Options for businesses during downturns in work due to coronavirus

With the spread of coronavirus (COVID-19) becoming more prevalent and the impact on businesses more severe, we are receiving a large number of enquiries from employers about their ongoing obligations to employees when there is a downturn in business due to COVID-19.

Many businesses who rely on customers physically visiting their premises (hospitality, retail, etc) are facing a significant slackness in trade due to the increased number of people staying at home and following the Governments guidance to socially isolate. For these businesses there is no option for employees to work from home – their jobs are tied to physical premises where they work.

If such a business cannot continue to maintain their current staffing levels (due to the drop in trade) what are the options? We provide answers to some of the common questions we are receiving below.


There is a downturn in my business due to coronavirus can I reduce employees’ hours or pay?

For any casual employees, an employer is generally free to choose what shifts to offer them. If there is a need to reduce the number of shifts for a casual employee, this should be a relatively straight-forward process (although employers should of course always be aware of the risks that an employee who has been working a set pattern of shifts over a prolonged period is, in reality, a permanent employee, not a casual).

For full-time and part-time employees it is not generally possible to reduce their hours (or their pay) without their agreement (although employers should check any modern award or enterprise agreement that applies to the business for any special rules regarding this).

If an employee agrees to a change in hours or pay, then implementing this change is fairly risk-free. An employer should take care to record the change in writing, ideally with the employee signing a document confirming their consent.

Employers may find that if employees are fully consulted about the impact of COVID-19 on the business, they may be agreeable to temporary changes in their terms and conditions if they understand that this is necessary to safeguard the future of the business and their jobs within it.


Can I force employees to take leave?

Generally, it is not possible to force employees to take a period of unpaid leave due to a downturn in trade (even if the downturn is due to circumstances outside of the employer’s control).

It is possible to direct employees to take a period of unpaid leave under the “stand down” provisions of the Fair Work Act 2009 where there is a stoppage of work caused by COVID-19. This might arise where a business cannot open due to a direction from Government, (i.e. that certain types of businesses should not open). Professional advice should always be sought before seeking to rely on these provisions.

Where a business wishes an employee to take a period of unpaid leave so that the business can try and cope with a downturn in trade if the employee agrees to this request, then the situation should not be problematic: as above, we would recommend that the agreement is recorded in writing.

We explore further below, options for employers where employees do not agree to take periods of leave.

In respect of annual leave and long service leave the ability for an employer to force an employee to take a period of such leave will depend on the terms of any modern award or enterprise agreement that applies to the business (and for long service leave the terms of the applicable State / Territory legislation).

For annual leave, award-free employees can be required to take annual leave where the requirement is “reasonable” (we consider the current climate is likely to give employers a wide discretion to direct such employees to take annual leave). For employees covered by modern awards, some – but not all – awards provide for an employer to require employees to take annual leave if the business temporarily closes down (but usually only where the employee is given a set period of notice). Where the award is silent, the employee cannot be forced to take leave.

As above, it may well be that if employers fully engage with their employees about the impact of COVID-19 on their employees, they may be able to secure “buy-in” from employees to take periods of leave to safeguard the future of their business and their jobs.


What if employees don’t agree to reduce hours or pay or taking leave, and I can’t afford to keep paying them?

Where a business is faced with the situation that it is not viable to continue to employ employees (unless they agree to a reduction in hours/pay or to take a period of unpaid leave), this will generally provide a valid reason to commence a redundancy process.

To avoid the risk of claims in unfair dismissal – or for failure to comply with modern award/enterprise agreement obligations to consult staff – we would generally advise employers to follow the redundancy process we set out in our free guide. This also deals with employees’ entitlements to redundancy pay.

It will be imperative that options for avoiding the redundancy – such as an employee reducing their hours/pay or taking a period of leave – are discussed as part of the consultation process.


About Employment Innovations

Employment Innovations is one of Australia’s leading providers of employment services designed to increase your business’ productivity and ensure compliance. Its services include workplace advicelegal servicespayroll solutionsmigration (visas/sponsorships), human resource management & HR software. Our partner firm EI Legal provides employment law advice and representation.


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