Pub­li­ca­tions

Can you stand down your employees?

A com­mon ques­tion for employ­ers is whether and in what cir­cum­stances can they stand down an employee.

At com­mon law there is no gen­er­al right to stand down or sus­pend an employ­ee with­out pay absent an express con­trac­tu­al term (see dis­cus­sion of cas­es at [65] to [73] of Coal & Allied Min­ing Ser­vices Pty Ltd v MacPher­son [2010] FCAFC 83 (12 July 2010)).

The evolv­ing indus­tri­al land­scape has prompt­ed leg­is­la­tion which pro­vides a statu­to­ry right to stand down. This is cur­rent­ly found in sec­tion 524 of Fair Work Act 2009 (Employ­er may stand down employ­ees in cer­tain cir­cum­stances”), and is a sec­tion that often caus­es uncer­tain­ty and confusion.

Sec­tion 524(1) pro­vides a right for an employ­er to stand down an employ­ee dur­ing a peri­od in which the employ­ee can­not use­ful­ly be employed” because of one of three cir­cum­stances set out in the sub­sec­tion (dis­cussed fur­ther below).

As is clear from the draft­ing of the sec­tion – that the employ­ee can­not use­ful­ly be employed” is a pre­req­ui­site to rely on the pro­vi­sion. Courts have deter­mined that there will be no right to stand down if there is use­ful work avail­able which is with­in the terms of the employee’s con­tract of employ­ment. Though it need not be the work that the employ­ee ordi­nar­i­ly car­ries out (see: Kidd v Sav­age Riv­er Mines (1984) 6 FCR 398).

Where an employ­er stands down an employ­ee in reliance on sec­tion 524(1), sec­tion 524(3) makes clear that the employ­er is not required to pay the employ­ee dur­ing the peri­od of stand down.

The three cir­cum­stances in which an employ­er may stand down an employ­ee under sec­tion 524(1) are as follows:

  1. indus­tri­al action (oth­er than indus­tri­al action organ­ised or engaged in by the employer);

  2. a break­down of machin­ery or equip­ment, if the employ­er can­not rea­son­ably be held respon­si­ble for the breakdown;

  3. a stop­page of work for any cause for which the employ­er can­not rea­son­ably be held responsible.

The cir­cum­stances set out in sub­sec­tion (a) and (b) are eas­i­ly under­stood. It is the cir­cum­stance at sub­sec­tion (1)(c) which tra­di­tion­al­ly caus­es more dif­fi­cul­ty. In par­tic­u­lar, it rais­es the issue of how far the phrase “…for which the employ­er can­not rea­son­ably be held respon­si­ble” extends?

Clear­ly it would cov­er stop­pages due to force majeure” events such as adverse weath­er, war, ter­ror­ism, etc. But what about a sit­u­a­tion where there is no work to give employ­ees due to eco­nom­ic fac­tors or a loss of a key client or a contract?

Will it be rel­e­vant whether the employ­er had some respon­si­bil­i­ty” for the lack of work, eg because a con­tract was can­celled due to poor service?

The Fair Work Ombudsman’s view on all this appears fair­ly unequiv­o­cal: Employ­ees can’t be stood down just because there is not enough work.” (see: https://​www​.fair​work​.gov​.au/​p​a​y​/​p​a​y​-​d​u​r​i​n​g​-​s​t​a​n​d​-​d​o​w​n​-​a​n​d​-​s​e​v​e​r​e​-​w​e​ather).

How­ev­er, uncer­tain­ty around the prop­er oper­a­tion of sec­tion 524 has been per­pet­u­at­ed by the lack of court deci­sions deal­ing with the pro­vi­sion. The recent case of Unit­ed Voice v Philip Clean­ing Ser­vice Pty Ltd [2017] FCA 392 (21 April 2017) (Unit­ed Voice’) which touch­es upon the right to stand down (albeit briefly) there­fore deserves attention.

