualify as a lawful reason to stand employees down.  

Businesses should always seek advice before standing down. Where stand down is not available, businesses should consider the alternatives available such as reaching an agreement with employees as to the taking of leave, cutting hours and pay, or alternatively redundancy.”

What does ‘usefully employed’ mean?

The Fair Work Act does not provide a definition of the term ‘usefully employed’, Courts and tribunals have usually determined that if an employer is able to obtain some benefit or value for work that could be performed by an employee, then the employer would not be able to stand down the employee. 

The meaning of this term is critical in determining whether an employer is justified in applying the stand down provision to a particular circumstance. The onus would be on the employer to establish that the employees concerned cannot be usefully employed.

An employer must show that all reasonable steps were taken to find useful employment for the employee(s). This does not mean an employer is bound to employ those affected in occupations significantly different to their contracted position or that an employer should change the whole system of work and put an obsolete plant into use to maintain the continuity of employment.

For example, it does not mean an employer is required to offer a skilled tradesperson the work of sweeping floors just to keep them employed.

Employers should consider whether employees can work from home, from a different location or in an otherwise different capacity than usual before initiating a stand down. 

Does stand down affect an employee’s entitlements?

Being stood down feels very much like unpaid leave, however, it is better described as a period of authorised absence without pay. During a stand down, the employee remains employed – without work or income (if not using leave entitlements). 

It is therefore important that any stand down decisions be implemented as fairly and reasonably as possible and that any affected employees be given as much notice as possible.

The Fair Work Act recognises a period of stand down as ‘service’ which means an employee will continue to accrue entitlements such as annual leave and personal leave under the National Employment Standards (NES), as well as an entitlement to a public holiday that falls on a day the employee has ordinary hours of work.

Can the employee look for alternative work if stood down?

Double-check the employment contract. Generally, this is at the discretion of the business and usually in the case where the alternate employment does not pose any conflicts of interest. In the case of Qantas (who stood down two-thirds of their staff recently), employees were told they were able to seek alternative employment and still keep their jobs as well as access unemployment benefits.

More information and resources

To help ensure you have the right policies and procedures in place, you can download helpful resources like Business Australia's free Employer Toolkit, which includes:

  • Leave policy 
  • Letter to employee advising stand down 
  • Mental Health Policy 
  • Working from Home Checklist 
  • Working from Home Policy 
  • Ergonomics Checklist

HR Advance has other helpful policies to help you during this period such as: 

We recommend you seek specific legal advice before making any changes to your workforce. Australian Business Lawyers & Advisors can help you find solutions and minimise the risk to your business.

Business Australia is on hand with a range of resources to help employers navigate this difficult time, with practical advice and information to maintain and sustain your business. Visit our resource hub to find out more.

Catherine Ngo

Senior Editor and Content Writer, Business Australia

Catherine is passionate about unravelling the latest news and insights to help entrepreneurs, small business owners and employers.

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