Stand Down of Employees

By 2 June 2020Workplace
Employment Law

With many employees stood down as a result of the impact of COVID-19 disputes will inevitably arise regarding the validity of the stand down and whether an employer should pay the employee for the period of the stand down.

A recent decision of the Fair Work Commission in Marson v Coral Princess Cruises (N.Q.) Pty Ltd (C2020/1936) provides some guidance on how the Fair Work Commission will consider in these disputes.

Mr Marson was employed as a Marine Superintendent by Coral Princess Cruises who operated a cruise line providing tourist cruises. Due to government regulations to prevent the spread of COVID-19 it was no longer able to operate these cruises and he was stood down on 26 March 2020. He was one of some 50% of staff stood down.

The employer relied on s 524 of the Fair Work Act 2009 which relevantly provides that an employer may stand down an employee during a period in which the employee cannot be usefully employed because of a stoppage of work for any cause for which the employer cannot reasonably be held responsible.

The key issue was whether a genuine stoppage of work occurs when an employer’s business is not trading but there still exists some limited functions that can be performed. The Commission found that there was a genuine stoppage of work due to the inability of the employer to engage in its primary function as there was no intervening cause between the government restrictions on travel and the employer’s decision to stand down.

The term ‘useful employment’ was considered a question of fact which necessarily involved consideration of the conduct of the employer. It was found that if the employer had acted in good faith that this would be a factual consideration in favour of the employer as notions of fairness were part of the consideration.

The Commission noted that where an employer is acting out of self-preservation it is difficult to contemplate how their actions would be outside the realms of good faith or fairness.

The test of useful employment was found to involve two considerations:

  1. An assessment of the work available-is their useful work and how many employees are required to perform that useful work?
  2. A general analysis of the conduct of the employer against notions of good faith and fairness must be undertaken

and in resolving that question regard could be had to the economic consequences to the employer.

It was found the employer’s business had no income yet was incurring significant costs in fixed overheads. It had stood down casuals, ceased hiring, obtained a 6 month extension on all vessel survey requirements and all maintenance had been either extended out to the end of 2021 or put on hold.

The Commission found that the fact the stand down was widespread, impacted employees from all areas of the business as well as another employee from Mr Mason’s department, indicated that the actions were considered and fair. It accepted that based on the evidence there was insufficient useful work for him to perform. It found that it could not be said that there was a contemplated net benefit in retaining Mr Mason as a large number of his tasks were so reduced in capacity that they can be performed by other members of the Marine Department. The evidence showed the employer had made the decision to stand down with due consideration and it acted upon proper principles and in good faith.

It was determined the employer had made a genuine attempt to salvage the business in the face of ‘crushing financial conditions’ and to disregard economic considerations in such a time would be contrary to the case law and notions of fairness.

Takeaways

If an employer has acted reasonably and is able to demonstrate:

  • a stoppage a work due to COVID-19;
  • due assessment of the business’s work needs;
  • reasonable application of the stand downs across the business; and
  • economic necessity for the stand down

it is likely to be able to successfully defend any challenge to its stand down.

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