Covid-19

Man Overboard! – Stand Down in the Time of Covid-19

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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.

Facts

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:

  1. The employee must be stood down during a time in which they cannot be usefully employed.
  2. 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.
  3. The employee cannot be usefully employed because of the stoppage.

Decision

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:

  1. 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.”
  2. 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 [2020] FWC 2721 (25 May 2020)

 

 

COVID-19 Omnibus Regulations – Electronic signing of documents

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The COVID-19 Omnibus (Emergency Measures) (Electronic Signing and Witnessing) Regulations 2020 were introduced on 11 May 2020 and can be accessed here. These were issued following the introduction of the COVID-19 Omnibus (Emergency Measures) Act 2020 in response to the COVID-19 pandemic.

The Regulations will have effect for a six month period and provide alternative methods for signing and witnessing documents during the COVID-19 pandemic period. The Regulations apply from 25 April 2020 – 25 October 2020. The changes will make it significantly easier to sign documents whilst maintaining physical distancing during the pandemic period.

The changes do not limit existing methods of witnessing documents, so long as witnessing that is carried out in person is carried out in safe circumstances in accordance with Government restrictions.

Below is a brief summary of the changes to relevant legislation, however we recommend seeking further legal advice if you are unsure how to comply with the changes.

Oaths and Affidavits Act 2018

Where the Oaths and Affidavits Act 2018 requires a signature, an electronic signature will now be permitted. This applies to statutory declarations and affidavits. If a person is required under the Act to do something in front of another, they are permitted to do so via audio visual link. The effect of this will allow witnesses, deponents and affidavit takers to comply with the Act without needing to be physically present. Furthermore, where the Act requires an original copy of a document to be signed, signing a scanned hard copy, or an electronic copy of a document will satisfy the requirements.

If an affidavit taker signs the document electronically, or witnessing is done via audio or audio visual link, the affidavit taker must include a statement in the jurat that indicates the document was signed electronically, or was witnessed via audio or audio visual link in accordance with the Regulations.

Furthermore, if a person cannot comply with the requirements, the court may nonetheless admit the document into evidence if they consider it to be in the interests of justice. The document must include the reasons why it was not practicable to comply with the Act, but this is ultimately a decision of the Court whether or not to admit the document.

Powers of Attorney Act 2014

Enduring and non-enduring powers of attorney can be executed and witnessed by audio visual link, if the requirements set out in the Regulations are followed. However, all witnesses must still fulfil their existing obligations under the Act. These Regulations do not apply to Advanced Care Directives or to appointments of Medical Treatment Decision Makers.

If a witness observes the signing of a Power of Attorney remotely, the following steps must occur:

  • the principal, or person directed to sign, signs the document whilst any remote witness observes the signing via audio visual link.
  • if there are any witnesses physically present, they must sign the document.
  • a copy of the document is then transmitted to the remote witness.
  • the witness may then sign the document electronically, or sign a hard copy.
  • the witness must write on the document that it was witnessed in accordance with the regulations.
  • if there are any further remote witnesses, the document must be transferred to the next witness.
  • once all witnesses have signed, the document must be returned to the principal or directed signer.
  • this person must then write that the copy is a true copy of the Power of Attorney in accordance with the Regulations.

The end result will mean that there is one copy of the Power of Attorney that has all signatures and statements of the witnesses. The above steps must all occur on the same day.

Where the above steps refer to ‘transmission’ of the document, the Regulations state that the method of transmission does not matter. For example, a document may be transmitted by emailing, faxing, or scanning it to the required party.

Wills Act 1997

The execution, alteration and revocation of a will by a testator that must generally be done in the presence of a person may now take place if parties are present by audio visual link. The steps that a witness is required to fulfil are:

  • the testator signs the document.
  • if there are any witnesses physically present, they must sign the document.
  • a copy of the document is then transmitted to the remote witness.
  • the witness may then sign the document electronically, or sign a hard copy.
  • the witness must write on the document that it was witnessed in accordance with the regulations.
  • if there are any further remote witnesses, the document must be transferred to the next witness and the above process repeated.
  • once all witnesses have signed, the document must be returned to the testator.
  • the testator must then write that the copy is a true copy of the will in accordance with the Regulations.

Deeds and mortgages

The Regulations also allow for electronic signature in relation to deeds and mortgages. The changes allow each signatory to sign either the document, or a copy of a document which may be either electronic or hard copy. The changes also allow witnessing to occur via audio-visual link where required.

Where a person signs electronically, they must include a statement to the effect that the document was electronically signed in accordance with the Regulations.

A person witnessing the signing of a document must also include a document to indicate that it was witnessed by audio-visual link in accordance with the Regulations.

