Stand-down orders
The law briefly
Employers covered by the Fair Work Act 2009 (Cth) are permitted to stand down an employee when the employee cannot usefully be employed because of any of the following circumstances:
- industrial action which is organised or engaged in by the employees of the business
- a breakdown of machinery or equipment for which the employer cannot reasonably be held responsible, or a stoppage of work for any reason for which the employer cannot reasonably be held responsible.
If there is an industrial instrument (for example, an award, enterprise agreement, AWA [Australian Workplace Agreement], ITEA [Individual Transitional Employment Agreement]), or a contract of employment that applies to an employee’s employment that contains a provision relating to stand down, the provision in those instruments may apply. If you are unsure of whether a provision in an industrial instrument or a contract of employment relating to stand down applies, you should seek specific advice.
However, such a provision will only apply where it permits an employer to stand down an employee where the employee cannot be usefully employed, due to the reasons listed above (being industrial action, breakdown, or a stoppage of work). If the provision allows an employer to stand down an employee for a reason other than that listed above, an employer will not be permitted to stand down an employee for that reason.
An employer is not required to pay an employee during a stand down period.
The industrial instrument or contract of employment may provide other pre-conditions to be met before an employee can be stood down. One common pre-condition is the requirement that an employer make an application to a third party, such as Fair Work Australia, prior to implementing a stand down period. Other common pre-conditions include the requirement to consult with employees, or to provide employees with a certain amount of notice.
The employer therefore must ensure that it complies with the provisions of the stand down provision in any relevant industrial instrument or contract of employment before implementing a stand down.
While an employer is not required to pay an employee during a stand down period (subject to any terms to the contrary in an industrial instrument or contract of employment), employees may elect to use any accrued leave entitlements (such as annual leave or long service leave) to ensure that they continue to receive payment.
Note that the use of an annual leave or long service leave entitlement cannot be imposed on employees without the requisite notice being given by the employer.
Insurance may be taken out to cover such contingencies as outlined and if this is the case then the employer must be careful to act with due regard to the insurer’s position.
What to do
Check: to do
Inform the employees of the reason that work cannot proceed and the proposed actions of management if these are clear and decided.
Inform your insurers (if relevant)
Inform the police (if relevant) so a report can be written and investigations can start.
Work out a detailed management response – calling in advisers as the need arises – eg industrial relations assistance if stand-downs look likely.
If stand-downs seem likely, consider the possibility of offering employees the option of taking leave instead of losing pay during a stand-down period.
Consider the options
The options are to try to continue to trade with some or all staff or to close-down the business until the situation can be rectified.
Follow-up
When putting in place stand-down provisions make sure to do so in the proper legal manner – through a registered award or agreement or by varying contracts of employment with the agreement of the employees involved.
When the crisis is over there may be an opportunity to consider provision for stand-down in awards, agreements and contracts of employment. This should be done in consultation with employees. Note that unilateral variation of contracts of employment is not legal and so the cooperation and agreement of employees has to be gained to vary contracts of employment. Note that awards and agreements can be arbitrated in the relevant industrial tribunals and stand-down clauses may be inserted in these instruments by industrial tribunals - to apply to award and agreement regulated employees.
Was the insurance cover adequate? Did it take into account all losses suffered by the business? If not, these issues deserve addressing.
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