The case con­cerned the oper­a­tions of Philip Clean­ing Ser­vice (‘PCS’). All employ­ees rel­e­vant in this case were employed on a part-time basis. PCS pro­vid­ed the employ­ees with let­ters of employ­ment spec­i­fy­ing the num­ber of hours they were required to work each week, the time dur­ing which that work was to take place and the loca­tion of the work.

How­ev­er, dur­ing peri­ods of school hol­i­days – where PCS was not required by its clients to pro­vide clean­ers to schools – the employ­er adopt­ed the posi­tion of ros­ter­ing some employ­ees to do oth­er work and in respect of many oth­ers sim­ply not pro­vid­ing any work or any pay.

Along with sev­er­al oth­er ques­tion­able employ­ment arrange­ments, one of the issues for the Court was to con­sid­er the law­ful­ness of the arrange­ment of not pay­ing employ­ees who were not required to work dur­ing the school holidays.

In her judg­ment, Jagot J quot­ed with approval the appli­cants’ sub­mis­sions on this issue

24. .….….. The sub­mis­sions for the appli­cants… were in these terms:
71. A per­ma­nent employ­ee is enti­tled to be paid the amount due in respect of ordi­nary hours each week. Unlike casu­al employ­ees, the employ­er was not enti­tled to pay them only for hours actu­al­ly worked. Set­ting aside cas­es of prop­er­ly autho­rised stand downs, an employ­ee is enti­tled to wages for attend­ing work even if no work is avail­able: Coal & Allied Min­ing Ser­vices Pty Ltd v MacPher­son [2010] FCAFC 83; 185 FCR 383 at [15]; Vehi­cle Builders Employ­ees Fed­er­a­tion of Aus­tralia v British Motor Cor­po­ra­tion (Aust) Pty Ltd (1966) 8 FLR 70 at 74 – 75. That is the priv­i­lege of per­ma­nent work­ers and is part of the quid pro quo for low­er wages asso­ci­at­ed with per­ma­nent work.

72​.To the extent that an employ­er relies on an excep­tion to the gen­er­al oblig­a­tion to pay wages — by rea­son of stand down or oth­er­wise — it bears the onus of proof that the excep­tion applies: Townsend v Gen­er­al Motors Hold­en (1983) 4 IR 358. That is a par­tic­u­lar man­i­fes­ta­tion of the gen­er­al prin­ci­ple that a per­son seek­ing to rely on an excep­tion to a gen­er­al oblig­a­tion bears the onus of prov­ing that the excep­tion applies.

25. I accept these sub­mis­sions. PCS did not estab­lish any excep­tion to its oblig­a­tion to pay its employ­ees dur­ing school hol­i­day peri­ods for their ordi­nary hours of work. (our emphasis)

It is use­ful to refer to the sec­tions of judg­ments on which the appli­cants relied.

Para­graph 15 of Coal & Allied Min­ing Ser­vices Pty Ltd v MacPher­son [2010] FCAFC 83 is in the fol­low­ing terms:

Prop­er­ly under­stood, a stand down…. encom­pass­es a large range of sit­u­a­tions where, for var­i­ous rea­sons, an employ­er is unable to pro­vide use­ful work for its employ­ees, for a par­tic­u­lar peri­od of time, for cir­cum­stances beyond its con­trol. The employ­er may be tem­porar­i­ly deprived of elec­tric­i­ty to run its oper­a­tion. It may not have suf­fi­cient com­po­nent sup­plies to man­u­fac­ture its goods, due to indus­tri­al dis­pu­ta­tion by the employ­ees of its sup­pli­ers. The employer’s fac­to­ry may have been flood­ed. Numer­ous exam­ples read­i­ly come to mind. The need for claus­es in indus­tri­al instru­ments deal­ing with stand downs of this type has long been recog­nised because, in the absence of such a pro­vi­sion, an employ­ee is pri­ma facie enti­tled to wages for attend­ing work even if no work is avail­able: see Vehi­cle Builders Employ­ees Fed­er­a­tion of Aus­tralia v British Motor Cor­po­ra­tion (Aust) Pty Ltd (1966) 8 FLR 70 at 74 – 75. (our emphasis)

