Covid 19 stand downs in Australia

 

*******  The following decision of the Fair Work Commission has been varied by the employee on 21 May 2021 having won an appeal ( [2021] FWCFB 1015 ) and had the matter returned to the Deputy President for further consideration. The result is that Mr Carter has been awarded compensation to resolve the stand down dispute with the Deputy President determining as following

9] Mr Carter claimed that he was not lawfully stood down during the period from 25 March 2020 until the termination of his employment on 21 April 2020 (Stand Down Period) and sought an order for his unpaid wages and commission.

[10] The Stand Down Application was listed for a Hearing in Perth at 10:00am, Thursday 20 August 2020.

[11] In a decision handed down on 25 September 2020 in [2020] FWC 4348 I determined that Mr Carter’s had not been stood down lawfully pursuant to s 524(1) of the FW Act and that I was not satisfied that in any event that his stand down was fair. 1

[12] I was sympathetic to the circumstances in which Mr Carter found himself. However, based on the reasoning set out in Schell v Ensign Australia Pty Ltd [2015] FWC 8825, Dylan Collis v SPI Plumbing (Australia) Pty Ltd [2020] FWC 4196 applying Construction, Forestry, Maritime, Mining and Energy Union v DP World Melbourne Ltd  [2020] FWC 4147 at [46] and Bristow Helicopters Australia Pty Ltd v AFAP [2017] FWCFB 487 at [53] to [57], I took the view that it was not within my power to order APG to pay Mr Carter his wages for the Stand Down Period as this was a matter for a court of competent jurisdiction.

[13] Mr Carter appealed my decision not to order a remedy. In a decision handed down by the Full Bench of this Commission on 25 February 2021 in [2021] FWCFB 1015 the Full Bench of this Commission distinguished these authorities from the circumstances in this Application. 2

[14] The Full Bench held as follows:

“Apply the principles stated in Re Cram to the Commission’s functions under s 526, it seems to us that while the Commission cannot make a monetary order in grant of a claim for an entitlement to wages said to be owing under an award or a contract of employment, the Commission is empowered to make a monetary order to resolve a stand down dispute based on tis consideration of what is fa fair outcome between the parties and other issues relevant to the industrial merits of the matters an, in doing so, is entitled to take into account whether, in its opinion, the stand down was authorised by s 524(1).” 3

[15] Applying those principles, I have determined that it is appropriate to provide a proportionate remedy to resolve the dispute in this Application. It is appropriate that the remedy bear some relationship to the component of the income loss incurred by Mr Carter which was unwarranted or unfair.

[16] There is no specific formula to apply in these circumstances though I adopt the approach used in Stelzer v Ideal Acrylics Pty Ltd [2020] FWC 4129 and cited with approval by the Full Bench in Christopher Carter v Auto Parts Group Pty Ltd [2021] FWCFB 1015.

[17] Mr Carter was stood down for a period of 17 working days. He was paid for two public holidays which fell during the period he was stood down but was not otherwise paid during this period. I accept his evidence that he was informed that he could not use his accrued annual leave to mitigate his income loss. I therefore take the view that it is not appropriate to expect him to have used any accrued annual leave he had available to him to mitigate his loss during the period he was stood down.

[18] Mr Carter was the most senior and the most experienced sales representative. The other two sales representatives commenced work in the week before Mr Carter was stood down. Fairness and logic suggests that the commencement of employment of these other employees been delayed or that they share any necessary reduction in the hours of work available.

[19] I also take into account the contingency that APG did not know how long the stand down period would last, did not know exactly how the pandemic would impact actual work flows, was acting to avert redundancies and was endeavouring to protect its business by seeking to reduce costs. I apply a discount of one day on this account because the more logical approach would have been to delay the start date of the employment of the new sales representative or to reduce the hours of work of both new sales representatives rather than stand down the most senior and experienced sales representative.

[20] As Mr Carter’s bonus payments were discretionary I do not believe it is reasonable to include these in any payment made by APG to Mr Carter.

[21] Consequently I consider that a payment equivalent to sixteen working days is in all the circumstances a proportionate and reasonable payment that APG should make to Mr Carter as a contribution to his income loss during his stand down (a stand down that I have found not to have been consistent with the FW Act).

[22] On the material before me this equates to a figure of approximately $5476.80.

[23] An order to this effect will issue with this decision.”

