To date of publication, there has been no government directive for all retailers to close or cease trading.
In his announcement on 29 March 2020, the Prime Minister confirmed that there is no directive to close shopping centres although he urged Australians to only shop irregularly and only for essential items which he considered to be “food and supplies”. The Prime Minister has referred to this advice as instructions or guidance, rather than a directive.
The Federal and State governments have previously ordered a shutdown of only some businesses including cafes, restaurants, nightclubs and pubs, licensed venues, gyms, spas and beauty services. Stand down without pay pursuant to the Fair Work Act may be available to these employers.
For other employers, there are serious questions around whether employees can be lawfully stood down without pay in the absence of a government directive to close or the existence of an enterprise agreement which deals specifically with stand down with or without pay.
There are limited circumstances that allow a retailer to stand down an employee without pay under the Fair Work Act 2009 (Cth) (Fair Work Act) (see also our other publication of today here). Essentially, to be able to stand down store employees, a retailer would need to be able to demonstrate that these employee cannot do “useful work” because there is a stoppage of work for a cause for which the retailer cannot be held responsible.
The Federal Government’s recently announced “JobKeeper” allowance for stood down staff, does not change the circumstances when an employer can lawfully stand down employees.
Whether an employee can be “usefully employed” is a question of fact and will need to be considered in the specific circumstances of an individual retailer and each employee. The explanatory memorandum to the Fair Work Act sets a high threshold for whether an employee can be “usefully employed”:
“if the employer is able to obtain some benefit or value for the work that could be performed by an employee then the employer would not be able to stand down an employee.”
Stoppage of work?
In the past a “stoppage of work” has extended to situations such as natural disasters or severe weather events. There is case law that suggests that a deterioration in business or economic downturn, even if the cause of that downturn is beyond the employer’s control, may not be a stoppage of work that qualifies as a stand down event.
A reduction in sales and foot traffic may be directly referrable to the current health crisis and, perhaps even, the comments and guidance issued by the Federal government. However, in the absence of a directive that closes retail stores entirely, retailers will need to carefully consider whether there is a stoppage of work in their particular circumstances. For example, it is possible that the imposition of social distancing measures have meant that retailers are unable to operate stores and comply with these measures and, therefore, need to close.
It is also possible, although untested, that the combination of severely reduced to non-existent sales, the Federal government’s latest recommendations against shopping and social distancing directives are, in combination, enough for a court to find there has been, in practical terms, a “stoppage of work”. There is the possibility that landlords may place unacceptable conditions on future trading.
The FWC may need to determine such matters as more retail employers apply stand down without pay.
Where a retailer can still open but is operating at a significantly reduced rate of trade, it is likely that permanent employees will still have a right to be paid. That right continues even if the retailer decides to shut its doors because it cannot afford to keep operating with massively reduced foot traffic. The retailer’s alternative is to terminate the employees’ employment on the grounds of redundancy. That, of course, requires the giving of notice (or payment in lieu) and payment of severance/redundancy pay.
An alternative to all this (i.e. stand down or redundancy) is to talk to the staff to ascertain if they are willing to agree to reduce their hours or take leave (with or without pay) – see further below.
What if we decide to close stores and stand down employees without pay anyway or put them on unpaid leave?
Generally, as long as employees remain ready, willing and able to work, they are entitled to be paid their usual wage.
Requiring employees to take unpaid leave because the employer has made a decision to close stores is likely to amount to a breach of the employees’ employment contracts and the General Retail Industry Award 2010 (Retail Award).
Currently, there are other options that are available to retailers where a decision is made to shut down stores, including encouraging employees to take annual leave or reaching agreements with employees to take unpaid leave.
There might also be some light at the end of the tunnel. Just this weekend, the Fair Work Commission agreed to vary temporarily (from 28 March to 30 June) the Clerks -Private Sector Award 2010 (Clerks Award) to allow employers to direct employees to take unpaid leave where they do not have sufficient accrued annual leave to cover the period of a close down.
There is a good chance that a similar application will be made and granted on behalf of the retail sector in the coming days or weeks.
Can we stand down our employees and pay them just the JobKeeper payment?
On 30 March 2020, the Federal Government announced the introduction of a JobKeeper Payment which immediately provides businesses impacted by the Coronavirus a wage subsidy from the Government to continue paying their employees. Companies that have been affected by the Coronavirus and can demonstrate at least a 30 per cent reduction in revenue and, for employers with a turnover exceeding $1 billion, a 50 per cent reduction in business, will be able to claim a fortnightly payment of $1,500 per eligible employee for a maximum period of 6 months from 30 March 2020. Employees must be employed (even if stood down) in order for the company to be eligible to receive the JobKeeper Payment.
