Covid-19: How to deal with your employees – A practical guide to the law

The global outbreak of COVID-19 has and will continue to have a material impact on businesses worldwide and in Australia.

The COVID-19 landscape and both the national and state government updates are regularly evolving and changing. As a result, many employers are now faced with the challenge of understanding their rights and obligations in managing employees during this health pandemic and in circumstances where their business has significantly reduced and/or the business has shutdown.

In this regard, we have had a number of clients contact us over this period seeking advice to understand their rights and obligations during the COVID-19 pandemic. There have also been a number of Fair Work updates released in order to deal with COVID-19 and changing employment circumstances.

It is crucial businesses are complying with national and state government directions in relation to COVID-19 and employers are reminded to keep in mind employee safety, employee rights and leave entitlements to ensure the best outcome for everyone involved.

Accordingly, in this client alert we cover an employer’s rights and obligations regarding shutdown, some of the changes being implemented by the Fair Work Commission and the government’s newly introduced stimulus package.

 

How does an employer lawfully reduce an employee’s hours of work and/or remuneration?

Outside of the specific changes to the modern award regime (mentioned below), in all other circumstances, an employer cannot unilaterally reduce an employee’s hours of work or remuneration. Any reduction of an employee’s hours or remuneration should be done by agreement and the agreement should be reflected in writing and signed by the parties.

 

Can an employer stand down its work force and what does this mean for your employees?

 Section 524 of the Fair Work Act 2009 (Cth) (“FWA”) provides that an employer may stand down an employee during a period in which the employee cannot usefully be employed because of, among other things, a stoppage of work for any cause for which the employer cannot reasonably be held responsible.

In these circumstances, the question then becomes whether COVID-19 is a lawful cause beyond an employer’s control. In this regard, section 524 of the FWA cannot usually be relied on in circumstances where there is merely a downturn of business or if a building is inaccessible. As such, the COIVD-19 impact on businesses and the question as to whether businesses can lawfully stand down their employees during the pandemic crisis remains untested by law.

However, it is important to understand there is a differentiation between businesses who have been affected by COVID-19, and as a result has seen a significant reduction in business (such as the retail industry) compared to where the government has sanctioned a lockdown or closure of certain business (such as hospitality, beauty premises, fitness centres and other sectors of the economy now restricted from trading). The latter would be considered a very clear example of circumstances beyond an employer’s control under section 524 of the FWA. However, the former may not qualify for such treatment. We note that the unions are challenging the shutdown by Qantas for this reason. In essence, where a business has decided to close stores and cease trading because of a significant downturn in business, this may not be sufficient to warrant a shut down sanctioned by section 524 of the FWA. Employers should tread carefully in this regard, and to the extent possible, provide as much notice of a shut down as possible and obtain employee consent.

 

Does an employer need to pay an employee during a stand down period?

In usual circumstances when an employer does not require work to be performed by a permanent employee, subject to an employee’s agreement, an employer will be required to pay the employee for the period.

However, in circumstances where an employer has a stoppage of work and stands down employees in accordance with Section 524 of the FWA, an employer is not required to make payment of ordinary remuneration to those employees for the period of the stand down. Notwithstanding this, employers must accrue for leave entitlements as per usual.

In addition, employees that are stood down by their employer under the FWA are still entitled to be paid for public holidays that fall during the stand down period. This is only if the public holiday falls on a day that the employee would have usually worked. It is important to keep this in mind with the upcoming Easter public holidays.

 

Can an employee ask to use annual leave during a stand down period?

A stand down is a drastic step for any workforce, and it deprives employees of an income for an unspecified period. Accordingly, inviting employees to access their accrued leave or long service leave entitlements as an alternative is a great benefit to both the employee and employer. For the employee, it allows them to continue to receive an income, and for the employer, it reduces the employer’s leave liability.

If an employee requests to use their leave entitlements, employers must not unreasonably refuse an employee’s request to take paid annual leave. What is considered ‘reasonable’ will depend on the personal circumstances of each employee and the employer’s business needs. In these circumstances, it is best if the employer and employee come to a mutual agreement in this regard.