This is the post I published in May 2020.

There have been surprisingly few stand down cases heard by the Fair Work Commission despite the omnipresence of Covid 19 implications to Australian workplaces. Here is the relevant portion of a recent case dealt with by the Fair Work Commission about the lawfulness and legal implications of a stand down in these Covid times.

“Relevant Legislation

[36] Section 524 of the FW Act provides that:

“Employer may stand down employees in certain circumstances

(1) An employer may, under this subsection, stand down an employee during a period in which the employee cannot usefully be employed because of one of the following circumstances:

(a) industrial action (other than industrial action organised or engaged in by the employer);

(b) a breakdown of machinery or equipment, if the employer cannot reasonably be held responsible for the breakdown;

(c) a stoppage of work for any cause for which the employer cannot reasonably be held responsible.”

(2) However, an employer may not stand down an employee under subsection (1) during a period in which the employee cannot usefully be employed because of a circumstance referred to in that subsection if:

(a) an enterprise agreement, or a contract of employment, applies to the employer and the employee; and

(b) the agreement or contract provides for the employer to stand down the employee during that period if the employee cannot usefully be employed during that period because of that circumstance.

Note 1: If an employer may not stand down an employee under subsection (1), the employer may be able to stand down the employee in accordance with the enterprise agreement or the contract of employment.

Note 2: An enterprise agreement or a contract of employment may also include terms that impose additional requirements that an employer must meet before standing down an employee (for example requirements relating to consultation or notice).

(3) If an employer stands down an employee during a period under subsection (1), the employer is not required to make payments to the employee for that period

[37] The parties agree that no enterprise agreement applied to Mr Carter’s employment. The Employment Contract and the relevant Modern Award do not contain any stand down provisions.

[38] Section 526 of the FW Act sets out how the FWC may deal with a dispute about the operation of section 524 as follows:

“526 FWC may deal with a dispute about the operation of this Part

(1) The FWC may deal with a dispute about the operation of this Part.

(2) The FWC may deal with the dispute by arbitration.

Note: The FWC may also deal with a dispute by mediation or conciliation, or by making a recommendation or expressing an opinion (see subsection 595(2)).

(3) The FWC may deal with the dispute only on application by any of the following:

(a) an employee who has been, or is going to be, stood down under subsection 524(1) (or purportedly under subsection 524(1));

(b) an employee in relation to whom the following requirements are satisfied:

(i) the employee has made a request to take leave to avoid being stood down under subsection 524(1) (or purportedly under subsection 524(1));

(ii) the employee’s employer has authorised the leave

(c) an employee organisation that is entitled to represent the industrial interests of an employee referred to in paragraph (a) or (b);

(d) an inspector.

(4) In dealing with the dispute, the FWC must take into account fairness between the parties concerned.”

[39] Mr Carter filed the Stand Down Application at 9:30am on 21 April 2020. On the same day he was informed that his last day of employment would be 21 April 2020. I am satisfied that at the time Mr Carter filed the Stand Down Application he had standing to make the Stand Down Application in his capacity as an employee who has been stood down or purportedly stood down under subsection 524(1) of the FW Act.

[40] Mr Carter’s employment with APG ceased on 21 April 2020. However, this application retains utility because a finding in this matter would allow him to commence proceedings to recover his unpaid wages and commission during the period he was ‘stood down’.

[41] Essentially there are three requirements for a stand-down to be valid:

  1. one or more of the three circumstances specified in s 524(1)(a) to (c) must exist (Circumstances Requirement);
  2. it must be the case that the relevant employee “cannot usefully be employed” (No Useful Work Requirement); and
  3. the fact that the employee “cannot usefully be employed” must arise “because of” the relevant circumstance (Causation Requirement).

[42] APG submit that each of the requirements of section 524(1) of the FW Act were satisfied during the Stand Down Period. Namely that Mr Carter could not be usefully employed between 26 March 2020 and 21 April 2020 because a stoppage of work for a cause for which APG could not reasonably be held responsible.

Was there a stoppage of work for the purposes of section 524(1)(a) of the FW Act?