The person who will receive the document is required to give their consent that the document be executed electronically. However, the fact that a person proposes to electronically sign a document is not a sufficient reason to withhold consent under the Act.

Need more guidance?

If you would like to discuss anything mentioned in this article, or need guidance or assistance to ensure compliance with the changes, please contact us for further information.

 

Emily Clapp
Graduate-at-Law

The JobKeeper Payment Scheme – What do I need to know?

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What payments are available to employers under the JobKeeper scheme?
When is an employer eligible?
When is an employee eligible?
How do Employers nominate to participate?
“One In All In” – An employer cannot pick and choose employees
What if an employee has multiple employers?
What directions can an employer give an employee?
Are there any conditions on directions?
How do service and entitlements accrue while an employee is on JobKeeper?
What are the consultation requirements?
When does a JobKeeper enabling stand down direction not apply?
What about the requests under JobKeeper?
Can an employer stand down an employee if not eligible for JobKeeper?

What payments are available to employers under the JobKeeper scheme?

Payments under the JobKeeper payment scheme are available in fortnightly periods between 30 March 2020 and 27 September 2020. A business that is entitled to a JobKeeper payment will be reimbursed a fixed amount of $1,500 per fortnight per eligible employee. The business must pay the employee before it is entitled to the JobKeeper payment.

When is an employer eligible?

Employers are eligible for the JobKeeper payment if all of the following apply:

  • On 1 March 2020, they carried on a business as a self-employed person, sole trader, company, partnership or trust. Not-for profits and some charities are eligible.
  • Their eligible employees are employed by the business for the fortnights claimed for (including those who are stood down or re-hired).
  • The business has faced either a:
    • 30% fall in turnover (for an aggregated turnover of $1 billion or less)
    • 50% fall in turnover (for an aggregated turnover of more than $1 billion), or
    • 15% fall in turnover (for ACNC-registered charities other than universities and schools).

Some employers are not entitled to receive JobKeeper payments:

  • banks (or entities within consolidated groups of banks) liable to pay a Major Banks Levy;
  • Australian government agencies;
  • local governing bodies;
  • companies where a liquidator has been appointed; and
  • individuals where a trustee in bankruptcy has been appointed.

An alternate decline in turnover test applies for special purpose service entities that provide employee labour to group members and have not met the basic test for decline in turnover.

When is an employee eligible?

An employee will be eligible if:

  • they are a full-time, part-time or fixed term employee;
  • they are a long-term casual. This means they were employed regularly for at least 12 months, provided that they are not also employed by another employer on a permanent basis;
  • on 1 March 2020 they were 18 years of age or older (if they were 16 or 17 they can also qualify for fortnights before 11 May 2020, and continue to qualify after that if they are independent or not undertaking full time study);
  • they were an Australian resident as at 1 March 2020;
  • they are an Australian tax resident who is a Special Category (Subclass 444) Visa Holder;
  • they agree to be nominated by the employer;
  • they were not in receipt of any of these payments during the JobKeeper fortnight:
    • government parental leave or Dad and partner pay;
    • a payment in accordance with Australian worker compensation law for an individual’s total incapacity for work.

An employer cannot claim JobKeeper for any employees who:

  • were first employed after 1 March 2020;
  • left employment before 1 March 2020;
  • have been, or have agreed to be, nominated by another employer.

How do Employers nominate to participate?

The Australia Tax Office (ATO) is administering the JobKeeper scheme.  Eligible employers can enrol with the ATO by 31 May 2020.

They must provide the employees with an Employee nomination notice within 7 days of enrolling.

 “One In All In” – An employer cannot pick and choose employees

If an employer decides to participate in the JobKeeper scheme, they must nominate all of their eligible employees. They cannot choose to nominate only some employees. However, individual eligible employees can choose not to participate.

What if an employee has multiple employers?

If an employee has multiple employers, they can choose which employer they want to nominate through. However, if the employee is a long-term casual and has other permanent employment, they must choose the permanent employer and cannot nominate the employer where they work casually. They cannot be nominated for JobKeeper by more than one employer.

What directions can an employer give an employee?

An employer who is entitled to JobKeeper payments for an employee can give the employee three new kinds of directions:

JobKeeper enabling stand down directions: These are a flexible form of stand down. The employer can direct an employee not to work on a day they would usually work, or work for less time on a day, or work a reduced number of hours overall (which can be nil).

The stand down direction can only be given if the employee cannot be usefully employed for the employee’s normal days or hours because of changes attributable to the COVID-19 pandemic or government initiatives to slow its transmission.

Directions to perform other duties:  Employers can direct employees to perform other duties, provided that:

  • they are within the employee’s skill and competency;
  • are reasonable; and
  • the employee has any relevant licence or qualification.

