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Options and considerations for employers in these challenging times
A crisis such as COVID-19 affects the economy and businesses in different ways. As an employer, you will need to consider the duration of the crisis and the impact it is having or will have on the business.
Many employers are putting in place measures to weather the COVID-19 economic implications. Whilst the initial reaction is to reduce staff costs, this may not necessarily assist businesses with managing through the current crisis.
Before taking any action, such as stand downs or redundancies, consider these important questions:
Have you communicated with your staff about the tough decisions you need to make?
Are any staff willing to take extended unpaid leave?
Are any staff willing to work fewer hours (and be paid pro-rata), or voluntarily take a temporary pay cut?
That said, employers may consider the following options to deal with the economic challenges:
Direction to Access Leave Entitlements
While there is scope to direct employees to access leave entitlements in relation to a mandated close down associated with COVID-19, measures need to be taken in order for it to be considered reasonable, including having regard to applicable employment documentation such as an Enterprise Agreement or applicable Awards.
Employers should implement an effective communication process to ensure that the message is appropriately delivered.
Reduction of Hours, Pay Cuts or Leave Without Pay
Where possible, consider reducing an employee’s hours of work or enacting leave without pay arrangements. These can be effective interim measures.
Prior to implementation, employers should explore and discuss the current situation with staff through effective communication and consultation.
Some Awards have recently been varied by the Fair Work Commission to allow greater power for employers to reduce hours (including the Nurses Award 2010, Aged Care Award 2010 and the Health Professionals and Support Services Award 2010).
Stand Down of Employees
The bar before employees can be legally stood down under the Fair Work Act 2019 (Cth) (‘the Act’) is justifiably high and should be seen as the ‘last resort’ option. However, various Job-Keeper-like financial stimulus initiatives provided by the Government have made this option arguably more palatable than redundancy as these have aimed to ensure the employee’s tenure remains unsevered with the organisation.
Section 524 of the Act permits an employer to stand down an employee without pay during a period in which the employee cannot be ‘usefully’ employed. If there is a stand down provision in an Enterprise Agreement or Contract of Employment, the employer is required to abide by this. For example, an employer may be required to consult with the employees that they are considering standing down with respect to the current situation.
Stand down of employees generally applies where there is a stoppage of work that is beyond the control of the employer, and the employees cannot be usefully engaged. Stand downs are temporary in nature and are intended to ‘freeze’ the employment relationship as an alternative to termination, and employees cannot be stood down indefinitely. During a stand down period, employees are unpaid, but the employee would still be entitled to applicable benefits.
Employers are not required to pay employees during a stand down, but they may choose to.
An employee who is stood down is still employed and continues to accrue leave entitlements during the period (even where they are not paid for work).
Where an employee has applied for leave prior to the stand down taking effect, they are still entitled to that leave.
After a stand down takes effect you don’t have to approve leave requests, but it is good practice to allow employees to take their paid leave accruals in this circumstance.
Employees can seek alternative work while stood down and this does not trigger their resignation.
EBA’s and employment contracts can have varying rules about standing down an employee without pay.
If employment cannot be resumed, the employee is still be entitled to any applicable termination benefits.
Employers cannot generally stand down employees simply because of a deterioration of business conditions or because an employee has coronavirus.
Some examples of when employers may be able to stand down employees include (this is not an exhaustive list):
If there was an enforceable government order or direction requiring the business to close (which means there is no work at all for the employees to do, even from another location).
If a large proportion of the workforce was required to self-quarantine with the result that no useful work was able to be performed in the business by the remaining employees/workforce
If there was a stoppage of work due to lack of supply for which the employer could not be held responsible.
Important questions to consider before standing down an employee:
Can you deploy your staff to any other useful duties?
If you need to reduce hours or implement stand downs, are you allocating this fairly (based on genuine business needs, avoiding discrimination)?
Stand downs can be implemented on part or all of the business. There are areas where stand down scenarios may not be clear cut, and in normal circumstances would appear to be more like redundancy. If unions or employees challenge your actions, the Fair Work Commission may take a practical view in these uncertain times. If the Fair Work Commission decides it was redundancy rather than a stand down, employers can apply to vary redundancy obligations in certain circumstances.
Redundancy is where the employer no longer requires the work to be performed by anyone, the employment ends, and the employer is required to pay redundancy (unless they fall under the small business exemption).
Redundancies may be a suitable response to a downturn of business associated with COVID-19. As with any redundancy, steps need to be taken to ensure the redundancies are “genuine” to avoid potential unfair dismissal claims:
The business must no longer require the person's job to be performed by anyone because of changes in operational requirements,
The business must consult with any employees who are covered by a Modern Award, Employment Contract, Enterprise Agreement (in accordance with the relevant consultation provision); and
It must not have been unreasonable in all the circumstances for the person to be redeployed within the business or an associated entity. If redundancies are implemented, you must consider your obligation to provide:
- redundancy pay;
- provide notice of termination (or payment in lieu);
- and other statutory or contractual entitlements.
Always consider alternatives to redundancy – e.g. part-time employment, JobKeeper Payment.
If you would like to explore any of these options or need help working through the process, WorkPlacePLUS remains open to support employers via phone and teleconferencing.
For more information, please contact us today.