The JobKeeper Payment does not provide an employer with a right to stand down an employee outside the provisions of the Fair Work Act. Its aim is to assist employers with continued wage payments to employees. If employees are lawfully stood down without pay, they will now be entitled to payment of $1,500 per fortnight. Where stand down is not available, employees will continue to be entitled to their usual rate of pay but eligible employers will be entitled to receive a subsidy of $1,500 towards their employees’ wages (in other words, the employer must make up any difference).
Can we reduce pay, working hours or other entitlements?
Many retailers are currently negotiating reductions in pay and working hours with store employees as a means of preserving the workforce and avoiding redundancies. In the current uncertain job market, employees are generally willing to consider such measures.
In most circumstances a reduction in an employee’s take home pay can only be done with the employee’s agreement. Variations to working hours, pay and other entitlements require careful consideration of the employment contract and the Retail Award. Importantly, a proposed change in working hours also triggers consultation obligations under the Retail Award.
There is a possibility that this might change if there is a temporary variation to the Retail Award that allows employers to direct an employee to work (on a temporary basis) reduced hours (to a specified limit) at a commensurately reduced rate of pay (i.e. without the employee’s agreement). For example, earlier this week, the Fair Work Commission granted a temporary variation to the Hospitality Industry (General) Award 2010 (Hospitality Award) to allow hospitality employers to direct a full time employee to work an average of between 22.8 and 38 ordinary hours per week and pay the employee on a pro-rata basis. Employers are also able to direct part time employees to work an average of between 60% and 100% of their guaranteed hours per week. The only conditions on these directions is that the employer must consult with affect employees and notify their union (where the employees are union members). Hospitality employees will be entitled to continue to accrue their leave entitlements based upon their previous, usual ordinary hours of work.
Retailers are always entitled to seek the agreement of its employees to a reduction in entitlements, pay and benefits. As noted above, employees may be willing to reach such an agreement if the alternative is a redundancy of their position.
Currently, however, in the absence of a Fair Work Commission variation to the Retail Award, any substantial reduction or variation in duties or entitlements which is unilaterally imposed by the employer will usually amount to repudiation (i.e. fundamental breach) of the employee’s employment contract.
It is also important to remember the various protections available to employees if an employer decides to reduce entitlements or terminate in circumstances where they are ill or injured or because they have family responsibilities. Under the Fair Work Act, an employee is protected from being dismissed because of a temporary absence due to illness or injury.
Can we force our store employees to take annual leave?
The Retail Award allows retailers to direct employees to take annual leave if there is a close down of operations (clause 32.5).
However, the Award requires employers to give employees at least 4 weeks’ notice before the leave commences. Despite the impracticality of this requirement in the current circumstances, not providing the mandatory notice period would amount to a breach of the Award.
The Fair Work Commission’s orders granting temporary variations to the Hospitality Award and Clerks Award extended the circumstances in which an employer can direct employees to take annual leave. In particular, these variations now allow employers to direct employees to take annual leave with only 24 hours’ notice in the case of employees covered by the Hospitality Award and 1 week’s notice (or an agreed shorter period) in the case of employees covered by the Clerks Award.
We understand that the SDA and relevant employer associations are currently in discussions and are considering making a similar application to the Fair Work Commission to vary the Retail Award.
Currently, it is preferable to obtain the agreement of employees that they take annual leave, without the need for a direction that may breach the Retail Award in terms of notice provided. The employment contracts and an applicable leave policy (if any) should also be considered to determine whether these impose any limitations on directing employees to take annual leave.
Can we force our employees to take paid personal leave?
No. Paid personal/carer’s leave can only be taken by an employee when they are not fit for work because of personal illness or injury or to provide care or support to a member of the employee’s immediate family or household.
Paid personal leave may be available to employees who are required to care for a child in circumstances where schools have closed.
What should we do now?
While there is no current government directive requiring all retailers to close, this is a rapidly developing situation and it is possible that such a directive will be made by the Federal or a State government soon with various exclusion for essential services.
In the interim, employers are now requesting employees to take annual leave, or negotiating with employees for reduced hours or even leave without pay where the employer is not yet able to invoke the Fair Work Act provisions and stand down employees without pay. The JobKeeper Payment will provide some assistance to employees who agree to leave without pay. Any such period of leave should be limited and not provide any guarantee or ongoing right to paid leave given that it may be necessary to invoke the Fair Work Act stand down provisions in the coming days/weeks.
As the ability to stand down employees depends on individual circumstances, please do not hesitate to reach out to our employment specialists in our dedicated Consumer Goods and Retail Industry Group for further advice.