Para­graphs 74 – 75 of the Vehi­cle Builders Employ­ees Fed­er­a­tion of Aus­tralia v British Motor Cor­po­ra­tion (Aust) Pty Ltd (1966) 8 FLR 70 (which con­cerned a stand down pro­vi­sion in an award sim­i­lar to that con­tained in the Fair Work Act 2009) states as follows:

The award pro­vides for engage­ment by the week, and in the absence of any express pro­vi­sion an employ­ee is enti­tled to a week’s wages for each week of his employ­ment even if there is no work for him to do. Clause 7(b). of the award pro­vides, how­ev­er, that the employer’s right to deduct pay­ment for any day the employ­ee can­not be use­ful­ly employed because of any strike or through any break­down in machin­ery or any stop­page of work by any cause for which the employ­er can­not be held respon­si­ble’ is not affect­ed by the pro­vi­sion for week­ly employment.

We start, there­fore, from the posi­tion that an employ­ee who is on a week­ly engage­ment is pri­ma facie enti­tled to a week’s wages. If, being ready and will­ing to work, he is told by his employ­er that he need not report for work the next day as there is no work for him to do, he is nev­er­the­less enti­tled to be paid for that day, unless the employ­er can show that the employ­ee can­not be use­ful­ly employed on that day for a rea­son falling with­in the clause above quoted.”

Although in Unit­ed Voice, the facts were com­plex and the court did not dwell on the issue of stand down for long, we note that – hav­ing approved the appli­cants’ sub­mis­sions on stand downs – it then found (in the next breath) that PCS did not estab­lish any excep­tion to its oblig­a­tion to pay its employ­ees dur­ing school hol­i­day peri­ods”. The judg­ment is arguably sup­port for the propo­si­tion that the stand down pro­vi­sions in sec­tion 524 of the Fair Work Act 2009 can­not be relied on to stand down per­ma­nent (part time) employ­ees with­out pay mere­ly because of inter­ven­ing hol­i­day periods.

Anoth­er some­what chal­leng­ing area of sec­tion 524 of the Fair Work Act 2009, relates to stand down pro­vi­sions con­tained in employ­ment con­tracts or enter­prise agreements.

The three cir­cum­stances where an employ­er may stand down an employ­ee under sec­tion 524 (1) as not­ed ear­li­er in this arti­cle, do not apply where stand down pro­vi­sions already exist in employ­ment con­tracts or enter­prise agree­ments which are appo­site to the cir­cum­stances of the stand down. In the words of sec­tion 524(2):

(2) How­ev­er, an employ­er may not stand down an employ­ee under sub­sec­tion (1) dur­ing a peri­od in which the employ­ee can­not use­ful­ly be employed because of a cir­cum­stance referred to in that sub­sec­tion if:
(a) an enter­prise agree­ment, or a con­tract of employ­ment, applies to the employ­er and the employ­ee; and
(b) the agree­ment or con­tract pro­vides for the employ­er to stand down the employ­ee dur­ing that peri­od if the employ­ee can­not use­ful­ly be employed dur­ing that peri­od because of that cir­cum­stance.
Note 1: If an employ­er may not stand down an employ­ee under sub­sec­tion (1), the employ­er may be able to stand down the employ­ee in accor­dance with the enter­prise agree­ment or the con­tract of employ­ment.
Note 2: An enter­prise agree­ment or a con­tract of employ­ment may also include terms that impose addi­tion­al require­ments that an employ­er must meet before stand­ing down an employ­ee (for exam­ple require­ments relat­ing to con­sul­ta­tion or notice).”

