How to lawfully stand down an employee

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The Fair Work Act 2009 (Cth) provides an employer with the right to stand down an employee without pay where the employee cannot perform “useful work” in certain defined circumstances.

The consequences of stand downs can be severe as they deprive an employee of wages or, in some instances, redundancy benefits, which is why stand downs are generally temporary measures.

So how do you lawfully stand down an employee?

When can an employer legally stand down an employee?

An employer can stand down employees during periods where 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.

Employers will also need to check their employment contracts and enterprise agreements (if any). These documents may contain additional stand down rights or requirements before a stand down can be implemented. These additional requirements can include notice requirements or consultation requirements.

What constitutes a stoppage of work?

Stand downs have been used historically when an employer has been forced to close operations due to:

  • industrial action; or
  • machinery failures.

Where there is a stoppage of work for other reasons, an employer will need to establish that:

  • the stoppage was for a reason that is genuinely beyond the reasonable control of the employer; and
  • the employees could not have been usefully employed elsewhere.

In contrast, a government restriction which prohibits an employer from opening its stores may justify its exercise. However, the employer will also need to establish that it cannot redeploy each employee. Redeployment can include having the employee work:

  • from home;
  • at a different location; or
  • in a different business operated by the employer.

What does “usefully employed” mean?

Whether or not an employee can be usefully employed is:

  • a question of fact; and
  • determined having regard to the circumstances faced by the employer and the nature of the employee’s role.

That being said, the Fair Work Act sets a high threshold for whether an employee can be “usefully employed“. An employer will not be able to stand down an employee from which they can obtain benefit or value for the work that could be performed by that employee.

An employer that wants to stand down an employee will need to lead evidence which demonstrates the connection between:

  • the occurrence of a circumstance; and
  • the absence of useful employment.

An employer should consider:

  • the circumstances that led to the stoppage of work;
  • whether or not they had any control over these circumstances; and
  • whether the employee could be engaged to perform other work that may exist within the business.

Is there a need to give notice?

While there is no express statutory obligation to provide notice or consult with employees prior to a stand down, employers must:

  • consider whether any notification or consultation obligations might be triggered under an enterprise agreement or employment contract; and
  • check whether the terms of any consultation clause in a modern award would place an obligation on an employer to consult with employees ahead of any stand down.

For example, the consultation clause in the Clerks – Private Sector Award 2010 requires an employer to consult with employees in writing about any major workplace change. Where an employer makes a definite decision to make major changes in production, program, organisation, structure or technology that are likely to have “significant effects” on employees, the employer must:

  • notify employees of the changes;
  • discuss with affected employees the introduction of the changes, their likely effect on employees and measures to avoid or reduce the adverse effects of the changes on employees;
  • commence discussions as soon as practicable after a definite decision has been made.

Will leave entitlements accrue during a period of stand down?

If you stand down an employee, they will continue to accrue leave during the stand down period.

This is due to section 22 of the Fair Work Act which provides that a period during which an employee is stood down:

  • is counted as a period of service; and
  • does not break an employee’s continuous service with his or her employer.

However, the position in relation to long service leave depends upon the laws that apply in the state or territory in which the employee performs works.

Alternative measures before standing down an employee

Consider alternative ways of working

Consider changing your business operations so employees can be usefully employed.

Reduce leave balances

Consider inviting employees to take accrued annual leave and, if need be, directing them to so do.

Seek expressions of interest for reduced hours, pay or other entitlements

Consider seeking expressions of interest for reduced hours, pay or other entitlements from employees (whether they are full time, part time or casual). Some employees will welcome the ability to drop one day per week or one shift if that results in the business staying afloat during a downturn. Others will be content to take a pay cut if it means they can avoid redundancy.

Cut bonuses and reduce executive remuneration

It may be an unpopular step but saying no to bonuses and salary increases is an easy option to reduce your wage bill.

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How we can help

  • Advise you on whether you can stand down employees in accordance with the Fair Work Act
  • Prepare stand down notices and a strategy for consulting employees on stand downs
  • Advise you on your rights and obligations under the National Employment Standards and other workplace entitlements
  • Help you interpret modern awards, legislation and other industrial instruments to ensure you are complying with workplace laws
  • Advise you on alternative measures before standing down employees