Notably, an employer may refuse paid annual leave to an employee on reasonable business grounds. In this regard, if a business is financially unable to pay annual leave due to the downturn in business and financial impact COVID-19 has had on the business, this may be considered a reasonable business ground.

 

Changes to Modern Awards relating to COVID-19

 The Fair Work Commission has announced proposed changes in relation to modern awards in response to the current and unique COVID-19 pandemic crisis.

Notably, on 1 April 2020, the Fair Work Commission (“FWC”) announced an intention to vary 103 modern awards across various industries and occupations. These variations will be in place until 30 June 2020 (unless extended). Accordingly, businesses should check if they are affected by the changes proposed.

The proposed changes include the following:

 

• Provide all employees who are required to self- isolate the ability to access two weeks of unpaid leave. This was a response to a concerns that if an employee was required to self-isolate because they have been exposed to someone infected with COVID-19, they did not have protection in relation to unfair dismissal and were not able to use their personal leave as they themselves were not unwell. It will not be necessary for employees in these circumstances to exhaust their paid leave entitlements before accessing the unpaid pandemic leave.

 

• Provide additional flexibility in respect of annual leave by allowing an employer and employee to agree for the employee to take up to twice as much annual leave at half the rate of pay. Notably, this provision has already been introduced in the Hospitality Award 2010, the Restaurant Award 2010 and Clerks – Private Sector Award 2010 (discussed further below).

In addition to the above, the FWC have made additional changes specific to the Hospitality Award 2010, Restaurant Award 2010 and Clerks – Private Sector Award 2010 as a result of the major impact COVID-19 has had on these industries.

In order to assist our clients, we have outlined the changes below:

 

Hospitality Award 2010

 On 24 March 2020, the FWC made a determination to provide additional flexibility for employers under the Hospitality Award 2010 during the COVID-19 pandemic. These include:

Changes in duties:

Employers can tell their employees to do any tasks that they have the competency and skill to perform, even if those tasks are not in their usual classification or normal work. However, the task must be safe, and the employee must have at least the appropriate licence and/or qualifications to perform the task.

Hours of work for full-time and part-time employees:

Employers can now direct the reduction of permanent employees’ hours of work to an average of:

• Between 22.8 and 38 ordinary hours each week for full-time employees; and
• Between 60% and 100% of the guaranteed hours per week or over the roster cycle for part-time employees.

If employers want to reduce an employee’s hours, they need to discuss the changes with the employee, ensuring they follow the Award prescribed consultation rules about changes to rosters or hours of work and provide as much notice as practicable. It should be noted that employees will continue to accrue leave entitlements based on their ordinary hours before the employer reduced the hours.

Annual leave:

An employer can direct an employee to take annual leave in accordance with the updated award. Employers now need only to provide the employee at least 24 hours’ notice (rather than 4 weeks) and consider the employee’s personal situation. In addition, employees can take twice as much annual leave at half pay by agreement.

 

Restaurant Award 2010

 On 31 March 2020, the FWC introduced the same changes as the Hospitality Award 2010 above to the Restaurant Award.

In addition to these changes, the FWC also provided that if a business is closing down for a period, an employer can direct their employees to take annual leave in accordance with the new changes by giving the employee at least 1 weeks’ notice (or any shorter period of notice which is agreed).  If an employee does not have enough paid leave to cover the whole period of shut down, the employer can direct the employee to take unpaid leave for the remainder of the close down. The period of unpaid leave would continue to count as service for entitlements.

 

Clerks- Private Sector Award 2010

 On 28 March 2020, the FWC introduced temporary flexibility provisions during the coronavirus outbreak for the Clerks – Private Sector Award 2010. These changes include:

Changes in duties:

Employers can tell their employees to do any tasks that they have the competency and skill to perform, even if those tasks are not in their usual classification or normal work. However, the task must be safe, and the employee must have at least the appropriate licence and/or qualifications to perform the task.

Minimum Engagement:

Part-time employees who have agreed with their employer to work from home can have their minimum engagement reduced from 3 hours per shift to 2 hours per shift. Casual employees who have agreed with their employer to work from home must be paid for a minimum of 2 hours’ work per shift (rather than 3 hours per shift).

