Standing down employees without pay

NATIONAL

Under the Fair Work Act 2009 (Cth) (the Act), members may stand down an employee without pay during a period in which the employee cannot usefully be employed. There is a narrow range of circumstances where the stand-down provisions can be utilised lawfully.

Consultation is integral to any workplace and can present a legal requirement for members. Consultation effectively means asking for, and considering an employees’ views, when making decisions. The Act outlines three circumstances in which an unpaid stand down can take place: 1. Industrial action (other than industrial action organised or engaged by the member); 2. A breakdown of machinery or equipment, if the member cannot reasonably be held responsible for the breakdown; or 3. A stoppage of work for any cause for which the member cannot reasonably be held responsible It should be noted that members who have been affected by recent flooding events or other major natural disasters or have employees who are affected may be able to stand down employees based on circumstance (c) above. If there is a stand-down clause in your employees’ employment contracts or enterprise agreements, you must use those clauses instead. MGA TMA can assist members and provide members with a stand-down letter for relevant employees to assist members with record-keeping obligations. Members may also have the option to agree with employees to use annual leave of unpaid leave to cover the period of absence that would otherwise be processed as an unpaid stand down. Permanent employees who become ill, injured, or are required to care for a family or household member due to the recent flooding events may also use their personal/carer’s leave. If members stand an employee down according to the Act, the member is not required to make payments to the employee for that period. Despite the above three circumstances, there are instances where standing down an employee is not permitted. Employees cannot be stood down if they can otherwise be usefully employed. Members are reminded that if an enterprise agreement or contract of employment applies to an employee that provides for a stand down during one of the abovementioned three circumstances, the employer must stand down the employee under the enterprise agreement or the contract of employment. Furthermore, an enterprise agreement or a contract of employment may also include additional requirements that an employer must meet before standing down an employee (for example, requirements relating to consultation or notice). Members should be aware that employees cannot generally be stood down under the Act simply because of a deterioration of business conditions or because an employee has contracted COVID-19.

Unlawful stand downs may result in legal liability for members for underpayment, unpaid wages, or breach of the Act.

Example scenario: where stand down of employee would be permitted

Tim’s company imports a large portion of their stock from interstate, but due to enforceable government COVID-19 restrictions, the business is prevented from selling any in-date stock. Tim explores other options to compromise but is unable to identify any alternative work of any value for his ten permanent employees. Tim closes the store and regrettably informs his employees that they will be stood down without pay. Tim explains that they are entitled to request a period of paid annual leave during the period as an alternative to being stood down without pay.

Concerning lawful stand-downs, contact our Employment Law Team on 1800 888 479.

NATIONAL