BridgePoint Group Expert Panel Member, Russell Debney (Commercial and Corporate Lawyer), provides insights Section 524 and the staff stand-down decision made by Qantas.

Qantas has just stood down 20,000 employees without pay. Can I do that in my business as I am preparing for a substantial downturn as a result of coronavirus?

“Within hours of the announcement by Qantas, my phone and messages were running hot with clients asking “If Qantas can do that, then why can’t I?”

In most cases, the advice is that you cannot – or, at least for the time being, you should not.

Section 524 of the Fair Work Act entitles employers to stand down employees without pay in certain prescribed circumstances. These include, industrial actions, a breakdown of machinery or equipment, or a stoppage of work for any cause for which the employer cannot be reasonably held responsible. Qantas has obviously concluded that the last of these circumstances apply to it.

Industrial agreements can modify Section 524 and so too can employment contracts.

So what does this mean for SMEs?

Section 524 is intended for catastrophic circumstances that will differ from business to business; usually natural causes or a loss of production equipment in the event of a fire, for example. In the case of Qantas , they have argued that the closure of the borders fits that description for a national airline and in the case of their unique business.

But for now, other businesses are trading on in one form or another, even if that includes in many cases, an absolute need to reduce salaries and employment costs.

For that, termination or redundancy provisions exist – or preferably in the current environment, agreements can be reached with employees to take leave, paid or unpaid and with or without using accrued entitlements. And note that most small businesses do not have to pay redundancy in any case.

The alternative of a small business attempting to utilise Section 524 is that most lawyers will advise the employee to give notice that the employee does not accept the right to stand down and reserves all rights to claim salary and employment entitlements, as well as damages, for the stand-down period.

If the coronavirus goes on for 6 or 12 months or more, then this is a risk that no small business can take.

Instead, if a mutual agreement cannot be reached, it is far better to cap the liability, to terminate and then to look at contracting or some other legal options before re-employing, perhaps, at a later date when things improve.”

If you need to reduce staff costs due to the COVID-19 situation, contact Russell Debney at BridgePoint Group before taking any action that may later backfire.

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