Devastating effects are being felt by small businesses across Australia as a consequence of the COVID-19 world crisis. Small business operators, have poured their heart and soul into their businesses. Employees are an integral part of any business and may be viewed as family in tight knit operations. But now revenues have dropped sharply (or soon will) and your clients are saying that they can no longer afford to keep their employees, what do you tell them to do?
A small business is one that employs fewer than 15 employees. There are special rules that apply to small businesses, which must not be forgotten when considering options during this crisis. Can’t remember or never knew them all? No problem. We’re here for you.
Understandably, there has recently been extraordinary interest in the “Stand Down” of employees as a response to the crisis. Section 524 of the Fair Work Act 2009 (Cth) (“Act”), provides:
524 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:
(a) industrial action (other than industrial action organised or engaged in by the employer);
(b) a breakdown of machinery or equipment, if the employer cannot reasonably be held responsible for the breakdown;
(c) a stoppage of work for any cause for which the employer cannot reasonably be held responsible.
While the application of this section will depend on the individual circumstances of every employer (and will not apply if stand downs are dealt with by a relevant Award or enterprise agreement), there is a clear consensus that it will apply to businesses ordered to close by the Government as a result of this crisis.
The position is less clear in relation to businesses who are legally permitted to continue trading at this stage. Further, to meet the criteria of s.524 of the Act, employees must also not be able to be usefully employed by the business, even outside of their ordinary duties, otherwise the right to stand down does not arise.
What are the options if the business is unable / unwilling to conduct stand downs?
Casual employees can simply not be engaged to complete further work and unfortunately are very vulnerable in this crisis. This is a reality that many casual workers and their employers have sadly had to confront during this crisis.
Voluntary Leave Without Pay
There may be employees who are personally at high risk from COVID-19 or who have immediate family who are at high risk. These employees may be willing to take voluntary leave without pay if they are given the assurance that their position will be preserved for them to resume at the end of the crisis. If there are employees who are willing to take up such an option, the same practical effect as a stand down is achieved while respecting the wishes of the employee. In challenging times such as this, exploring the possibility of such cooperation is in the interests of all.
Annual Leave and Long Service Leave
Employees may be encouraged to use their annual leave and/or long service leave entitlements. Employers should be transparent with their employees about the impact of the pandemic on their business operations and why it is desirable to the business for employees to use their paid leave at this time. If employees agree to use their annual leave or long service leave entitlements, employers are able to reduce their liabilities on the books and are paying out entitlements at the current rate rather than at a future higher rate (wage/salary increase). Employees may take comfort that their taking of paid leave is helping the business and assists you with avoiding the option of redundancies.
Reductions of hours or pay cuts may be explored
Again, it is important to be transparent with employees about business operations when introducing the idea of reducing hours or pay cuts. Any reduction of hours or pay should be reached as an agreement with your employee. Consider whether any applicable agreement or Award sets minimum conditions for employees including, for example, minimum hours and rates of pay. Businesses may also be required to give notice prior to transferring employees to lower paid duties. Therefore, any changes to hours or pay may take a significant period of time (considering consultation periods and notice periods).
Personal or Carer’s Leave
Personal or Carer’s Leave is available to any employee suffering illness or caring for a family member who is suffering illness. Businesses should adopt a generous posture in this regard, and employees should be encouraged to take this leave when those circumstances apply to them. Such an approach is also consistent with health and safety obligations which are of particular concern during this COVID-19 Crisis.
Have any of your client’s employees been employed for less than 12 months? Small businesses are protected from unfair dismissal claims brought by employees who were employed for less than 12 months. Employers should consider and follow the Small Business Fair Dismissal Code when terminating any employees. Termination is a serious option and as such we highly recommend obtaining expert legal advice before taking any steps to terminate employment.
The positions which are currently surplus to your requirements, will likely be required again once the crisis is over and demand resumes. If that is the case, redundancies may not be a desirable path due to the risk of unfair dismissal claims arising from the redundancy not being a “genuine” redundancy in the event that a person is hired in a similar role in the coming months.
If your clients are required to consider redundancies, remember that some small businesses benefit from the exemption from having to make redundancy payments.
At the time of writing, the Federal Government has just announced a wage guarantee of $1,500 a fortnight, which will be available to eligible employers. We will provide a follow up to this article as the details of that scheme emerge.
This legal update was drafted for our small business accountants and all the small business clients of all of our accountant friends. Please share this with your colleagues, clients, associates, friends, family and anyone who may benefit from this important information.
We hope this overview has provided some useful guidance during these difficult times. However, please remember that you should always seek independent and specific legal advice regarding any particular employee and circumstance as the legal position varies widely from employee to employee and is dependent on the applicable facts.
Gavin Parsons and Associates can assist you with any questions you may have regarding employment law and your business. Contact Gavin Parsons and Associates on (02) 9262 4471 for a free no-obligation consultation today