Directions to work at a different place: An employer may direct an employee to work at a different place, including the employee’s home, provided that it is ‘suitable for the employee’s duties’. It must not require the employee to travel an unreasonable distance.

Are there any conditions on directions?

JobKeeper enabling directions:

  • must be in writing;
  • must be reasonable;
  • are subject to provision of three-days’ notice and the requirement to consult with employee and any representative about it.

Leave continues to accrue as if the JobKeeper enabling direction had not been given.

JobKeeper enabling directions apply even if they are not consistent with relevant provisions of the Fair Work Act, modern awards, enterprise agreements or contracts of employment.

How do service and entitlements accrue while an employee is on JobKeeper?

Leave continues to accrue as if the JobKeeper enabling direction had not been given.

The period that an employee is subject to a JobKeeper enabling direction counts as service for the purposes of the Fair Work Act, e.g. accrual of leave and calculation of length of service. This means that while a JobKeeper enabling direction applies to an employee:

  • the employee accrues annual leave entitlements; and
  • redundancy pay and payment in lieu of notice of termination are calculated,

as if the direction had not been given.

What are the consultation requirements?

A JobKeeper enabling direction does not apply to an employee unless:

  • the employer gave the employee at least three days’ written notice of the employer’s intention to give the direction. A lesser period of notice may apply if the employee genuinely agrees to a lesser notice period, and
  • before giving the direction, the employer consulted the employee, or a representative of the employee, about the direction.

An employer must keep a written record of a consultation with an employee or their representative.

When does a JobKeeper enabling stand down direction not apply?

A JobKeeper enabling stand down direction does not apply during a period when the employee is taking paid or unpaid leave authorised by the employer, or the employee is otherwise authorised to be absent from their employment.

What about JobKeeper requests?

Employers entitled to JobKeeper payments can give employees a request, which the employee must then consider and not unreasonably refuse.

  • Request to work different times and days: An employer may request an employee to work on days or at times that are different from the employee’s ordinary days or times, but which do not reduce the employee’s number of hours of work.
  • Request that an employee take paid annual leave: An employer may request an employee to take paid annual leave, provided the request does not result in the employee having a balance of fewer than two weeks. They may agree to annual leave at half pay.

If an employer has given an employee a JobKeeper stand down enabling direction, the employee may give the employer a request to engage in secondary employment or training and professional development. The employer must consider and must not unreasonably refuse the request.

Can an employer stand down an employee if not eligible for JobKeeper?

A JobKeeper enabling stand down direction is different to a direction to employees to stand down that previously were in place.  An employer continues to be able to stand down an employee during a period in which the employee cannot usefully be employed because of:

  • industrial action (other than industrial action organised or engaged in by the employer);
  • a breakdown of machinery or equipment, if the employer cannot reasonably be held responsible for the breakdown; or
  • a stoppage of work for any cause for which the employer cannot reasonably be held responsible.

Information current as of 22 May 2020.

If you have any other questions, let us know and we’ll include popular issues in future FAQs. Don’t hesitate to contact us if you require more information or have specific concerns relating to the JobKeeper scheme or other workplace relations matters.

 

COVID-19 and commercial leases – Victoria issues Regulations to implement the Code

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Download PDF – Commercial Leases Regulations – Covid19

Background

On 7 April 2020, the National Cabinet published a mandatory Code of Conduct (the Code) setting out the principles to guide negotiations around the structuring of rental relief to be granted to tenants under commercial leases impacted by COVID-19.  The principles were to be implemented by legislation passed in each state and territory.

On 23 April the Victorian Government passed the COVID-19 Omnibus (Emergency Measures) Act 2020 which, among other measures, created the power to make regulations to implement the principles of the Code in Victoria.  On 1 May the government issued the COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Regulations 2020 (Vic) (the Regulations).

Landlords and tenants in Victoria will now have a much clearer understanding of their rights and obligations, and of the roadmap for resolving and formalising rental relief terms.  We have summarised below some of the key obligations and processes imposed by the Regulations, and some of the practical implications.

Eligibility

The Regulations apply where:

  • the lease is a retail lease, or a commercial lease or licence, and the premises are used solely or predominantly for the purpose of carrying on a business. Subleases and sublicences are also covered;
  • the tenant, or the group of which it is a member, had annual turnover in the previous financial year of less than $50m OR its annual turnover in the current financial year is likely to be less than $50m. This means that the impact of the pandemic up to 30 June this year can be taken into account in determining whether a tenant (or a group) who would normally have annual turnover in excess of $50m, may nevertheless be covered by the Regulations; and
  • the tenant is an employer who qualifies for the JobKeeper scheme and is participating in the scheme.

The following leases are excluded:

  • leases or licences entered into on or after 29 March; and
  • leases for farming, grazing and a broad range of other agricultural activities.

