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Coronavirus/COVID-19 - Managing Business Downturns and Closures

NOTE: This article includes general information only and should not be regarded as legal advice. While we believe the information below to be current as at the time of writing - 23 March 2020, the situation is changing rapidly. We recommend either seeking professional guidance or reviewing the information currently published by the Fair Work Ombudsman - click HERE.

Businesses are clearly facing challenging times, and many will be looking at their options to ensure that the business remains viable, and that their employees remain both employed and meaningfully engaged in work. There are a number of options that may be available to you. It is important that you consider each of these options in the context of your particular circumstances (legal, workplace culture and other) before taking any action.

Note also that the information below refers to full-time and part-time employees (generally speaking, casual employees are not guaranteed ongoing work, though in these cases it's still recommended that employers work with their employees to see what can be done to continue engaging them).

For guidance as to types of leave and payments that may or may not apply to employees impacted (directly or indirectly) by the virus, please refer to our earlier blog.

In the event of business downturn, a number of options ​maybe available:

Employees may take leave

You may consider offering to or suggesting to your employees that they take any available time-in-lieu or accrued annual (or potentially even long service) leave at this time. Employers and employees may also agree to the employee taking a component of leave (say, 2 days per week) and working the remaining days for a period of time. This will both reduce leave liabilities and accruals, reduce time physically in the workplace, and allow the employees some time to rest and relax away from the workplace.

Employees may IN LIMITED CASES be directed to take leave

If allowed by any relevant Award, agreement or employment contract, an employee may (with notice, usually 4 weeks), be directed to take some accrued annual leave, though this is often only possible in cases where the employee's annual leave balance is in excess of 8 weeks. Be sure to check any relevant Awards/contracts/agreements for specific requirements.

Employees may work remotely (from home)

There are a lot of businesses exploring the option of allowing employees to work from home during this time. This is a good option if it makes sense for the business, and if there is meaningful home-based work for people to do.

You might consider using a Working from Home checklist to ensure WHS precautions are taken into consideration (copy available for download on the Free Templates and Tools page of our website).Consider also how you can effectively use the available technology to both keep in contact with employees and continue to operate, including Zoom meetings, Skype, WhatsApp Groups, FaceTime, GoTo Meeting, Facebook Messenger, etc…

It is also recommended that you clearly articulate and agree with your employee the expectations around the sort of work to be done, expected deliverables / outcomes and put in place some simple measures for tracking hours of work.

Finding other work for employees to do

Do you have a list of things you've been meaning to get to for ages, but haven't had the time? It might be now!

There are potentially a range of different activities that you might ask your employees to engage in during difficult trading times. These may include:

  • Housekeeping
  • Filing
  • Catching up on paperwork / administration
  • Repairs, renovations
  • Team training and development. Upskill and build the knowledge-base of your team.
  • Strategy and planning sessions – get organised and ready for when things are on the up again
  • Networking (keeping in mind social distancing, of course!)
  • Gaining customer / client feedback through surveys, etc, to ready the business for the future
  • Researching and reading
  • Generating process improvement ideas – review your current processes and discuss / come up with new and innovative ways of doing things

Changing / reducing employee hours

Proceed with caution - some Awards/agreements/employment contracts (but not all) may allow for changes to or reductions in working hours. In these circumstances, it is essential that employers check and comply with relevant provisions, including the need to consult with affected employees before acting. Often, contracts, agreements or Awards provide that a change may only be made by mutual agreement. Usually, there will also be a requirement to provide a period of notice that these changes are coming into effect.

Standing-down employees without pay

The issue of standing-down staff without pay is particularly challenging. In the past, stand-downs have been used for cases such as mechanical breakdowns or in times of natural disaster. The current situation is unprecedented and at this point in time not entirely clear. What we do know is that stand-downs should be seen as the absolute last resort. 

It's generally accepted that where employees:

  • cannot be "usefully employed"
  • because of a stoppage of work
  • for which the employer cannot be held responsible,

they may be stood-down without pay for a period of time. Note that employee leave continues to accrue during a period of unpaid stand-down.

Our current thoughts are that:

1. Where the business needs to close entirely as a result of a government direction AND there is no other way employees could be "usefully employed", you should generally be able to stand them down for a temporary period without pay. It is suggested that you seek specific advice before proceeding to do so.

2. In a case where a business is permitted to continue operating but is nonetheless experiencing a significant downturn, it is our understanding that the stand down provisions under the Fair Work Act would generally NOT be able to be applied. In these cases, other options should be explored with employees, such as seeking their agreement to take accrued annual or long service leave entitlements, reduce their hours of work or take a period of leave without pay. If that is not possible or sufficient, redundancies may be the only option. Seek advice as required.

Relevant Awards, agreements and contracts should be reviewed to ascertain specific requirements.

Making employees redundant

If it becomes necessary to make employees redundant as a result of business downturn or outright closure of the business, it is essential that the provisions of any applicable Award/employment contract/agreement and the Fair Work Act are followed. Further information on requirements for redundancy under the Fair Work Act can be found here.

Employers need to be particularly aware of the following key requirements relating to redundancies:

  • The redundancy needs to be genuine (ie. the employer no longer needs the job to be done by anyone)
  • The need to consult with employees prior to making a definite decision to make roles redundant
  • The requirement to provide adequate notice (or payment in lieu of notice), per the Fair Work Act
  • The requirement to pay redundancy payments (based on years of service). Check any relevant Award/agreement/contract for details (small businesses with less than 15 employees will often not be required to make redundancy payments).

​This article represents our best understanding of the situation at the time of writing. It should not be considered legal advice.
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