With respect to all of the disruptions that the last few years have brought, from COVID-19 to natural disasters, it has been an understandably trying time for Australian small business owners. 

Many employers have therefore looked to the “stand down” provisions in section 524 of the Fair Work Act when their operations have been affected by matters outside of their control.

 

What does Section 524 provide?

Section 524 of the Act provides that an employer can “stand down” its permanent employees (basically, put them on unpaid leave) if they cannot be usefully employed because of either:

  • Industrial action (including organized strikes, union-represented disputes, etc), or
  • Breakdown of equipment (including machinery which the employees rely on to perform ordinary duties etc), or
  • Stoppage of work for any cause for which the employer cannot be held responsible (including government public health orders, natural disasters, etc).

 

The last point (“stoppage of work for any cause for which the employer cannot be held responsible”)  is particularly broad and, unfortunately, can be interpreted in many ways. 

Whilst it is reasonably clear that a business that is ordered to close its doors by a public health order could rely on the provisions in s.524 of the Fair Work Act, what about a general slowness of trade due to the impact of COVID-19 (or a natural disaster) on the business?

COVID-19 has certainly caused a painstaking slowing of trade across many industries, with some businesses suffering to the point of not being able to trade. For example, take a restaurant owner who has suffered a decline in diners due to people preferring to stay home and not risk contracting COVID-19, or reservations being canceled because customers need to isolate themselves? If the business owner wanted to stand down some of their usual staff because of a slow down in business (which was outside of their control) could they do it?

 

A Common Misconception

Whilst many business owners assume that the stand-down provisions can be used in these circumstances, decisions from courts and tribunals and guidance from the Fair Work Ombudsman indicate that stand-downs cannot be used when there is a slow down in business, even if this is not the business owner’s fault.

The Act, it seems, is designed to cover more extreme circumstances in which employees are literally unable to attend the workplace or complete their duties due to a complete stoppage of work. 

The reason that there is such a high bar to reply on stand-down provisions is that the consequences for employees are severe: A stand-down is generally the only time an employer can unilaterally place a permanent employee on a period of unpaid leave (although keep in mind this period of stand down counts as service for other entitlements under the Fair Work Act).

 

Some Practical Advice

If the stand-down provisions are not available to employers then what should a business owner do if it needs to reduce the hours of permanent employees, or have a period of time where they do not attend work at all?

Generally, it will only be possible to do these things with the agreement of the employees. We find that if it is explained to employees that it is necessary for them to agree to reduce their hours or take a period of unpaid leave to ensure that the business is able to continue to operate – and to ensure that they are able to keep their jobs – many employees will agree to a temporary change to their working arrangements.

Ultimately, if an employee cannot be stood down, and will not agree to a temporary change in their conditions, an employer will always have the option to make a role redundant where there is a risk that the role cannot be preserved in the long-term. 

As with the stand-down provisions, there are also strict rules about redundancies and what processes must be followed, such as obligations to consult with employees. Consultation (even outside the context of redundancies) opens up a platform for employees to suggest measures for preserving their roles. Even in the direst of circumstances, you never know who will have a game-changing idea!

If you need any further information or resources about stand-down provisions or redundancies under the Fair Work Act, please reach out to the HR Connect team.

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Disclaimer

The information provided in these blog articles is general in nature and is not intended to substitute for professional advice. If you are unsure about how this information applies to your specific situation we recommend you contact HR Connect for advice.

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