Unlike the NSW Regulations, which adopts the “related corporations” test under the Corporations Act 2001, the Victorian Regulations adopt definitions from the Income Tax Assessment Act 1997, which potentially create a wider membership group, for the purpose of applying the turnover threshold test. Under the Victorian approach:

  • an ownership interest of 40% between two entities will be sufficient to make them part of the same group; and
  • a person or company who is under the effective control of the tenant (in that the person or company acts or could reasonably be expected to act at the tenant’s direction) is an affiliate, and that affiliate’s turnover must be combined with the tenant’s turnover for the purpose of the turnover test under the Regulations.

As discussed below, it will be the responsibility of any tenant seeking rental relief to demonstrate to the landlord that it meets all the eligibility criteria.

Tenant must initiate negotiation process

The fundamental principle that underpins the Code is that the circumstances of each lease are different and a negotiated agreement must be reached on a case by case basis.

The Regulations now put the onus on the tenant, if it wants rent relief, to initiate the process by making a written request to the landlord for rental relief.  The request must state that the tenant is eligible for relief (see discussion on eligibility above) and be accompanied by supporting information.

A tenant is not obliged to request relief, but if it does not do so, it will not be entitled to the protections under the Regulations (see discussion on protections below).

Relevant period

The Regulations apply for the period commencing on 29 March 2020 and ending 29 September 2020 (the Relevant Period).  Eligible tenants are only entitled to seek rent relief for rent payable during that period (although the parties can agree otherwise), and the protections under the Regulations only apply during that period.

The Code contemplated that the protections would continue to apply for a “reasonable recovery period” after the end of the JobKeeper scheme.  No mention is made of a recovery period in the Regulations, and the protections will end on 29 September 2020, regardless of the pandemic situation at that time, unless legislative changes are made before then.

Landlord must make offer within 14 days of receiving request

A landlord must make a written offer of rental relief within 14 days of receiving the written request from the tenant (or a longer time, if agreed).  It will be important for a tenant to include with its request all the necessary information to verify its eligibility, because the 14 day period for the landlord to make an offer will not commence until that information is provided.

The landlord’s offer must relate to the whole of the Relevant Period, and must include a waiver by the landlord of at least 50% of any rental reduction, and the remaining portion must be dealt with by way of deferral as envisaged by the Code, or other means agreed between the parties.  A range of other issues must be taken into account by the landlord, which are discussed below.

After the landlord provides its offer, the parties must negotiate in good faith and endeavour to reach agreement.  A term is implied in all eligible leases that the parties must cooperate and act reasonably in all discussions concerning anything under the Regulations.  It will assist the process of negotiation and in reaching agreement if the offer includes all the issues that the landlord wishes to address in any rent relief package.  In some cases this might extend to a broader lease restructure proposal.  Open discussions during that 14 day period will help to expedite the process of narrowing the issues and reaching an agreement.

What is relevant for a landlord in structuring its offer?

The Code suggested that any rental relief would be in proportion to the tenant’s reduction in turnover.  The Regulations take a broader approach and suggest that the tenant’s reduction in turnover during the relevant period is only one of a number of specific things a landlord must consider.

The Regulations state that the landlord’s offer must be based on “… all the circumstances of the eligible lease…” and the landlord must “… take into account…” a number of other specified matters.

One of those specified matters is the reduction in the tenant’s turnover “associated with the premises” during the relevant period.  Where a tenant has more than one business premises, or operates other business activities that are not directly related to the premises, the turnover from these other premises or activities must be quantified and excluded.  Turnover from on-line sales will also be included provided it is sufficiently “associated” with the premises.

Another matter to be considered by the landlord is whether the rent relief package is sufficient to enable the tenant to be able to continue to perform its obligations under the lease, including payment of rent.  This seems to suggest the landlord must give some consideration to how the proposed rent relief package will impact on the tenant’s financial viability.

The Regulations do not specify what information the tenant must give the landlord in relation to these issues (for example, there is no specific obligation for a tenant to provide trading and other financial information), nor do they give any guidance as to how a landlord is to consider these issues, or what weight is to be given to them. .

A landlord can only consider the issues that it is aware of.  Therefore it would be prudent for a tenant requesting rent relief to put before the landlord all the information it says is relevant and should be considered by the landlord, including its current and anticipated turnover through to 29 September, and other financial details which it says will affect its ability to continue to pay rent and comply with the lease for the remainder of the lease term.

Is the landlord’s financial situation relevant?

The Regulations also require the landlord to take into account its own financial ability to offer rental relief, including any relief provided by its lenders, in response to the pandemic.

While this is to be welcomed by landlords, the Regulations give no guidance as to how to resolve an impasse between a tenant who maintains it cannot survive financially without a certain level of rent relief, and a landlord who is not in a financial position to grant it.

