Under section 524(1) of the FW Act, an employee can be stood down if they cannot be usefully employed because of:
- industrial action (other than industrial action organised or engaged in by the employer),
- a breakdown of machinery or equipment if the employer cannot reasonably be held responsible for the breakdown, or
- a stoppage of work for any cause for which the employer cannot reasonably be held responsible.
The purpose of section 524(1) is to ensure the financial viability of a business which cannot provide work for employees in circumstances out of its control, and to protect employees from termination where there is a stoppage of work.
The third limb was not frequently relied upon, nor tested, until earlier this year when we began to see businesses who were ineligible for JobKeeper suffer because of the pandemic.
There has been confusion around what constitutes a stoppage of work and the causation test linking the employer to a stoppage of work. Some clarification was provided in Qantas Airways Ltd v Australian Licensed Aircraft Engineers Association (No 3) [2020] FCA 1428, summarised below.
A stoppage of work is determined solely in relation to the facts of the case. For example, where government directions require a business or industry to stop the work of some employees(who can’t be usefully employed), which cannot carry out its work or provide services remotely, to close.
The causation test requires consideration of:
- whether the employer caused or contributed to the stoppage; and
- whether the employer could have prevented the stoppage after analysing the reasonableness of any steps taken. For example, where government directions require an office-based business to close which could relatively easily carry out its operations remotely, the employer could prevent the stoppage by allowing employees to work from home.
In the case of Buttress v Preston James 1 Pty Ltd [2020] FWC 5927, the Fair Work Commission (FWC) ordered a recruitment company to end the stand down of its state manager, finding that although profits had dropped there was no stoppage of work.
The company stood down its state manager after claiming there was a stoppage of work caused by the current pandemic. During the period of stand down, the company offered to return the manager to work on a permanently reduced wage or alternatively, to pay her out slightly less than her contractual entitlement if she left immediately. The manager rejected both offers. The company held fortnightly calls with the manager while she was stood down, during which time she would provide business leads that the company would pursue.
She subsequently returned to work two days per week, which was to increase as the market improved. She was stood down again shortly after her return. This time, the company claimed there was a stoppage of work caused by the lockdowns in Victoria. However, the managers role was physically based in Western Australia and the lockdowns in Victoria had no impact on Victoria’s recruitment sector, meaning the manager could have continued performing her work remotely.
The FWC criticised the company’s actions, finding the stand downs (during which the manager received no pay) were engineered to force the manager to resign so the company could avoid paying her the lengthy notice period contained in her employment contract.
Lessons for employers
- A stoppage of work is more than a slowing of demand , but does not require a stoppage of work for all employees. It only requires a stoppage of the defined business activity with respect to which work is performed in a particular role to stop.
- Unless otherwise provided in an employment contract, enterprise agreement, modern award or policy/procedure, an employee need not be paid during any period of stand down under section 524(1) of the FW Act.
Written by Nes Demir
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