The inten­tion of sec­tion 524(2) is dis­cussed in the Explana­to­ry Mem­o­ran­dum to the Fair Work Bill:

2080. An enter­prise agree­ment or a con­tract of employ­ment may pro­vide for stand down in a wider range of cir­cum­stances than as pro­vid­ed in this Part (sub­clause 524(2)). If an enter­prise agree­ment or a con­tract of employ­ment does not pro­vide for stand down, or autho­ris­es stand down in more lim­it­ed cir­cum­stances, or does not deal with one of the spec­i­fied cir­cum­stances in sub­clause 524(1), then the pro­vi­sions for stand down set out in this Part will apply.
2081. A note alerts read­ers that if an employ­er is unable to stand down an employ­ee under sub­clause 524(1) an employ­er may be able to stand down the employ­ee under an enter­prise agree­ment or a con­tract of employ­ment.
2082. If an employ­er stands down an employ­ee under an applic­a­ble enter­prise agree­ment or con­tract of employ­ment, the employ­er is required to com­ply with the terms of the enter­prise agree­ment or con­tract of employ­ment in rela­tion to the stand down, includ­ing (for exam­ple) any con­sul­ta­tion require­ments or any require­ment to con­tin­ue to make pay­ments to the employ­ee. A fail­ure to com­ply with those require­ments may con­sti­tute a breach of the terms of the agree­ment or con­tract of employ­ment. Where an employ­ee is stood down under the terms of an enter­prise agree­ment, any dis­pute about the stand down could be dealt with under the agreement’s dis­pute set­tle­ment clause (if it so pro­vides).” (our emphasis).

It is clear then, that (as with a stand down pur­suant to sec­tion 524(1)) that the first require­ment of a stand down is that an employ­ee can­not be use­ful­ly employed.

How­ev­er, it is also rea­son­ably appar­ent that it is pos­si­ble for a con­tract of employ­ment or an enter­prise agree­ment to pro­vide for dif­fer­ent (ie nar­row­er or broad­er) set of cir­cum­stances in which a stand down can be effect­ed than those list­ed in sec­tion 524(1).

Inter­est­ing­ly the pro­vi­sion excul­pat­ing the employ­er from pay­ing an employ­ee dur­ing stand down, is only expressed to be referrable to sec­tion 524(1) (see sec­tion 524(3)). How­ev­er it is con­sid­ered that the leg­is­la­tion hav­ing autho­rised a stand down through a con­tract of employ­ment or enter­prise agree­ment, decid­ed to leave it to those instru­ments to cal­i­brate the cir­cum­stances of payment.

Anoth­er area of uncer­tain­ty in con­trac­tu­al / enter­prise agree­ments is whether there is any lim­it on the cir­cum­stances in which the par­ties can agree that a stand down can be implemented.

Could – for exam­ple – the employ­er in the Unit­ed Voice case have legit­i­mate­ly agreed with its staff (through their con­tracts or any enter­prise agree­ment ) that per­ma­nent employ­ees could be stood down dur­ing the school hol­i­day peri­od? If so, is it open to an employ­er to agree with its employ­ees that stand downs with­out pay can be imple­ment­ed where the lack of work is based on pure­ly eco­nom­ic fac­tors? It is dif­fi­cult to do oth­er than to spec­u­late on the answer to this question.

Whilst s 524 does not seek to cir­cum­scribe the cri­te­ria for stand­ing down employ­ees pur­suant to a con­tract or enter­prise agree­ment, it is con­sid­ered that cer­tain­ly an enter­prise agree­ment would be less like­ly to be approved if it was not con­sis­tent with the cri­te­ria in s 524(1). Con­tracts may enjoy a greater lat­i­tude but it is sug­gest­ed that stand down cri­te­ria in con­tracts which give an employ­er a dis­cre­tion to stand down employ­ees based on fac­tors with­in the employ­ers’ con­trol, are more like­ly to be open to challenge.