Given the current unprecedented challenges in light of the COVID–19 pandemic, employers are having to consider a range of options in order to (i) to minimise the immediate financial impact on their business operations in the immediate term; and (ii) ensure the overall structure of their business is “fit for purpose” post-pandemic.

Key issues

Some of the more challenging business decisions under consideration by employers during the current period include:

  • Resizing their business operations;
  • Temporary business closure or stand down of employees; and
  • Termination of employment and/or redundancies.

Resizing of business operations

As an initial step, employers should first explore the option of employees accessing paid leave entitlements. This could include annual leave and where applicable, long service leave.

Alternatively, it may be necessary to canvass staff regarding a voluntary reduction of hours for a period of time.

Of course, any contractual variation should be done with care and it is important to understand that any variation to the terms and conditions of an employee’s employment should only be arrived at by mutual agreement. Generally, contracts of employment cannot be changed unilaterally by one party to the agreement. We encourage employers to seek advice on this prior to making any changes to existing verbal or written contracts.

Additionally, if consultation obligations are triggered pursuant to any relevant State Award, Federal Modern Award or Enterprise Agreement, then employers are required to consult with employees on major workplace changes such as “alteration of hours of work” and “major changes in the composition, operation or size of the employer’s workforce”. Failure to comply with modern award consultation requirements could result in the imposition of civil penalties.

Temporary closure or stand down of employees

On 22 March 2020, the Australian Government has enforced a shutdown of non-essential businesses, including cafes, restaurants, gyms and entertainment venues.

In these circumstances, for national system employers (including corporations) it may be lawful to stand down affected employees without pay, unless they are on a period of pre-approved leave (including annual leave or personal leave).

The Fair Work Act 2009 (Cth) (FW Act) provides that an employer may stand an employee down during a period in which the employee cannot usefully be employed relevantly due to “the stoppage of work for any cause for which the employer cannot reasonably be held responsible”.

Arguably, an acceptable cause is likely to include a mandated Government direction requiring an (i) employer to shut a business; and/or (ii) employee to self-quarantine temporarily.

Note, this provision will not assist employers who could have employees undertaking other work but who wish to minimise their obligations based solely on an economic detriment to the business.

Generally, a stand down period should align with any period of business closure or interruption mandated by Government. Again, we suggest legal advice is obtained prior to taking any action.

However, for businesses covered by the State system (sole traders, partnerships and government agencies) there is no general provisions for stand down in the Minimum Conditions of Employment Act 1993 (MCE Act), although there may be in a relevant State Award.

Termination of employees and/or redundancies

The above options should be carefully considered before turning to the option redundancy.

It is best practice however, to foreshadow in any employee communications, that a redundancy may ultimately be the outcome, in circumstances where the above steps do not sufficiently improve the viability of an employer’s operations.

A change in operational requirements is likely to include a change due to a global pandemic which causes a downturn in clients, however each case will need to be assessed on its merits to determine whether a genuine redundancy is satisfied pursuant to the applicable legislation.

In the event of termination due to redundancy, employers must comply with any notice provisions provided in an employee’s contract, or relevant legislation or industrial agreements (for national system employers the FW Act, any applicable Modern Awards or Enterprise Agreement and for State system employers the MCE Act, and any relevant State Award that may apply).

Key takeaways

  • Encourage employees to access paid leave entitlements, including annual leave and long service leave. 
  • Discuss reducing hours of work with staff and implement an effective communication strategy as soon as practicable as employees, naturally, may be feeling uncertain during this period. 
  • Subject to mutual agreement between the parties, document any variation to the terms and conditions of employment. 
  • If legally prevented from operating your business, explore a stand down period which aligns with any Government order (as amended from time to time).
  • If redundancy is a live option, ensure compliance with respect to any obligations under the contract, and relevant State or Federal industrial laws or instruments.

Please click here to download a pdf copy of the above alert.

Please contact our employment and workplace relations team at Panetta McGrath Lawyers on (08) 9321 0522 should you require any advice on how to best implement any workplace changes, and navigate any potential employment risks during this pandemic.