Employers are sometimes faced with the difficult decision about what to do with employees when their business is forced to close temporarily due to factors that are beyond their control. Typically, this occurs when there are power disruptions or mechanical breakdowns and no alternative work is available for employees.

Often in these circumstances many employees seek to take annual leave and employers are usually willing to accommodate this. In some circumstances, however, an employee has no or insufficient accrued annual leave to cover the period of the stand down or they want to keep their leave to use at a later date. Below is an overview of the stand down options available to employers.

Is it lawful to stand down an employee?

Once an employment contract is formed, legal rights and obligations are imposed on the parties in the employment relationship. As well as other obligations, employers have a legal duty to their employees to provide work and pay remuneration.

These are known as common law duties. As a consequence of these common law duties, an employer has no general right to stand down or suspend an employee without pay. This means that under their common law obligations an employer must continue to pay an employee notwithstanding that there is no work available for them and they do not actually perform their duties.

A right to stand down or suspend an employee, however, may be available in a specific provision of an employment contract, relevant statute, award or enterprise agreement (known as industrial instruments) that applies to the employee.

Stand down provisions contained in statutes

The main employment statutes that apply in Western Australia are:

• Fair Work Act 2009 (Federal)
• Industrial Relations Act 1979 (State)
• Minimum Conditions of Employment Act 1993 (State).

These statutes, together with other more specific pieces of legislation, form the basic legislative framework for employment arrangements in the Federal and State industrial relations systems. As different provisions apply for stand downs in each respective system, it is critical that an employer establishes which system applies to their business before following any of the guidance material contained in this information sheet.

Federal system stand down provisions

If there is a provision allowing for a stand down in the particular circumstance contained in a contract of employment or industrial instrument that stand down provision applies. If there is no such provision or the provision does not confer a right to stand down an employee in those circumstances, then the Fair Work Act 2009 (FW Act) provisions apply.

The FW Act provisions allow employers to stand down an employee and withhold payment for the period of the stand down when an employee cannot be usefully employed. Examples of these circumstances include:

• industrial action (other than industrial action organised or engaged in by the employer)
• breakdown of machinery or equipment, if the employer cannot reasonably be held responsible for the breakdown
• stoppage of work for any cause for which the employer cannot reasonably be held responsible.

Before standing down an employee, an employer must establish that one of the above circumstances exists. This is a question of fact which the employer may be called upon to justify. The employer must also be able to demonstrate that the employee cannot be “usefully employed” elsewhere in the business, including alternative or different duties. If no other duties are available the employer may stand down that section of the business and not make payments to the employee(s) for that period of time.

Before applying the stand down provisions in the FW Act employers should check any applicable contract or industrial instrument for any specific stand down provisions that may amend the FW Act provisions.

Employers should note that, due to Part 3-5 and Section 22 of the FW Act, regardless of any specific contract or industrial instrument provisions, the employee’s continuity of service cannot be broken and the period of the stand down must be counted as service for all purposes. In addition, an employee is not taken to be stood down under the FW Act during a period when the employee is taking paid or unpaid leave that is authorised by the employer.

State system stand down provisions

There are no specific provisions contained in either the Industrial Relations Act 1979 (IR Act) or the Minimum Conditions of Employment Act 1993 (MCE Act) that provide a right for an employer to stand down an employee.

Employers covered by the state system should refer to each contract of employment or legally binding industrial instrument to establish whether or not a right to stand down exists. In the absence of any relevant provision, standing down the employee could result in a breach of the contract and the employer could potentially be prosecuted for non-payment of wages.

Can employees be forced to take annual leave during a period of stand down?

Often employees are willing to take their accrued annual leave during a stand down period.

Awards or Agreements may contain the ability for the employer to direct the taking of annual leave or unpaid leave.

How should I communicate with my employees about a potential stand down?

Modern Awards have a standard consultation provision. In most cases a stand down will be of short duration and not fall into the category of ‘significant effect’.  It would be best practice, however, to take steps to consult with employees if any situation which may require them being stood down.

In the absence of any specific provision in an industrial instrument, Section 41 of the Minimum Conditions of Employment Act requires that an employer must consult an employee where changes occur that are likely to have a significant effect on the employee. A stand down could be considered to be a “significant effect” [see Section 40(2)(c)]. It is important that, prior to standing down an employee, that the employee be informed in writing of what is happening and to let them know what steps you have taken to avoid this situation.

It may be that employees could suggest alternatives which could include:

• an agreed minor reduction in weekly hours for all staff instead of the employer standing down one or two employees;
• employees working part time and using part of their accrued annual leave entitlements to top up weekly wages allowing employees to retain some leave accruals for the future;
• undertaking maintenance work or upgrades during the stand down period, or;
• utilising the period to undertake an essential training program.

CCIWA can provide more detailed information to assist you in interpreting your contracts and industrial instruments in conjunction with the relevant legislation. For further assistance call CCI’s Employee Relations Advice Centre on (08) 9365 7660 or email [email protected].