Rental deferrals

Deferred rent is to be amortised over the remainder of the term of the lease (after the Relevant Period ends), but not less than 24 months. No costs or interest can be charged for the deferred rent.  In effect the landlord is financing this deferral for the benefit of the tenant.  It is presumed this Regulation does not prevent the parties agreeing on default interest to apply for late payments under the amortisation plan.

Outgoings

Consistent with the Code, the Regulations require a landlord to pass on to its tenant the benefit of any reduction or saving in outgoings (which includes operating expenses or authority charges), according to the tenant’s proportional share.

The Regulations also deal with the question of recovery of outgoings in circumstances where the tenant does not trade.  The relevant provision suggests this is not obligatory as it only requires a landlord to “consider waiving” outgoings for any period the tenant is not able to operate their business at the premises.  However, it is noted that in preparing its offer of rent relief, a landlord must take into account any waiver of outgoings that is granted under this particular regulation.

Can a negotiated rent relief agreement be varied if things change?

If a tenant has negotiated and agreed on a rental relief package, and subsequently its financial circumstances change materially, it can make another request for rent relief from the landlord, and the same process will apply except that the landlord will not be obliged to waive any part of any further agreed rent relief.  However, a threshold requirement is that there must have been a material change to the tenant’s financial circumstances, and if the tenant cannot demonstrate that its financial circumstances are materially different to what they were at the time the original rent relief agreement was entered into, it may not be entitled to request further relief.

A landlord is not entitled to seek any adjustment if the tenant’s circumstances change materially for the better – for example, if recovery in turnover is much greater or faster than envisaged when the rent relief package was agreed.  Nor is it entitled to seek an adjustment if its financial circumstances were to change adversely.

Given the limited scope for making any changes to any rent relief package agreed at the outset, it will be important to ensure that the risk of these possible changes over the remainder of the Relevant Period is understood and accepted by each party, or that the agreement is structured to adapt to these changes in an appropriate manner.

Disputes

As contemplated by the Code, a mediation process will be available where the parties are unable to reach agreement.  The Regulations give either party the right to refer any “dispute” to the Small Business Commissioner for mediation.  The mediation provisions of the Retail Leases Act 2003 will apply, and the mediator will have wide powers.

The parties must undergo a mediation before either can resort to proceedings at VCAT or in court.  Time is likely to be critical in these matters, particularly for landlords who wish to reach agreement quickly so that rent payments re-commence.  It will be important for the parties to actively plan and drive the negotiation process, so that they can initiate mediation quickly if they consider the other party is not acting in good faith or dragging out the process.

There is likely to be high demand for mediation and parties who are already in dispute should be applying for mediation as soon as possible.

Tenant protections during the Relevant Period

A landlord is prevented from taking or attempting to take action to evict a tenant, recover possession of the premises or access or pursue any security bond, guarantee or indemnity given under a lease, as a result of a tenant not making any rent payment which is due in the Relevant Period.  However, there are some important qualifications:

  • the restriction only applies if the tenant has made a written request for rental relief under the Regulations, provided the information required, and pursued good faith negotiations with the landlord after receiving the landlord’s offer. The Regulations do not specify how quickly a tenant must make the application, or exactly what information is to be supplied to the landlord.  To minimise the risk of losing these protections, tenants should make written requests as soon as practical, and include as much information as possible to substantiate its eligibility and the extend and duration of the relief it is seeking;
  • if a tenant has reached an agreement with the landlord on a rent relief package, and does not pay the rent in accordance with that agreement, the tenant will lose the benefit of the protections with regard to those breaches, and be at risk of enforcement action by the landlord;
  • in relation to timing of rental payments, the relevant date is the date the payment is due, not the period to which it relates. For example, in the case of rent for March, if payment was due in advance (on 1 March) a failure to make that payment it is not protected, whereas if payment was due in arrears (on 31 March) a failure to make that payment is protected;
  • other outstanding payments, which fell due before 29 March, are not protected.

Other rights and benefits for tenants are in effect treated as terms of the lease during the Relevant Period:

  • a tenant has discretion to choose its own trading hours, and if these differ from the requirements of the lease, the tenant will not be in breach;
  • a landlord cannot increase the rent. In effect rent increases that would otherwise apply during the Relevant Period are postponed until the period ends;
  • any reductions in outgoings (including rates and taxes) must be passed on proportionally to the tenant;
  • both the landlord and the tenant are bound by confidentiality obligations in relation to personal information and business and financial information.

Apart from the specific rights and protection granted under the Regulations, each lease continues to apply according to its terms, and each party continues to have the normal rights and remedies in relation to breach of those terms by the other.

