March 2020

Stand downs and redundancies: are there any other options in light of COVID-19?

We are in a crazy time, without precedent.  The novel coronavirus, COVID-19, has led to confusion and shutdowns across many industries.  This has in-turn led to a slow-down of economic activity for many businesses. 

We know that this will pass.  It’s important to remember that.  Stories of people helping one another in response to COVID-19 are starting to appear, whether it’s helping Tom Hanks to ease up on the amount of Vegemite he’s spreading: here, or the socially-distant ‘bear hunts’ that are popping up to provide another non-contact activity for parents and their stir-crazy littl’uns: here.

Unfortunately, in the meantime, some businesses are having to make tough decisions to ensure they can eventually emerge from this mire.  This has led many employers to consider the ‘stand down’ provisions of the Fair Work Act 2009, and whether roles need to be made redundant.

But, are these the best or only responses available to employers?  Let’s have a quick look.

Redundancy is an option currently being considered by some employers.  In a nutshell, a role is redundant when an employer no longer requires that role to be performed by anyone, because of a change in operational requirements.  In order for the redundancy to be deemed a ‘genuine redundancy’, there are then hoops for an employer to jump through, which may include consultation, redeployment and redundancy pay.

Stand down is another option being considered.  Under the Act, employers can stand down an employee without pay if there is a stoppage of work due to causes beyond the employer’s control which means the employee cannot otherwise be usefully employed. 

According to the Fair Work Ombudsman’s recently published advice, employers cannot generally stand down employees simply because of a deterioration of business conditions resulting in a reduction in business: see here.  There must be a stoppage of work.

A stand down of employees is a last response.

So what other options are there?

Making roles redundant, or standing down employees, are drastic steps that have a massive impact on both the employees (in the immediate short term) and the company (in both the short and long term).  The loss of employee goodwill is significant especially for any recovery phase from this pandemic.  So what are the other options?

Firstly, consult with your people.  This is generally good corporate practice at a time as uncertain as this to retain them moving forward, and also to allay certain fears (so far as is possible).  Indeed, a stand down may amount to ‘major workplace change’ requiring consultation for award-covered employees. 

Secondly, ask your people whether they might volunteer to change their circumstances.  In any business, there will be a myriad of different circumstances and financial positions.  Some people will have paid off their mortgage, others will barely be making ends meet, others may work for interest or enjoyment and not because they need the money. 

Calling for volunteers to reduce hours, reduce pay or take leave without pay, early on may really help some businesses avoid redundancies and stand downs (and help others to keep their jobs).  This might be a viable option for some businesses.  Remember, changes to pay and hours of work cannot usually be made unilaterally, so you need agreement.

Thirdly, consider whether you can direct or encourage employees to take paid leave.  In certain circumstances, businesses can direct employees to take leave.  This usually requires notice, and this can depend on the wording in their employment contracts, or any applicable Modern Award or Enterprise Agreement. 

Encouraging employees to take annual leave at full, or ‘half-pay’ (which technically involves half their absence being on annual leave, and half being on an unpaid authorised absence), may be an option where there is no ability to direct employees to take such leave.  Such circumstances can’t be forced, this must be by agreement with the employee.

Finally, if possible, businesses might follow in the footsteps of the casinos, Star and Crown, who have each provided special paid ‘pandemic leave’ (see here and here).  Obviously, not all companies will be in the financial position to be able to do this.  But for those companies who can, it is worth considering.  Not only will it help retain your current work force (and simultaneously boost morale, something we could all do with right now), it will likely also provide a useful public relations tool.

After these options have been exhausted, if stand downs or redundancies remain the only option for your business, messaging is important.  A stand down is not a dismissal, and redundancy relates to a role not a person. 

During a stand down, affected employees will continue to accrue employment entitlements over the period.  After the business is back in operation, the ‘stood down’ employees will be able to return to their jobs.  The business still needs the role of the employee to be performed (except for the unforeseen stoppage of work).

In the meantime, employees who have been stood down should be informed that they may be able to access one of the Government’s recently passed stimulus packages, including ‘JobSeeker payments’, depending on their personal circumstances.

It is a tough and, frankly, scary time, for many.  Individuals are acutely aware that the security of their employment may be taken from them any moment.  In that context, we would encourage businesses to consider all options available to them before deciding on standing down their employees.  Employees may just be willing to share the pain for the greater good of all.  After all, we are all on this ride together!

Authors: Ryan Murphy and Jade Bond

Contributing partner: James Mattson