The COVID-19 pandemic has affected all businesses in one way or another. With no clear end to this crisis in sight, business owners are becoming increasingly anxious as to how to best handle their employees. We have already seen in Australia large corporations forced to implement mass stand downs of employees. However, whether or not standing down employees is the right step for your business will vary on a case by case basis.
We have helped some of our clients navigate these challenges. Below are the main options available to business owners.
If you need help identifying the best option for you and your business, please contact Quest Legal at info@questlegal.com.au.
Decreasing or modifying your employees’ hours
It may be possible for you to decrease the regular hours for some or all of your employees. This not only allows you to manage your wage costs, but also allows you to ensure that your employees are treated fairly. However, whether or not you can reduce hours will depend on the employee’s employment agreement, the National Employment Standards and the relevant industrial award.
Importantly, in most cases any change to an employee’s hours of work (whether that be achieved via the reduction of days worked or through the use of annual leave etc) must be agreed upon by both parties.
In the event that you alter an employee’s hours of work without their consent, you may be found to be in breach of the employment agreement or the National Employment Standards.
Standing down
Another option is to stand down an employee. “Standing down” means that your employee does not come to work, and you do not pay them a salary, however their employment has not been terminated.
Many employers, including large businesses such as QANTAS have stood down employees as a result of the COVID-19 crisis.
Section 524 of the Fair Work Act allows a business to stand down an employee without pay during a period in which the employee cannot be usefully employed because of:
- Industrial action;
- A breakdown in machinery or equipment; or
- A stoppage of work for any cause for which the employer cannot reasonably be held responsible.
Typically, significant reductions in business because of COVID-19 would fall into the third category.
However, the case Re Carpenters and Joiners Award established that you cannot stand down an employee if there is useful work available that is within the terms of the employee’s contract of employment. The work available need not be the work that the employee normally carries out.
The onus is on the employer to show that the employee could not be usefully employed. A right to stand down an employee will not exist simply because the employer can no longer afford to pay the employee.
Therefore, the right to stand down employees must be exercised with both caution and diligence.
Termination (without redundancy)
Another option available for employers is to terminate the employee’s employment contract.
In order to terminate the contract a business owner must show:
- There was a valid reason for the dismissal related to the employee’s capacity or conduct;
- The employee is notified of this reason, and given an opportunity to respond; and
- The employee had previously been warned that their performance was unsatisfactory.
Termination in this way could lead to an employee claiming unfair dismissal. An employee can only bring an action for unfair dismissal if they have been employed for more than 12 months by a small business (less than 15 employees) or for more than 6 months for a large business (15 or more employees). An application for unfair dismissal must be lodged with the Fair Work Commission within 21 days of the date of termination.
In the event that an application for unfair dismissal is successful, then the employer can be liable to pay damages to the employee up to an amount equivalent to 6 months of their base salary.
For this reason, a business owner must be careful when terminating an employee to ensure they have followed the required steps to dismiss the employee and are in compliance with the employment contract and the Fair Work Act.
Redundancy
Employers can also assess whether an employee’s role is now redundant.
In order for a redundancy to be classified as a genuine redundancy for the purposes of the Fair Work Act, the employer must no longer require the role performed by that employee to be performed by anyone. That is, the role itself becomes redundant, rather than the individual.
Common reasons for making a role redundant include a corporate restructure, economic hardship or slow down due to lower sales or production.
When a role is made redundant then the employee will be entitled to notice of termination and redundancy pay (the amount is determined under the employment contract, relevant award or National Employment Standards).
Again, a business owner must be careful when determining that a role is redundant to ensure it is a genuine redundancy and to ensure compliance with the employment contract and the Fair Work Act.
Government support
The Government has begun rolling out incentives to help businesses retain their employees.
Importantly, we note that the Job Keeper payments are not available in respect to employees who have already been terminated or made redundant. However, they are available in respect to employees who have been stood down or had their hours reduced.
Please see the below helpful links to information on the Government incentives which we recommend you carefully review.
JobKeeper Incentive: https://www.ato.gov.au/Job-keeper-payment/
Boosting Cash Flow for Employers Incentive: https://www.ato.gov.au/Business/Business-activity-statements-(BAS)/In-detail/Boosting-cash-flow-for-employers/
Instant Asset Write-Off for Eligible Businesses: https://www.ato.gov.au/Business/Depreciation-and-capital-expenses-and-allowances/Simpler-depreciation-for-small-business/Instant-asset-write-off/
Backing Business Investment – Accelerated Depreciation: https://www.ato.gov.au/Business/Depreciation-and-capital-expenses-and-allowances/Backing-business-investment—accelerated-depreciation/
If you need help with any employment related matter please contact Quest Legal at info@questlegal.com.au.
Regards
Juan Perez
p | 02 9431 5307 and 1300 279 500
w | www.questlegal.com.au
a | 133 Alexander Street | Crows Nest | Sydney | NSW | 2065
