2 min read

When can you lawfully stand down an employee?

[Ed Note: The Fair Work Ombudsman (FWO) recently began legal proceedings against an employer after it avoided its termination entitlement obligations by placing six of its employees on extended stand down due to a lack of work.

A stand down involves directing an employee to stop performing work for a specified period, and not paying wages to the employee.

The employees were initially told that the unpaid stand down would last for around 3 months. Just before this period was up, they were told that the stand down would extend to 4 months. This pattern continued, leaving the employees without work – or pay – for more than 7 months.

When the employees complained to the FWO, Fair Work inspectors repeatedly tried to resolve the issue with the employer to avoid legal action, but the employer was uncooperative. Inspectors advised the employer that standing down employees without pay due to a lack of work is unlawful, and that the employees had, in fact, been made redundant. Therefore, the employer was obligated to pay the employees redundancy pay, plus their accrued leave entitlements and payment in lieu of notice.

The company now faces penalties of up to $51,000 per breach, while its director is looking at $10,200 per breach.

This case highlights the importance of understanding your rights and obligations when it comes to standing down your employees. It also raises the question of what you can do if, for a period of time, you do not have enough work. Charles Power explains below.

Until next time…]

When can you lawfully stand down an employee?

If you stand down an employee without a legal right to do so and you refuse to pay wages, you may effectively be dismissing the employee.

Your right to stand down an employee may be provided by an employment contract, an enterprise agreement or the Fair Work Act 2009 (Cth) (FW Act).

Under the FW Act, you can stand down an employee if you cannot usefully employ them due to an interruption to your business, e.g, due to:

  • an equipment breakdown, when you cannot reasonably be held responsible for it;
  • industrial action, when you have not organised or engaged in that industrial action; or
  • any other work stoppage for which you cannot reasonably be held responsible, e.g. a natural disaster.

Effectively, you can only stand down employees if the reason for the stand down is outside of your control. This does not include a lack of work.

What can you do if there is not enough work?

If you do not have enough work to usefully employ an employee, one option is to ask the employee to take their accrued annual leave – but only if they have sufficient leave to cover the stand down period.

Whether you can enforce this will depend on the terms in any relevant award, enterprise agreement or employment contract. Under the FW Act, you can impose a resonable requirement to take annual leave, e.g. if an employee has excessive annual leave or your business is being shut down.

You might also choose to lay off supplementary labour, such as casuals, contractors or labour hire employees. If you take this route, remember to look at:

  • how long it will take for normal work to resume;
  • whether there is any guarantee that the same labour hire workers can be provided to you again;
  • your labour supply agreement, to determine whether you need to give minimum notice periods to labour hire employees; and
  • whether your casual employees have had regular work with you for at least 6 months (or 12 months if you employ fewer than 15 people) – if they do, they are likely to have access to unfair dismissal remedies under the FW Act.
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