Renewal options

Renewal options are not dealt with in the Code or in the Regulations.  Accordingly tenants who have renewal options falling due during the Relevant Period must decide whether or not to exercise the option, and give the necessary notice, in accordance with their lease.

However, as rental increases are not permitted during the Relevant Period, any rent review scheduled to coincide with commencement of the renewal term, if it occurs during the Relevant Period, must be postponed.

Summary

While the Regulations have clarified many issues raised in the Code, and set out a workable process to guide the parties in their negotiations, fundamentally the scheme relies on the parties reaching agreement.  Doing so involves human interaction and compromise which cannot be prescribed in a legal rule book.  Each case will be different and questions of what circumstances are relevant, what weight is to be given to specified issues to be taken into account, and what will be sufficient to meet the requirement of “good faith” in the negotiations, will need to be determined on a case by case basis.

Our Property Group can provide advice and assistance on how to plan and manage the process in accordance with the Regulations, and in a way that best protects your rights and entitlements, whether as a landlord or tenant.

Steve Aitchison
Principal
Melbourne
T +61 3 8602 9217
F +61 3 8602 9299
E [email protected]

 

Disclaimer

This article is intended to provide general information only. It is not an exhaustive or accurate summary of the law, nor is it intended as legal advice and cannot be relied upon as such. Please seek legal advice specific to your circumstances should you require assistance.

 

 

ASIC releases further details of deferrals and dispensations in response to COVID-19

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In our recent newsletter,  we reported on the announcement by ASIC on Monday 23 March 2020 that it was recalibrating its regulatory priorities to focus on COVID-19 challenges.

On Tuesday 14 April 2020 ASIC provided further details of the changes to ASIC regulatory work and priorities in light of COVID-19.   It is opportune to review the changes which are coming thick and fast in this rapidly moving environment.

The changes are comprehensive an affect many area of ASIC operations, including:

  • Financial Advice
  • Managed Funds
  • Superannuation
  • Credit retail banking and payments
  • Insurance
  • Market infrastructure and supervision
  • Insolvency practitioners
  • Financial reporting and audit

Some of the more relevant changes as they affect the finance and advice industry are set out in the numbered paragraphs below. For full details of all the changes please refer to the ASIC information release.

1.    Credit, retail banking and payments

ASIC is making the following changes:

  • Review of lender responses to consumers experiencing financial difficulty – ASIC is deferring the next stage of this work until 30 September 2020.
  • ASIC will be actively engaging with stakeholders on how to approach financial difficulty issues, in particular around hardship requests resulting from the impact of COVID-19.
  • Buy now pay later products – ASIC will continue its follow up work, but is deferring the finalisation and release of the follow-up report until further notice.
  • Buy now pay later products – ASIC will be engaging with the sector on their responses to COVID-19.
  • Review of the ePayments Code – ASIC will continue working on this review, but is deferring the release of its second consultation paper on the Code until the second-half of 2020.
  • Debt collection industry review – ASIC is deferring the collection of data for this review until 30 September 2020.
  • Guarantee and co-debtor loans industry review – ASIC will continue to monitor developments and analyse the information it has already received. ASIC is deferring the collection of further data for the purposes of this work.
  • Fees in deposit and savings account industry review – ASIC is deferring the collection of further data for the purposes of this work.
  • Recurrent mortgage data collection pilot – ASIC is deferring its industry engagement activities until further notice.

2.  Financial Advice – ASIC grants temporary relief to financial advice industry to facilitate the provision of timely advice in particular with regard to superannuation.

a.  Advice in relation to early access to superannuation entitlements

Many members of the public will need advice about whether or not to access their super entitlements early. To facilitate this ASIC, on Tuesday 14 April 2020, announced that it has decided to:

  • allow advice providers not to give a statement of advice (SOA) to clients when providing advice about early access to superannuation;
  • permit registered tax agents to give advice to existing clients about early access to superannuation without needing to hold an Australian financial services (AFS) licence; and
  • allow superannuation trustees to expand the scope of personal advice that may be provided under the auspices of ‘intra-fund advice’, to include early access advice.

The relief granted is temporary and is granted on certain conditions, being:

  • clients must be provided with a record of advice (ROA), which meets certain content requirements. An ROA is a shorter, simpler document that sets out the advice that is being provided;
  • the advice fee, if any, is capped at $300;
  • the advice provider must establish that the client is entitled to the early release of their superannuation; and
  • the client must have approached the advice provider for the advice.

 

b.  Statements of Advice for time critical advice allowed to be given within 30 business days (5 business days currently)

This change allows financial advisers to give the urgent advice and not also have to comply with the obligation to provide a Statement of Advice shortly after.
 

c.  Records of Advice to be permitted for existing clients

ASIC will allow “records of advice” (ROA) to be given to existing clients instead of formal “statements of advice” (SOA)  A ROA is a shorter, simpler document than a SOA.
 

d.  Relief to be implemented by Legislative Instrument

The relief is being implemented by legislative instrument – ASIC Corporations (COVID-19 – Advice-related Relief) Instrument 2020/355
 

e.  The relief is temporary.

