Warning: COVID-19 and using this letter
Standing down employees without pay is usually seen as a last resort.
Employers usually exhaust employees taking available paid leave such as annual leave before considering standing down without pay and as with many other COVID-19 related decisions you should consider balancing affordability, culture and engagement with the law before deciding what to do.
Natural disasters and pandemics, such as the current COVID-19 pandemic, can place businesses in circumstances where they are unable to usefully employ an employee or group of employees.
It is critical that there is a stoppage of work to trigger a stand down. That is, all or part of the business must cease operations in order to lawfully stand employees down without pay.
So, you need to ask yourself:
- Is there a stoppage of work?
- Is it for a reason reasonably outside your control?
- Can the affected employees be employed to perform useful work?
You cannot stand down an employee if there is useful work available within the ambit of their usual job and employment contract (focus on the employee’s role and job description to make this assessment). Useful work does not have to be the work that the employee ordinarily performs but needs to be genuine productive work not made up work.
This commentary is intended to help you understand your options and decide what is right for your business. Please contact Australian Business Lawyers & Advisors if you have specific questions or need legal advice on the issues facing your business during COVID-19 including whether or not you can lawfully implement a stand down.
Who can use this correspondence
This document can be used by all employers throughout Australia, except the following excluded employers:
- Non-constitutional corporation employers in Western Australia
- State public sector employees (i.e. employees of a Minister, the Governor, or the Crown) and
- Local government employers — except in Tasmania and Victoria.
- Excluded employers may however, wish to use this document, but they should first obtain legal advice.
When is an employer permitted to stand down an employee?
The Act permits an employer to stand down an employee when the employee cannot usefully be employed because of any of the following circumstances:
- Industrial action which is organised or engaged in by the employees of the business; or
- A breakdown of machinery or equipment for which the employer cannot reasonably be held responsible; or
- A stoppage of work for any reason for which the employer cannot reasonably be held responsible. For example, this may include a natural disaster ie. Cyclone, flood, bushfire etc.
An employer is not required to pay an employee during a stand down period.
What if the business has an industrial instrument or contract of employment containing stand down provisions?
If there is an industrial instrument (for example, an award or enterprise agreement), or a contract of employment that applies to an employee’s employment that contains a provision relating to stand down, the provision in those instruments may apply. If you are unsure of whether a provision in an industrial instrument or a contract of employment relating to stand down applies, you should seek specific advice.
However, such a provision will only apply where it permits an employer to stand down an employee where the employee cannot be usefully employed, due to the reasons listed above (being industrial action, breakdown, or a stoppage of work). If the provision allows an employer to stand down an employee for a reason other than that listed above, an employer will not be permitted to stand down an employee for that reason.
What if the industrial instrument or contract of employment contains other pre-conditions?
It is not uncommon for an industrial instrument or contract of employment, which allows an employer to stand down an employee, to provide other pre-conditions to be met before an employee can be stood down.
Common pre-conditions include the requirement to consult with employees, or to provide employees with a certain amount of notice.
Therefore, employers must ensure that they comply with the provisions of a stand down provision in any relevant industrial instrument or contract of employment before implementing a stand down.
Use of other leave accrual entitlements during stand down period
This letter provides employees with the option of making an election to use any accrued leave entitlements (such as annual leave or long service leave) during the stand down period.
Whilst an employer is not required to pay an employee during a stand down period (subject to any terms to the contrary in an industrial instrument or contract of employment), employees may elect to use any accrued entitlements during the period to ensure that they continue to receive payment.
Any approval or non-approval for the taking of leave accruals should be in accordance with any applicable workplace policy, and the relevant legislation.
While this letter may be used to stand down employees who cannot usefully be employed because of industrial action, it should not be used for employees who are taking industrial action as payments to employees taking industrial action are prohibited under relevant legislation.