Stand-downs vs Shutdowns; options for employers during the COVID-19

As the government continues to announce restrictions on businesses and social gatherings many employers are grappling to understand how this impacts them and what their obligations are to their employees.

And it’s not easy, as these obligations seem to be a moving target as Fair Work Australia struggles to keep up with the changing landscape facing the business community.

In these times it is vitally important that employers stay compliant but also exercise the right amount of care for their employees during this stressful time.

Many employers are asking themselves the following questions:

1. What are the latest restrictions on business and how do these impact me?
2. If I am restricted from trading can I lawfully stand down my employees and what are my obligations around paying them? If I am not considered a restricted business and I can still operate but I am experiencing a downturn in business can I enact a stand down?
3. If I need to stand employees down, what is the process and how do I do it?
4. If my business is impacted by the pandemic and I am experiencing a downturn what are my options? Shut-downs and forced leave vs reducing my employees hours of work & redundancies?

We will now explore these questions to provide as much clarity as possible but please understand as this unfolds this advice may change.

1. What are the latest restrictions on business and how do these impact me?

In an attempt to stem the community spread of COVID-19 the government has announced certain restrictions on non-essential social gatherings. There is a phased approach to these restrictions and include:

From the 23rd of March the following facilities were restricted from opening from midday local time:

• pubs, registered and licensed clubs (excluding bottle shops attached to these venues), hotels (excluding accommodation)
• gyms and indoor sporting venues
• cinemas, entertainment venues, casinos and night clubs
• restaurants and cafes will be restricted to takeaway and/or home delivery
• religious gatherings, places of worship or funerals (in enclosed spaces and other than very small groups and where the 1 person per 4 square metre rule applies)

From 12:00 am on 26 March, these restrictions will extend to the following facilities:

• food courts (except for take away)
• auction houses, real estate auctions and open houses
• personal services (beauty, nail, tanning, waxing and tattoo salons)
• Spa and massage parlours, excluding health-related services such as physiotherapy
• amusement parks, arcades and play centres (indoor and outdoor)
• Strip clubs, brothels and sex on premises venues.
• galleries, national institutions, historic sites and museums
• Health clubs, fitness centres, yoga, barre and spin facilities, saunas, bathhouses and wellness centres and swimming pools
• community facilities such as community halls, libraries and youth centres, RSL and PCYC
• Gaming and gambling venues
• Indoor and outdoor markets (excluding food markets). States and territories will make their own announcements about this.

Hairdressers and barbers can continue to operate under strict new rules. The four square metre rule and social distancing must be observed.

Hotels, hostels, bed and breakfast, campsites, caravan parks and boarding houses will be a decision for each state and territory.

As far as we can tell businesses and facilities that are not listed above can continue business as usual, however, if it is possible for your employees to work from home then this should be implemented immediately. And, if you do continue to operate you need to ensure that you are practising social distancing guidelines in accordance with health regulations and have stringent hygiene practices in place. As an example, it may be prudent to remove chairs and seating within your lunchroom facilities to comply with social distancing rules. As the government has announced that further restrictions are likely to apply you can keep up to date by visiting the health.gov.au website.

2. If I am restricted from trading can I lawfully stand down my employees and what are my obligations around paying them?

This is a big question that many employers are grappling with right now. As per our previous communications, Fair Work Australia is continually updating their advice around stand-downs and whether section 524 of the Fair Work Act stand down provisions apply in the event of a pandemic. Below we will provide a summary of the most recent updates from the FWA website. You can view the entire update here:

Under work health and safety laws, employers are required to ensure the health and safety of their workers and others at the workplace. Workers also have responsibilities under those laws.

Employers and employees are encouraged to work together to find appropriate solutions that suit the needs of individual workplaces and staff. Employees who are stood down without pay remain employed for the period of the stand down.

Under the Fair Work Act, an employee can only be stood down without pay if they cannot be usefully employed because of a stoppage of work for any cause for which the employer cannot reasonably be held responsible.

Whether the option of standing down employees is available in circumstances relating to coronavirus is very fact dependent and an employer should exercise the option cautiously. The employer must be able to demonstrate that:

• there is a stoppage of work
• the employees to be stood down cannot be usefully employed (which is not limited to the work an employee usually performs)
• the cause of the stoppage must also be one that the employer cannot reasonably be held responsible for.