ASIC has stated that while the relief is temporary that it will consult with key stakeholder before revoking the Instrument of relief and provide 30 days’ advance notice of any change to the industry.
 

3.  Additional Financial Advice matters

ASIC is:

  • deferring its review of life insurance advice until further notice.
  • deferring work on grandfathered conflicted remuneration until further notice.

4.  Insurance

ASIC has advised changes in relation to the following matters:

  • Consumer credit insurance (CCI) lender review (follow up to REP 622) – Apart from overseeing remediation, ASIC is deferring other follow up work until further notice.
  • Total and permanent disability insurance industry responses (follow up to REP 633) – ASIC will contact insurers by the end of April 2020 to seek information about the steps taken so far to meet the expectations outlined in the report.
  • Travel insurance review – ASIC is deferring work on this until further notice

 

5.  Corporations

  • ASIC has provided a ‘no-action’ position on upcoming AGMs due by 31 May 2020 that need to be deferred or that are held online.
  • ASIC is providing temporary relief to allow ‘low doc’ placements, rights issues and share purchase plans to be made to investors, even if they do not meet all the normal requirements.
  • Additionally, ASIC is closely monitoring market conditions and COVID-19 developments that may affect financial reporting in general.

Coronavirus Workplace Law amendments

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A full text PDF of this article is available here.

The Federal Government’s urgent response to the impact of coronavirus on the economy led to the passing of two Bills by the Commonwealth Parliament on Wednesday, 8 April 2020.

The following Acts commenced operation on 9 April 2020:

  • Coronavirus Economic Response Package (Payments and Benefits) Act 2020; and
  • Coronavirus Economic Response Package Omnibus (Measures No. 2) Act 2020.

They set out obligations employers must satisfy in order to be eligible for JobKeeper payments. They also provide new powers to employers to give directions to employees (including stand downs) and reach agreement on other issues.

JobKeeper

Turnover requirements

Employers are now eligible for the JobKeeper payment of $1,500 per fortnight per employee until 27 September 2020 if:

  • their business has or will likely have a reduction in turnover of 30% or more for the relevant month or quarter (for businesses with an annual turnover of less than $1 billion);
  • their business has or will likely have a reduction in turnover of 50% or more for the relevant month or quarter (for businesses with an annual turnover of more than $1 billion);

The scheme is also available to sole traders or self-employed people.

Employer payment obligations

Three employer payment obligations are mandated, as follows:

1. Satisfy the wage condition

Employers must satisfy the wage condition (as defined in the Rules to be made by the Treasurer) for an employee by the end of the relevant fortnight. This is presumably the requirement that the employer first make the relevant wage payment to the employee, before the ATO will reimburse the employer for that payment via JobKeeper.

2. Minimum payment guarantee

Employers must ensure that the total amount payable to the employee for the fortnight is the greater of:

  • the JobKeeper payment for the employee; or
  • the amounts payable to the employee for the fortnight in relation to the performance of work (including overtime, penalties, loadings, leave payments, etc).

This means that part time or casual employees (who qualify) must be paid the full $1,500 per fortnight, even if they would normally earn less.

3. Hourly rate of pay guarantee

If a JobKeeper enabling direction (see below) is given to an employee, the employer must ensure that the base rate of pay (worked out on an hourly basis) is not less than the base rate of pay that would have been applied if the direction had not been given.  If the employee is not paid by reference to an hourly rate of pay but a workplace instrument applies (e.g. award/enterprise agreement), then the base rate of pay is that outlined in the instrument.

Directions to employees and related measures

Stand down and related options

An employer can give employees directions to:

  • not work on days they would usually work;
  • work for a lesser period than they would ordinarily work on any days; or
  • work a reduced number of hours (compared with their ordinary hours of work). This can include a complete stand down, with no hours worked.  Numerous requirements must be satisfied in order for such a direction to be permissible.

Periods during which an employee is under a direction count as service as an employee (i.e. periods of full or partial stand down still count as service).

Also, during a period of stand down, the following apply as if a stand down direction had not been given:

  • leave accrues;
  • if the employer makes a request to the employee to take paid annual leave as outlined above, then leave accrues whilst the leave is being taken; and
  • redundancy pay and pay in lieu of notice calculations are to be based on ordinary hours and rates of pay.

Direction to perform duties

An employee can be directed to perform duties within their skill and competency.  This allows employees to be allocated duties that they would not normally perform where there is not the same need for any or all of their duties currently, owing to the pandemic.

