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Perspective

Slowdown versus stoppage of work

Nes Demir
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To mitigate the financial impacts of the current pandemic and consequent downturn in business (slightly under the JobKeeper threshold), Ideal Acrylics stood down two employees under section 524(1)(c) of the Fair Work Act 2009 (Cth) (FWA). One was a casual fabricator and the other was Mr Stelzer, a full-time machinist. No other employees were stood down.

Mr Stelzer pushed back against the decision and claimed to have been singled out. He questioned why hours of all employees could not be reduced so each bore some loss.  He was told shorter working days amongst the workforce would not work operationally.

Ideal Acrylics proceeded to draw on Mr Stelzer’s annual leave balance to provide him with income support during the period of stand down, without Mr Stelzer’s consent.

Mr Stelzer suffered from stress and anxiety in light of all of this and presented Ideal Acrylics with medical certificates during the period of stand down. Ideal Acrylics advised Mr Stelzer he could not claim sick leave while stood down.

The stand down was extended to a total of 12 weeks at which point Mr Stelzer’s position was made redundant. Ideal Acrylics had provided notice of the potential redundancy and invited Mr Stelzer to advise of any redeployment options but proceeded with the redundancy three days later in the absence of a response.

The Fair Work Commission held there was no stoppage of work to trigger the stand down provisions of the FWA and it was unfair to impose almost the whole burden of the reduction in labour on Mr Stelzer, even though it was operationally the most straightforward solution.

The Commission noted had the reduction in labour been shared amongst all manufacturing employees, Mr Stelzer would have worked a total of 3.5 weeks during the stand down period. Ideal Acrylics was ordered to compensate Mr Stelzer accordingly.

See Stelzer v Ideal Acrylics [2020] FWC 4129

Lessons

  1. If there has not been a complete stoppage of work then section 524(1)(c) of the FWA cannot be relied on to stand down employees. A stoppage of work is more than a slowing of demand but does not require the entire stoppage of business activity – it is where some defined business activity with respect to which work is performed stops. See our previous discussion of Marson v Coral Princess Cruises [2020] FWC 2721 on what constitutes a stoppage of work, here.
  2. A slowing of demand due to the pandemic’s economic effect does warrant a reduction in labour costs. However, the implementation of such reductions should be conditioned by the principle of fairness. It is unfair to impose almost the whole burden of the reduction in labour on one employee, whilst retaining the ordinary employment amongst other employees. The Commission noted in this case a fair approach would have been to apportion the reduction of labour between all manufacturing employees performing work that Mr Stelzer was also capable of performing.
  3. Unless otherwise provided in an industrial instrument, modern award, employment contract or policy or procedure, an employee is not entitled to pay during any period of stand down under section 524(1)(c) of the FWA.
  4. Whilst it is reasonable for an employee to wish to retain some accrued leave for recreational purposes, it would not be reasonable to retain more than two weeks in circumstances where the current pandemic has resulted in a significant downturn in business. In such a case, so long as consultation about the accrual takes place an employer can draw on an employee’s annual leave accruals.
  5. Employees are not entitled to paid personal leave for any days during a period of stand down that they are certified unfit for work.
Nes Demir
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