Span of hours:

Employees who have agreed with their employer to work from home can make an agreement with their employer to change their span of hours to allow them to work between 6 am and 11 pm Monday to Friday, and 7 am and 12:30 pm Saturday. Employers do not need to agree with a majority of their employees to make these changes.

Hours of work for full-time and part-time employees:

Employers can temporarily reduce permanent employees’ hours of work to not less than 75% of their full-time hours or agree part-time hours immediately prior to the reduction. This may be applicable to the whole business or a section of the business. If an employer wants to reduce their employees’ hours, the employees will need to vote in favour of the reduction of hours. At least 75% of the full-time and part-time employees in the business or section of the business must approve the temporary reduction. There is a specific provision contained in the award which outlines the steps an employer must take to ensure the vote is considered ‘valid’.

Notwithstanding the above, an employer and employee can also individually agree in writing to reduce an employee’s hours.

In addition, an employee who has had their hours reduced can ask their employer for permission to find more work with another employer and/or access training, professional development and study leave through their employer. In this regard, an employer cannot unreasonably refuse an employee’s request to find alternative work and must consider all reasonable requests regarding training, professional development or study leave.

Employees on reduced hours under the changes will continue to accrue leave entitlements based on their ordinary hours of work prior to the reduced hours.

Annual leave and close down of business:

Employers can direct an employee to take annual leave by giving their employees 1 weeks’ notice (or any shorter period of notice that is agreed).

If the business is closing down for a period because of COVID-19 and an employee does not have enough paid annual leave to cover the whole period, the employer can direct the employee to take unpaid leave. The period of unpaid leave counts as service for entitlement purposes.

However, if the business is not closing, the employer can only direct an employee to take annual leave if the employee still has at least 2 weeks of annual leave left after the direction and the employer consider the employee’s personal situation. Employees can take up to twice as much annual leave at a proportionally reduced rate if their employer agrees.

 

Government stimulus package

On 30 March 2020, the Federal government announced the intention to pass legislation to introduce wage subsidies for businesses significantly affected by COVID-10, known as the ‘JobKeeper stimulus package’. The stimulus package is designed to preserve jobs and alleviate financial pressure on businesses in Australia.

In this regard, the JobKeeper payment is paid to employers by the Australian Taxation Office (ATO) who then provide the payment to eligible employees. The payment will be in the sum of $1,500 per fortnight (before tax).

In this regard, if the employee is employed, their prevailing wage or salary continues to apply and the JobKeeper subsidy serves as a supplement.

However, if the eligible employee has been stood down or re-engaged post 1 March 2020, the employer must pay, at a minimum $1,500 per fortnight, before tax. Superannuation contribution in these circumstances is discretionary.

The eligibility criteria for a business to apply to the stimulus package includes:

 

• turnover of less than $1 billion, which must have fallen by more than 30 per cent (of at least a month); or
• business has a turnover of $1 billion or more and turnover has fallen by more than 50 per cent (of at least a month); and
• the business is not subject to the Major Bank Levy.

The eligibility criteria for employees to benefit from the stimulus package includes:

• currently employed by the eligible employer (including those stood down or re-hired);
• employed by the employer at 1 March 2020 (or rehired);
• Available for full-time, part-time, or long-term casuals (a casual employed on a regular basis for longer than 12 months as at 1 March 2020);
• are at least 16 years of age; and
• Australian citizen, the holder of a permanent visa, a Protected Special Category Visa Holder, a non-protected Special Category Visa Holder who has been residing continually in Australia for 10 years or more, or a Special Category (Subclass 444) Visa Holder.

The JobKeeper subsidy will be available for 6 months unless extended by the federal government. If your business is interested in the JobKeeper stimulus package, you can register your interest on the ATO website.

We are currently working remotely but still servicing clients as per usual including, with the aid of technology, via virtual meetings and conference calls. If you require further information in relation to any aspect of this alert or assistance in dealing with an employment law related issue during the COVID-19 crisis, please feel free to contact us.

This alert is not intended to constitute, and should not be treated as, legal advice.