Direction to work from different location

An employee can be directed to perform duties at a different location (including at their home).

Before any of the above three directions can be given, there are a number of requirements that must be satisfied.  These vary depending on the direction.

Periods during which an employee is under a direction count as service as an employee (i.e. periods of full or partial stand down still count as service).

See the chart below for further detail about JobKeeper enabling directions.

Agreement with employee about days of work/taking paid annual leave

In addition to directing employees on the above issues, employers can also reach agreement with employees to:

  • perform duties on different days/at different times; and
  • for employees to take paid annual leave as normal, or take twice the amount of annual leave at half their rate of pay.

Employees must consider and not unreasonably refuse any request from an employer for any such agreement.

The second chart below summarises the types of agreements that can be reached.

Other issues

Employee requests during direction

Employers must consider and not unreasonably refuse requests by an employee to:

  • engage in reasonable secondary employment; or
  • undergo training/professional development.

Disputes

The Fair Work Commission may deal with disputes about the operation of these provisions by arbitration.

Paid parental leave

The period during which an employee is in receipt of the JobKeeper allowance is considered to be “qualifying work” for the purposes of the paid parental leave work test.

More detail about these provisions is contained in the charts and table below.

Potential JobKeeper Enabling Directions (JEDs)

A.   JobKeeper Enabling Stand Down (JESDD)

Necessary requirements for a JESDD:
Employers can give a JESDD to employee to:

(a)  Not work on day(s) employee would usually work;

(b) Work for a lesser period than they would ordinarily work on a day(s); or

(c) Work a reduced number of hours (compared with ordinary hours), potentially down to nil hours.

JESDD does not apply to an employee during authorised paid/unpaid leave/absence.

 Comply with requirements 1 to 9 inclusive in Table 1 below.

B.   Direction to perform duties

Necessary requirements for a duties direction:
Can direct employee to perform duties within their skill and competency (i.e. duties other than normal duties). Comply with requirements 1 to 12 inclusive (except for 7) in Table 1 below.

C.  Direction to perform duties at different location

Necessary requirements for a location direction:
Can direct employee to perform duties at a different location (including employee’s home). Comply with requirements 1 to 9 inclusive (except for 7) plus 13 and 14 in Table 1 below.

 

Agreements with employees about days of work and taking paid annual leave

A.           Agreements about days of work

Necessary requirements for a days of work agreement:
Can reach written agreement with employee to perform duties on different days.

If employer makes a request for days of work agreement:

(a)              Employee must consider request; and

(b)              Employee must not unreasonably refuse request.

 

 Comply with requirements 3, 4, 6, 15 and 16 in Table 1 below.

B.           Agreements about taking annual leave

  
Employee must consider and not unreasonably refuse request by employer to take paid annual leave if:

(a)               Employer satisfies items 4 and 6 in Table 1; and

(b)              The balance of annual leave remaining does not drop below 2 weeks.

Double leave at half pay – can also agree in writing to take twice as much paid annual leave at half the rate of pay.

 Comply with items 4 and 6 in Table 1 below.

 

Table 1

Requirements for JEDs/Agreements
1.    Employer must give written notice of intention to give the direction at least 3 days before the direction (unless employee genuinely agrees to a lesser notice period). *
2.    Employer must consult with the employee (or their representative) before giving the direction and keeps written record of consultation. *
 *Steps 1 and 2 are not necessary if the:

i.    employer previously took these steps in relation to an earlier direction of the same type;

ii.    employee/their representative expressed a view; and employer considered views in deciding to give the direction.
3.    Direction is in writing.
4.    Employer qualified for JobKeeper.
5.    The stand down is/duties are safe having regard to (without limitation) the nature and spread of COVID-19.
6.    Employer is entitled to one or more JobKeeper payments for the employee for the period.
7.    Employee cannot be usefully employed for their normal days/hours because of changes to the business attributable to:

i.    COVID-19 pandemic; or

ii.    Government initiatives to slow the transmission of COVID-19.
8.  The direction is reasonable (it does not apply if it is unreasonable in all the circumstances).
9.  Employer has complied with the 3 new payment obligations as follows:

i.    Satisfying the wage condition;

ii.    Ensuring the minimum payment guarantee; and

iii.    Abiding by the hourly rate of payment guarantee.
10.  The duties are reasonably within the scope of the business operations.
11.  Employee has appropriate licence/qualifications, where required.
12.  Employer reasonably believes direction necessary to continue the employment of one or more employees.
13.  The place where the employee is to work is suitable for the duties.
14.  If the place is not the employee’s home, it does not require unreasonable travel (including with reference to COVID-19 circumstances).
15.  Performance of the duties is both safe and reasonably within the scope of the employer’s business operations.
16.  The agreement does not reduce the employees ordinary hours.