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COVID-19 | The Fairness Principle in Standing Down Employees
In the recent matter of Mr Ryan La Plume v Thomas Foods International Pty Limited T/A Thomas Foods International [2020] FWC 3690, the Fair Work Commission (FWC) considered an application to deal with a stand down dispute arising in the context of the COVID-19 pandemic. This matter demonstrates the importance of employers taking principles of fairness into consideration when making decisions regarding standing down employees.
This case was decided in accordance with the general stand down provisions, as opposed to the recently introduced COVID-19 specific provisions relating to the more flexible JobKeeper enabling stand down direction; that direction only applies in circumstances where the employer and affected employees are in receipt of JobKeeper payments. As canvassed further below, that was not the position here.
The Facts
In 2015 Ryan La Plume, the Applicant, was employed as a full-time export documentation clerk by Thomas Foods International Pty Ltd (Thomas Foods International), a corporate entity within the multi billion-dollar Thomas Foods group.
The disruptive effect of the COVID-19 pandemic on global economic activity has been well documented. Although Thomas Foods International did not cease operations, the pandemic had a material impact on the business due to a fall in demand and restricted export markets. In response to the pandemic, Thomas Foods International undertook a number of initiatives to protect its commercial interests, including standing down approximately 300 employees and not rostering some casuals.
On 4 May 2020, the Applicant, who was based in the head office department, was stood down from his employment for an indefinite period. Notably, activity in the head office of Thomas Foods International was impacted to a lesser degree by the pandemic than other areas of the Thomas Foods group business, and as a result the employer of head office staff, Thomas Foods International, was ineligible to claim JobKeeper wage subsidies from the Federal Government.
Ultimately, the Applicant was one of five employees stood down from the head office and was the only person in the export documentation team to be stood down. The Applicant’s work was distributed among the remaining members of his team.
During the Applicant’s period of stand down, he became increasingly concerned and made enquiries regarding redeployment options and the JobKeeper wage subsidy. Eventually, the Applicant expressed his desire to be made redundant. This request was rejected by Thomas Foods International.
The Dispute
The dispute between the Applicant and Thomas Foods International was first referred to private conference before the FWC where the parties ultimately agreed that the Applicant’s position would be made redundant effective 25 June 2020. A dispute regarding the legitimacy of the stand down, however, was not resolved. As such, that dispute proceeded to arbitration before the FWC.
The Applicant challenged the stand down on two grounds:
- that it was not authorised by section 524 of the Fair Work Act 2009 (Cth) (FW Act) which provides that an “employer may stand down an employee during a period in which the employee cannot usefully be employed because of […] a stoppage of work for any cause for which the employer cannot reasonably be held responsible”; and
- that the terms of the stand down were unfair. Notably, in relation to stand down disputes, section 526(4) of the FW Act provides that “in dealing with the dispute, the FWC must take into account fairness between the parties concerned”.
To support these contentions, the Applicant submitted:
- he was given too little time from being told he was going to be stood down (28 April 2020) to when it took effect (4 May 2020);
- prior to being stood down, he had a full workload and there was no relevant stoppage of work due to COVID-19 or for any other reason;
- that inadequate communication from Thomas Foods International made him feel isolated and frustrated;
- his low annual leave balance should have been a factor weighing against standing him down; and
- it would have been fairer to him if all members of the export documentation team worked reduced hours, rather than him alone bearing the heavy burden of being stood down.
In response, Thomas Foods International contended:
- that it only made stand downs to the head office department when absolutely necessary, and stand downs had occurred to other business units beforehand;
- the Applicant was one of five head office employees who had been stood down and as a result, was not singled out;
- the stand down mitigated or delayed the need for redundancies, and was therefore a fair response in the circumstances;
- that COVID-19 was having a material impact on Thomas Foods International’s export activities and the work of the export documentation team;
- redeployment and other alternatives to stand down were considered and discussed with the Applicant, but no viable options existed; and
- that Thomas Foods International engaged in regular communication with the Applicant.
The Decision
In considering the question of whether there was a “stoppage of work” such as to properly enliven section 524 of the FW Act, Deputy President Anderson stated that (at [49]):
“[…] what constitutes a “stoppage of work” in section 524 should not be so broadly construed as to include a mere downturn in business activity nor be so narrowly applied as to require the entire cessation of business activity. The statutory phrase is a stoppage of work, not a stoppage of the business. For there to be a stoppage of work some defined business activity with respect to which work is performed needs to cease, but not the cessation of business activity entirely. Whilst in certain circumstances both may apply (for example, the fire at Thomas Foods Murray Bridge in January 2018 resulting mass stand downs and redeployments) a business might still be operating notwithstanding an external event causing distinct areas of work to be sufficiently impaired so as to warrant stand downs.”
In the present matter, Deputy President Anderson did not consider that the circumstances constituted a “stoppage of work” for the purposes of section 524.
It was noted that although the export documentation team did experience a downturn in work due to COVID-19, the work of that team continued and there was no stoppage per se. While the downturn in work may have warranted a reduction in hours, Deputy President Anderson noted that the Applicant could have been employed to do some of the work which did continue.
Furthermore, in considering Deputy President Anderson took into account principles of fairness, as required by section 526(4) of the FW Act. He stated (at [57] to [59]):
“It was fair for Thomas Foods to reduce working hours in the export documentation team. A circumstance beyond its control had impacted demand, and whilst the relevant business activity did not stop the employer needed to make consequential reductions in labour. It was also reasonable for Thomas Foods to, at least initially, maintain employment relationships and use options short of redundancy. I am also satisfied that Thomas Foods genuinely considered redeployment opportunities, which neither the employer nor Mr La Plume could identify.
Yet the employer chose to impose the whole burden of reduction in hours on one full time employee, Mr La Plume whilst retaining full time employment amongst other members of the business unit. That was unfair.
[…]
A fair approach would have been for Thomas Foods to apply some apportionment to the reduction to comparable employees in the export documentation team, not singularly to Mr La Plume.”
As a result, it was held that the stand down was not consistent with the FW Act. Thomas Foods International was ordered to pay the Applicant an amount equivalent to the Applicant’s stand down period, less an amount representative of what have been a fair reduction in the Applicant’s hours during the stand down period.
Final Observations
The decision in this case confirms that standing down employees pursuant to the general provisions in the FW Act is a measure of last resort. An employer must not only establish the requisite stoppage of work but also that the implementation of the stand down does not lead to unfairness to affected employees. Some employers, particularly in the early stages of the COVID-19 pandemic, adopted a “desperate times, desperate measures” approach that assumed there was a broad right to stand down employees in times of difficulty, overlooking the strict requirements of section 524 of the FW Act. This decision is unlikely to be the last of its kind.
The case also highlights the benefits for employers in taking advantage, where possible, of the flexibility conferred by the various JobKeeper directions and requests. The JobKeeper enabling stand down direction is, by design, broader than the general right of stand down pursuant to section 524 of the FW Act, pursuant to which this case was determined. While much of the commentary on JobKeeper focuses on the $1500 per fortnight payment, the flexibility conferred by the scheme should be top of mind for eligible employers needing to adapt during the ongoing COVID-19 crisis.