NSW Government Closes Industry Sectors

The NSW Government has today announced a series of measures to further combat the COVID-19 outbreak in Greater Sydney including the Central Coast, Blue Mountains, Wollongong and Shellharbour that will have material implications for business.

The measures may raise questions about:

• 1. Your right to stand down an employee without pay.
  2. Your workers being prevented to attend their workplace in certain local government areas.

Please contact us before deciding to stand an employee down without pay as you need to get this right otherwise you may expose yourself to a substantial underpayment claim.

The NSW Government has:

• 1. Closed all construction work until 31 July.
  2. Closed all non-urgent maintenance, including cleaning services and repair work on residential premises.
  3. Closed all non-essential retail ('click and collect', takeaway and home delivery can still operate) until 31 July.
  4. Restricted people living in the local government areas of Fairfield, Liverpool or Canterbury-Bankstown to not go to work outside of their local government area until 31 July unless they are health or emergency services worker (including aged care and disability care). These people can continue to work subject to the other general rules about working.

The following retail is still able to operate

• Supermarkets and grocery stores (including butchers, bakeries, fruit and vegetable stores, liquor stores and fishmongers)
• Stores that predominately sell health, medical, maternity and infant supplies
• Pharmacies and chemists
• Petrol stations
• Car hire
• Banks and financial institutions
• Hardware, nurseries and building supplies
• Agricultural and rural supplies
• Pet supplies
• Post offices and newsagents
• Office supplies.

Please check the NSW Government's website as Public Health Orders may provide greater detail or refine what is meant by construction and 'non-essential retail' over the coming days

This may raise a series of issues:

• 1. If the sector your business is in has been shut to 31 July can you stand down your employees without pay?
  2. If you service or supply one of these sectors can you stand down your employees without pay?
  3. If you operate a business that relies on employees living in the local government areas of Fairfield, Liverpool or Canterbury-Bankstown what can you do if your employees cannot leave their local government area to get to work?

What Stand Down Provisions Apply.

The Fair Work Act extends limited rights to an employer to stand an employee down without pay.  This is found in section 524 of the Act.  Relevantly, section 524(1)(c) states:

Employer may stand down employees in certain circumstances

(1) An employer may, under this subsection, stand down an employee during a period in which the employee cannot usefully be employed because of one of the following circumstances: ...
(c) a stoppage of work for any cause for which the employer cannot reasonably be held responsible.
In order to stand employees down under section 524(1)(c), you need to establish three things:

1. the employee must not be able to be usefully employed
2. there must be a stoppage of work and
3. the stoppage must have been caused by reasons that the employer cannot reasonably be held responsible for.

Usefully employed: Some exploration is required to ensure that there is no work that an employee can do that is within their skill and competence. Useful work does not have to be the work the employee usually performs but must be within their competence to perform and must be genuinely productive work. That is, the work must provide a 'net benefit' to the employer.

Stoppage of work: To constitute a stoppage of work, a business cannot merely slow down its operations or reduce certain staffing levels.  Instead there needs to be either;

• 1. a total cessation of all work or
  2. a cessation of work in an identifiable and defined function/s or part of the business.

The stoppage must have been caused by reasons that the employer cannot reasonably be held responsible for: However, to attract the benefit of section 524(1) (c) the employer, in effect, must have little or no alternative in the circumstances to cease work.

Where the Government has 'shut' an industry or part of an industry and you are in this industry then that will most likely trigger a 'stoppage' outside of your control.

If the requirements above are met then you are not required to make payments to the employee for the relevant period.

Can Enterprise Agreements and Employment Contracts contain stand down provisions?

Yes. If these are similar stand down provisions to the Act they will apply rather than the provisions in the Act. In simple terms you could:

• 1. have a right under the Fair Work Act to stand an employee down without pay pursuant to Fair Work Act or
  2. have a right under an enterprise agreement because a similar right (covering the circumstances in the Act) operates in the enterprise agreement that applies (thus the right arises under the enterprise agreement and replaces the right under the Act) or
  3. have a right under an employment contract because a similar right (covering the circumstances in the Act) operates in the employment contract that applies (thus the right arises under the employment contract and replaces the right under the Act) or
  4. have a combination of these.

Please do not make a stand down decision lightly. It would be customary to explore all available options before enacting a stand down without pay such as the taking of accrued annual or long service leave.

What to Consider if you Service of Supply an Industry or Sector that has been Shut Down.

It may be the case that the flow-through impact of the industry or sector you service or supply is such that your business is going to 'stop' operating. In such a case you will need to consider the stand down issues discussed above.

Be cautious though, a simple fall off in demand will not enliven the right to stand down an employee without pay as it will not trigger a 'stoppage of work'. 

For instance, if the shutting of an industry or sector that you service or supply impacts your business by dropping trade by say 50% and the employer decided that it was simply not in their immediate commercial interests to trade and therefore shut down until 31 July, this would not be a situation that would attract the right to stand down under the Act or a similarly worded enterprise agreement or employment contract provision.

Such a situation would be unfortunate but any stoppage of work would most likely be considered by a Court as being brought about by their own actions and within their own volition. A mere decline in profitability (into loss making for a while) is unlikely to be sufficient.

Workers Unable to get to Work because of the Government Rules Applying to Western Sydney Local Government Areas.

Terminating the employment of an employee unable to attend work because of the most recent restrictions would be very likely an unfair dismissal risk.

You should consider whether the employee can work from home in such a situation, otherwise you are not under any requirement to pay such an employee.

We would urge you to make available any accrued paid leave the employee might have such as annual leave or long service leave. Otherwise, you should apply your normal leave without pay policy to such an employee. We will continue to monitor this situation and provide updates that may impact your business.

Please get in touch if you need confirmation on actions to take or discuss revisions to your workforce planning.