Coronavirus Support: Standing Down Employees

In these unprecedented times, businesses are faced with difficult economic decisions in relation to the shutting of businesses in the interest of public health, with the spread of COVID-19. This has resulted in many employers standing down employees until further notice with uncertainty as to when they will be able to return to work.

In most circumstances, and subject to some exceptions, an employer is able to stand down workers with full ordinary pay. However, standing down employees without pay will be dependent on a number of factors including the circumstances, the industry in which the business operates and other factors relating to the situation at hand.

When can employers stand down employees?

A stand down under terms of the Fair Work Act (‘The Act’) is governed by section 524 and section 525. An employer may stand down employees during a period in which the employee cannot usefully be employed because of a number of circumstances including:

  • Industrial action (other than industrial action organised or engaged in by the employer)
  • A breakdown of machinery or equipment, if the employer cannot reasonably be held responsible for the breakdown, or
  • A stoppage of work for any cause for which the employer cannot reasonably be held responsible.

If an employer stands down an employee during a period in accordance with the above provisions from section 524 of the Act, the employer is not required to make payments to the employee from that period. However, section 525 provides that any employee stood down pursuant to section 524 of the Act, will continue to accrue usual leave entitlements while being stood down.

Stoppages of work

Cases around stoppage of work for reasons outside an employer’s control have broadly determined that mere economic downturn, or a decline in demand for the business in question, is not sufficient to constitute a “stoppage” of work. Again, Courts and the Fair Work Commission have taken the view that a stoppage is dependent on the surrounding circumstances of a stand down.

This was the case in Australian Workers’ Union v Brockman Engineering Pty Ltd & Veolia Environmental Services (Australia) Pty Ltd [2015] FWC 2077. Here, the Fair Work Commission considered whether a direction from Shell Refining (Australia) Pty Ltd to its cleaning contractors, that they would not require cleaning staff on a particular day, constituted a stoppage of work. Further, they assessed whether this fell within a cause outside the contractors’ control sufficient to enable the contractors to stand down their staff on that day.

The Commission found that while the direction did amount to a stoppage of work in the circumstances of the case, they did ‘not consider that every direction by Shell for the contractors not to provide labour would enable the contractors to stand down employees.  Whether the stand down is permissible depends on all the surrounding circumstances.’

What does this mean for current employers?

Given this decision, it may be possible in some (total or near total) decline in demand for a service may amount to a stoppage of work in which the right to stand down under section 524 of the Act may be triggered. However, a mere downturn in demand for a service does not necessarily meet this threshold, particularly when employees can still perform the work. In the case of Re Distilleries Award 1976 (1976) 180 CAR 786, Sharpe J stated, ‘I do not accept the contention…that standing down employees without pay should be an employer’s right if that is the most convenient way of avoiding economic loss.’

During these times, the employers right to stand down will be dependent on the circumstances of the business. It is important to seek independent legal advice in the event you are faced with having to stand down employees.

If you need help with employment law and want to talk to our experienced lawyers in Newcastle, Sydney or the Hunter, please do not hesitate to contact us. Call us on (02) 4929 7002, email us or complete an enquiry form.