In March, Australian businesses faced the impacts of Covid-19 and Government restrictions aimed at combatting the spread of the virus, which were being introduced quickly and before the JobKeeper scheme and other initiatives to support the economy could catch up.
Employers hurried to protect both cash flow and their workforce, but existing IR options were more limited and blunter than the JobKeeper directions which became available after 9 April 2020. You can see our earlier pieces on JobKeeper stand down directions and the other more flexible options available to employers participating in the wage subsidy regime.
Back in March, employers looked to their enterprise agreements or section 524 of the Fair Work Act and wrestled with industrial stand down provisions which were clearly not designed with Covid-19 in mind.
On 25 May 2020, the Fair Work Commission handed down its first decision arising from a stand-down dispute in the Covid-19 era.
It has important lessons for employers who were forced to move before JobKeeper was introduced, and for employers who (for one reason or another) are not participating in the scheme. It also provides a signpost for what to expect after the JobKeeper scheme ends on 27 September 2020, unless extended or replaced.
On 26 March 2020, Coral Expeditions – a cruise operator in the heavily-hit tourism sector – stood down one of its Marine Superintendents. This was part of a 50% workforce reduction with the hope of returning to normal operations in June.
Due to government regulations to combat the spread of the virus, Coral Expeditions was no longer able to conduct its business: revenue had dropped to zero and it had made several refunds for cancelled cruises.
The Marine Superintendent performed a range of tasks, and was primarily “responsible for the overall performance of the Marine Division. This extends to vessel maintenance, crewing and compliance to company and legislative requirements pertinent to the operation of the vessels.”
He argued that although cruises had been cancelled, his administrative responsibilities meant his role was still required, so there was no stoppage of work for him. He claimed that there was still work he could do, and that some of his duties were being performed by others, so he sought to be re-engaged by Coral Expeditions.
Interpretation of s 524 Fair Work Act
In this case, Deputy President Lake identified the three primary criteria which must be satisfied for a stand down to be lawful under s 524(1) of the Fair Work Act 2009:
- The employee must be stood down during a time in which they cannot be usefully employed.
- Secondly, one of the three sub-criteria must be present. The one the Company relied on was that there had been a stoppage of work for which the employer could not be held responsible.
- The employee cannot be usefully employed because of the stoppage.
The Deputy President commented that the concept of a “stoppage of work” had not been the subject of significant judicial commentary. His Honour looked at decided cases for guidance and determined:
- The Fair Work Act required the identification of some event which involved work being consciously halted for some reason and ordinarily for some identified period of time.
- A mere reduction in available work cannot constitute a stoppage.
- Where an employer’s business in not trading but there are still limited functions that can be performed, then this is a stoppage of work because there has been a cessation of trade. His Honour stated that Coral Expeditions’ business activities had:
“entirely halted and should, therefore, be properly characterised as a stoppage of work. This continues to be the case regardless of whether some administrative or caretaker functions of the business continue to be required – these functions do not properly represent the ‘activity’ of the business.”
It was then necessary for the Deputy President to consider whether the Marine Superintendent could be usefully employed, despite the stoppage of work. His Honour stated that the test of “useful employment” comprised of two parts:
- An assessment of the work available – “it must be determined if there is useful work and then the number of employees required to perform that useful work.”
- A more general analysis of the conduct of the employer against notions of good faith and fairness, including the economic consequences to the employer.
Analysis – applying the law to the facts
The fact that 107 employees, or 50% of the workforce had been affected, and that the business also took a range of other measures to reduce overheads – including reallocation of duties, a hiring freeze, delaying scheduled maintenance – showed that the decision to stand down the Marine Superintendent was not malicious and was taken in “good faith”.
The Marine Superintendent’s tasks had largely diminished, since his HR duties reduced when the ship crew was halved and maintenance and attendances with regulatory bodies were delayed. This meant his remaining tasks could be reallocated.
The Deputy President concluded with some excellent maritime metaphors:
“This case concerns a cruise line that has had no opportunity but to lay up all its ships and halt all voyages: Coral Expeditions has stood down its employees in an attempt to stay afloat. Australia, and the rest of the world, continues to sail through the uncharted waters of a pandemic not seen for 102 years and the Respondent has made a genuine attempt to salvage their operation against crushing financial conditions. To eschew economic considerations in a time such as this would be contrary to both the case law and notions of fairness. These facts constitute a total and government mandated stoppage of work and epitomise the purpose of Part 3-5 of the Act. In these circumstances, I find that the Applicant is not capable of useful employment and the claim is therefore dismissed.“
This case is significant because it relates to actions that the employer took to deal with the COVID-19 pandemic. In coming months there will likely be more, including in the areas of genuine redundancy, unfair dismissal, under payments (e.g. interpretation of the JobKeeper subsidies) and breach of contract.
We will continue to provide updates as developments unfold. If you have any questions or for assistance with specific issues, please don’t hesitate to get in touch.
Michael Marson v Coral Expeditions  FWC 2721 (25 May 2020)