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COVID-19 dilemma: cut hours, stand down, or redundancy?

Employment lawyer Joe Murphy says you may only have one option.
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COVID-19 dilemma: cut hours, stand down, or redundancy?

COVID-19 dilemma: cut hours, stand down, or redundancy?

26 March 2020

As COVID-19 devastates businesses large and small, employers are being faced with a dreadful conundrum: should we stand down staff, cut hours, or make people redundant? Employment lawyer Joe Murphy says you may only have one option.
 
No one want to lay staff off. Let’s get that straight right from the start. But your desire to do the right thing and keep workers employed could backfire on you.
 
Joe Murphy, managing director of workplace at Australian Business Lawyers & Advisors, says many employers believe that standing down employees is an easier or ‘nicer’ option than redundancy. It’s preserves the person’s employment, continuity of service is maintained, and leave continues to accrue.
 
The problem, says Joe, is that businesses may not be properly assessing the circumstances that allow for a stand down.

“It really is a last resort,” he says.

“You need to be very careful that you even have the option of standing someone down. There needs to be a cause for a stoppage of work that an employer cannot be held responsible for. Unless there is a stoppage and no useful work, you cannot stand down someone down.”

Joe says some employers mistakenly believe they can stand down employees simply because work is drying up and profits are down.

“But you can’t stand down employees on that basis or because of what you anticipate is going to happen in the next few months,” he said.

“Only at the point at which a stoppage occurs can a stand down occur.

“The problem with a stand down is that if you get it wrong, the business can attract a penalty for breaching the Fair Work Act, an award or agreement, and you could also be personally liable for any breaches.”


So, what should employers do?


If paid or unpaid leave is not an option, then reduced work hours may be a viable option for some businesses but be cautious about trying to steamroll any changes through.

“Every employee has to individually agree to cut their hours,” Joe says.

“Even though it’s a time of crisis you need every single employee’s agreement before you vary any terms of employment or contracted hours for that individual.

“And you need to be very careful that you don’t say ‘if you don’t agree, I will have to consider redundancy’.”

Joe suggests “painting a picture” for employees about the state of the business and why hours need to be cut. Talk about the need to remain viable and how this will help maintain everyone’s employment in the long term.

If employees don’t agree to reduced hours, then redundancy may be the only option. While redundancy is a more permanent solution, because you terminate the employee’s employment, it is usually a simpler solution legally speaking.

Before making any decision, Joe recommends employers consider:
  • Can they keep people on?
  • Looking ahead three months, what do they expect their workforce to look like?
  • If a stand down isn’t an option, and for many businesses it isn’t, is redundancy the most appropriate way to reduce the workforce now, even if you need to turn around in three months and re-employ people?

Sadly, says Joe, redundancy will often be the most practical option for employers.


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