It is, therefore, our view that employers that fall into stage one and two categories of restrictions would be able to stand their employees down without pay. Further, if you could demonstrate that your business was wholly or predominately dependant on one of those businesses then you could also stand your employees down without pay. However, these decisions should be made on a case by case basis and you should seek advice before enacting an unpaid stand down.

Fair Work has advised that 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:

• if there was an enforceable government 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 the remaining employees/workforce cannot usefully be employed
• if there was a stoppage of work due to lack of supply for which the employer could not be held responsible.

FWA has advised that if an employer unlawfully stands down employees without pay, the employees will likely be able to recover unpaid wages. It is therefore recommended that you seek advice before standing employees down without pay to avoid potential litigation.

3. If I need to stand employees down, what is the process and how do I do it?

Even if you clearly fall into the categories listed above before enacting a stand down it is recommended you would need to consult with your employees regarding any stand down. Individual advice should always be sought and if relevant you need to consider any enterprise agreements in force that may include stand down provisions.

When consulting with your employees you may like to discuss any steps and measures that you could take to minimise the impact of the stand down. These could include allowing employees to access annual leave or other paid leave entitlements. (Although this is not required by law).

It is recommended that you engage in a consultation with your employees about the potential stand down as soon as practical. The consultation process (like any other consultation) should include the following steps:

• Holding a meeting with your employees as soon as possible (you may have to consider remote meeting formats)
• After the meeting provide notice in writing regarding the proposed commencement date of the stand down, the length of the proposed stand down, and who will be directly impacted
• Once notice is provided you should allow your employees the opportunity to respond to the proposed stand down and provide any suggested alternatives (where practical, such as working from home, pivots in services etc)
• During the stand-down, you should maintain contact with your employees (they are still employed) and if the stand-down period is to be extended you need to provide that advice in writing as soon as possible

4. If my business is impacted by the pandemic and I am experiencing a downturn what are my options?

Many employers are already experiencing a downturn in business and need to know what actions they can take to keep the lights on. Following are a range of options for consideration:

• Reducing employee hours of work / changing rosters
• Forced shutdowns and forced paid leave
• Redundancies

In consultation with your employees, you may ask them to reduce their hours of work or change their rosters.  Employees must agree to this change and you need to ensure you get their agreement in writing. In the agreement, ensure you document the anticipated duration of the change and that it is temporary and after the duration of the pandemic, they will revert to their usual terms and conditions of employment.

There is a lot of talk out there of simply reducing employees hours unilaterally, however, this would potentially constitute a breach of contract and/or a breach of the applicable Award.

Same goes with changing rosters. Ensure that you consult, get agreement and follow the notice provisions in the applicable Award.

Some Awards, contracts and enterprise agreements allow for a forced shutdown. This would be the only time when you can insist employees take annual leave or unpaid leave. These shut down periods are often subject to notice periods as stipulated in your relevant workplace instrument but could be a useful provision to enact if the pandemic is likely to cause shutdowns for a long period of time.

Apart from that, you can consult and get agreement on employees accessing some of their leave during this time. Some organisations are allowing their employees to take their leave at half pay and access their long service leave early to help them through this challenging time.

It’s important to ensure that when you are consulting with employees, you are honest with them about why you are considering the options that you are considering. You should also let them know any other steps the business is taking and that they don’t have to agree to these measures.

You could step out what they likely consequences of not being able to enact those measures might look like. This should not be done in a threatening way at all, rather a frank and honest discussion about the future of the business.

The last step, which may be the only option for some businesses is to make their employees redundant. Again, with all the other options, consultation is essential to ensure it meets the obligations of being a genuine redundancy and you should make your selection on the role, not the person or the performance of the employee.

Companies who have great cultures are more likely to have teams that accept these changes and agree to take a personal hit for the greater good. If you can afford to offer some extra pandemic leave at this time, it will hold you in great stead later because once this is over, and one day it will be, you want your A-team to come back and not go work for your competitor. People remember how you made them feel when chips were down. Did you have their back and do your best to create a circle of safety, or did you simply cut people with no regard for the long term impacts this may have on your teams?

If you need support around managing stand-downs within your business then reach out and we can help!

Written by Emily Jaksch & Jessy Warn

HR Gurus