Stand down and out: FWC dismisses challenge to stand down

Across Australia, employers continue to face the difficult challenge of standing down employees in response to the effects of the COVID-19 pandemic.

Under s524 of the Fair Work Act 2009 (Cth) (FW Act), an employer is able to stand down an employee in circumstances where the employee cannot usefully be employed because of a stoppage of work for any cause for which the employer cannot reasonably be held responsible.

In the recent decision of Marson v Coral Princess Cruises (N.Q.) Pty Ltd T/A Coral Expeditions [2020] FWC 2721, the Fair Work Commission (FWC) was required to consider the stand down provisions of the FW Act when an employee claimed that he was unlawfully stood down.

The employee was a Marine Superintendent with a tourism-centric cruise line operator. As a result of the COVID-19 pandemic, the employer was ordered, by the government, to suspend its operations. In compliance with that direction, the employer ceased trading entirely.

Prior to the cessation of trade, the employee’s duties included a range of administrative and support tasks. As a result of the shut down of operations, the employee’s duties were reduced. The employer determined that the remaining tasks of the employee’s role could be performed by employees who formed part of a “caretaker” group, and it made the decision to stand him down.

In the end, the employer stood down 107 employees, representing about 50% of its workforce, while other employees worked reduced hours and for reduced wages.

The employee refuted the employer’s decision to stand him down and claimed that the stand down was not lawful, in large part, because there was still useful work that he could perform. The employee lodged a dispute with the FWC.

In reaching a decision on the matter, the FWC provided some useful guidance on the stand down provisions in the FW Act.

The FWC said that there are three main criteria for assessing whether a stand down is consistent with the FW Act, in circumstances such as the present:

  1. The employee must have been stood down during a time when they cannot be usefully employed.
  2. There must be a stoppage of work for which the employer cannot reasonably be held responsible.
  3. The reason the employee cannot be usefully employed must be because of the stoppage of work.

In this case, FWC found that there had been a genuine stoppage of work within the meaning of the FW Act because the employer had entirely ceased trading. This fact was not diminished merely because some employees continued to work to maintain the employer’s business in “caretaker” mode. The fact remained that the employer had entirely halted its normal operations of conveying passengers on its cruise vessels. Further, that stoppage was the result of a government direction, and was therefore not within the control of the employer.

Importantly, the FWC drew a distinction between a stoppage of work due to a complete cessation of trade and a downturn in trade. The FWC said that a downturn in trade would not constitute a stoppage of work for the purposes of the stand down provisions of the FW Act as it would produce an unintended result whereby employees would be denied their employment entitlements each time an employer experienced changes in the market – this was not the intended purpose of the stand down provisions.

The FWC then considered whether the employee in this case could be usefully employed. The FWC said that an assessment of whether there was “useful employment” involved consideration of the factual matrix, including whether the employer had acted in good faith in determining that the employee could not be usefully employed. The FWC held that the economic pressure on an employer should be considered a relevant factor and perfection in decision making under such circumstances should not be expected.

The FWC found that the employer had carefully considered its situation before standing down employees and had done so in an effort to stay afloat through the COVID-19 pandemic. The employer had considered the tasks usually performed by the employee and had decided that those tasks were reduced as a result of the pandemic and any remaining tasks could be performed by other employees who were not stood down and who formed part of the caretaker team. The decision to stand down the employee and other employees was not taken lightly and was made in difficult financial circumstances.

The FWC was satisfied that the employer had appropriately determined that the employee could not be usefully employed either in his usual capacity or in a reduced capacity.

Finally, the FWC considered whether the stand down was because of the stoppage of work. The evidence of the employer was that the stoppage and resulting stand down were a direct result of government restrictions in response to the COVID-19 pandemic. Accordingly, the FWC found that the required temporal and factual connection between the stoppage of work and the stand down were present.

The FWC decided that the stand down was lawful and dismissed the employee’s application.

What can your business learn from this decision?

Employers are not entitled to rely on the ordinary stand down provisions of the FW Act because they experience a downturn in trade – this will not satisfy the requirement that there was a stoppage of work for which the employer cannot reasonably held responsible. A complete cessation of trade or a total stoppage of the employer’s usual activities will satisfy the requirement that there has been a “stoppage of work” as required by the FW Act.

In a stand down situation, an employer is entitled to temporarily assign tasks to other employees where an employee’s duties do not exist at their usual capacity. Simply because some tasks of an employee’s role are still required does not mean that the employee can be usefully employed.

Finally, the stand down must be because of the stoppage of work – there must be a temporal and factual connection between the stoppage and the stand down.

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