Article By: Joey Tass Cappello Rowe Lawyers Sydney

The COVID-19 pandemic is an unprecedented global crisis. The situation is changing on a daily basis for many companies and individuals. Companies are now encouraging their employees to work from home in an attempt to both minimize the impacts of COVID-19 and comply with duty of care in accordance with the workplace health and safety laws.  

An important consideration for an employer in the midst of COVID-19 is the appropriate action that should be taken with their employees in the unfortunate circumstances where they are no longer required due to significant reductions in work. This is one of the hardest decisions to make and hardest conversations to have as the first thing that must be on their mind is what decisions can be made to keep the business running as long as possible to keep people employed.  

Does the employer in these circumstances:

1. Reduce the employees’ hours and remuneration?
2. Stand the employee down?
3. Make the employee redundant?

Without wanting to sound too much of a lawyer, the short answer is “it depends”.

Can an employer reduce an employee’s hours and remuneration?

This is a common question especially given the outbreak of COVID-19. However, there are associated risks with reducing an employee’s salary, including breach of contract, unfair dismissal claims, or potential breaches of minimum entitlements under any Award or Enterprise Agreement. If the employee is not covered by an Award or Enterprise Agreement, they must still be paid at least the national minimum wage.

In most circumstances, an employer cannot reduce an employee’s remuneration unless it is agreed by the employee. Doing so without the employee’s agreement may result in a breach of contract. As an employer, it is worthwhile having full and frank discussions with the employee as to the circumstances, for example the significant downturn in business in which case the employee may be more agreeable to do so once they are aware of the full picture.

Can an employer stand down his employee?

Section 524 of the Fair Work Act (2009) (FWA) allows an employer to stand down an employee without pay during a period in which the employee cannot usefully be employed because of either:

• Industrial action;
• Breakdown of machinery or equipment (if the employer cannot reasonably be held responsible for the breakdown);
• A stoppage of work for any cause for which the employer cannot be held responsible.

However, prior to undertaking stand down provisions, an employer is also confined to any provisions in an Enterprise Agreement, Award or other employment contract in relation to stand down provisions, if any exist.

What does ‘usefully employed’ mean?

The FWA does not provide a definition of the term ‘usefully employed’. Courts and tribunals debated about this and have usually determined that if an employer is able to obtain some benefit or value for work that could be performed by the employee, then in the circumstances the employer would not be able to stand down the employee. This factor is vital in determining whether an employer is lawfully justified in relying on the stand down provisions.

The onus falls on the employer to establish that the employee who has been stood down cannot be ‘usefully employed’. In doing so, an employer must show that the appropriate steps had been taken to find useful employment for the employee. This in itself does not require the employer to find an alternate position for the employee which is significantly different to their contracted position, or that the employer should change the whole system of work to accommodate for that employee in order to maintain their employment.

Therefore, in light of COVID-19, it is possible for an employer to rely on the stand down provisions, albeit in certain circumstances. It is recommended that legal advice is sought prior to doing so because if it is not done correctly pursuant to key requirements under the FWA, the employer might be exposed to proceedings in the Fair Work Commission.

Redundancy

Due to the impacts of COVID-19, causing a downturn in business for an employer, they may consider terminating an employee by making their position redundant.

In making an employee’s position redundant, it must be a genuine redundancy which is set out in Section 389 of the FWA, which provides that:

               “Meaning of genuine redundancy

(1)       A person’s dismissal was a case of genuine redundancy if:

(a)       the person’s employer no longer required the person’s job to be performed by anyone because of changes in the operational requirements of the employer’s enterprise; and

(b)       the employer has complied with any obligation in a modern award or enterprise agreement that applied to the employment to consult about the redundancy.

(2)       A person’s dismissal was not a case of genuine redundancy if it would have been reasonable in all the circumstances for the person to be redeployed within:

(a)       the employer’s enterprise; or

(b)       the enterprise of an associated entity of the employer.”

The onus falls on the employer to establish that the dismissal of the employee was a genuine redundancy in accordance with the FWA.

Whether the job is no longer required

The relevant statutory expression is whether the “job” is still required and it is not necessary to show that the duties of the employee are no longer required to be performed by anyone as it is entirely possible that a redundant employee’s duties continue to be performed in whole or in part by other employee’s (redistribution, upskilling, etc.)

Operational Requirements

The employer has the onus to establish that there have been changes in the operational requirements in the business which caused the employee’s job to become redundant in accordance with the FWA. A change in the operational requirements leading to a job no longer being required may include:

1. A machine becoming available to do the job performed by the employee;
2. The employer’s business experiencing a downturn and therefore the employer only needs three people to do a particular task or duty instead of five; or
3. The employer restructuring their business to improve efficiency and the tasks done by a particular employee are distributed between several other employees and therefore, the person’s job no longer exists.

Reasonable deployment within the enterprise or associated entity

Section 389(2) of the FWA provides that a dismissal will not be a genuine redundancy if it would have been reasonable in all of the circumstances, at the time of the dismissal, for the employee to be redeployed within the employer’s business or that of an associated entity. The employer must at least be able to show that they have made an effort to consider options for redeploying the relevant employee to an available suitable alternative within the business or within other companies in the corporate group (where applicable) having regard to things such as seniority, location, health and safety risks, etc.

It is recommended that an employer seek legal advice prior to determining to make their employee redundant as it must be genuine and follow the correct procedure, especially if an Award or Enterprise Agreement applies. Failure to do so may expose an employer a potential claim.

Cappello Rowe are here to help you and your business work through this crisis. Call our office on 6962 3433 or contact us via email at info@cappellrowe.com.au . In the meantime, stay safe and well!