[43] What constitutes a stoppage of work for the purposes of section 524(1) of the FW Act was considered by Deputy President Anderson in Ryan La Plume v Thomas Foods International Pty Limited t/a Thomas Foods International 20 where he said:

“For the aforementioned reasons, 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.” [Footnotes omitted]

[44] A mere reduction in available work can not constitute a stoppage of work. This would go against the ordinary definition of a ‘stoppage’ as required by the principles of statutory interpretation. Such an interpretation would result in a perverse outcome where section 524 of the FW Act could be applied so liberally as to deprive employees of their fundamental entitlement to be paid when they are ready willing and able to work in accordance with their contract of employment. 21

[45] Mr Carter submits that no stoppage of work occurred.

[46] APG concede that it “continued to open for trade” and that it “continued to operate” throughout the period in which Mr Carter was purportedly stood down albeit in a manner which was different.  22

[47] APG say that it was supply side considerations, in particular the decrease in supply of product manufactured in its factories in Asia and the delays in receiving product, which drove the decision to make stand downs. Ms Reynolds asserts that as a result of supply issues the Western Australian branch had limited stock available to sell to its customers.

[48] According to Ms Reynolds: 23

“Demand side considerations, which led to our eligibility for the Job Keeper program were not taken into consideration when the stand down decision was made.”

[49] Mr Carter asserts that stock continued to be available for customers across the national branch network and that in fact APG WA received a high volume of stock shortly before he was stood down. According to Mr Carter the WA branch had higher stock levels at the time he was stood down than it had in the previous 6 months.    Mr Carter says that APG staff responsible for stock management could verify his assertions however he felt prevented from calling them by the June Letter.

[50] Mr Carter says that throughout the stand-down period, and since, the APG online shop has consistently indicated stock availability and has not at any time indicated widespread shortages of stock as alleged by Ms Reynolds.

[51] Ms Reynolds says that the stand down decision was also driven by the government advice to observe social distancing and an expectation that the government would extend mandatory business closures to the automotive sector. Ms Reynolds says that it was in accordance with this advice that on 25 March 2020 APG closed its premises to visitors, imposed restrictions on employees attending the workplace, cancelled company travel, halted hiring and suspended training initiatives.  24 Ms Reynolds says that around the same time most of APG’s clients also closed their premises to visitors. Ms Reynolds says that as a consequence, marketing and sales initiatives were suspended because sales opportunities were limited.25

[52] Mr Carter points out that there was no mandatory government closure of the accident/ mechanical repair sector. He says that customers remained open and continued ordering parts and repairing cars. He says that typically less than 1% of APGs trade is transacted over the counter and that therefore the closure of the APG premises to visitors was of limited significance to business trade.

[53] According to Mr Carter APG representatives continued calling on customers albeit on a 4 day a week basis. For example, Mr Carter gave evidence of a conversation he had with one of the newly appointed sales representatives during the period in which Mr Carter was ‘stood down’. According to Mr Carter, Mr Tiba called him from outside of Kingsley Smash Repairs (one of Mr Carter’s customers) seeking background on the customer before entering the client’s premises.  26

[54] Mr Carter says that with the exception of one business the customers continued to accept visits from their key supplier’s representatives.

[55] This is consistent with the evidence of Mr Coupland who says that his business did not stop trading during the relevant period and did not prohibit sales representatives from attending their business premises. Mr Coupland is the owner of Bowra Car Craft and Vice Chairman of the Car Craft Group which is made up of 30 independent body repairers predominantly based in metropolitan Perth. Furthermore, in his capacity as Chairman of the Body Repair Association he says that he was not aware of any other business closures in the industry during this period. It is also consistent with the evidence of Mr Holliday who said that his business continued to buy parts from APG throughout the Stand Down Period.

[56] Ms Reynolds did not tender any evidence of stock levels and did not call as witnesses any APG employees with responsibility for maintaining stock levels. Nor did she tender any other evidence of an incapacity on the part of the business to meet customer demands. I am not therefore satisfied that supply side issues caused a stoppage of work for the purposes of the FW Act which might form the basis upon which Mr Carter might be stood down.

[57] There was no mandatory business closure in the automotive sector during the period Mr Carter was stood down. There is no evidence before me that the trading hours of the WA Branch were reduced during the period Mr Carter was stood down. The evidence is that little of APGs business occurs via counter sales at its premises, therefore I am not satisfied that the decision that APG made to exclude visitors from its premises would have had a significant impact on its trade. There is no evidence before me to explain how telephone or online sales were prevented by the social distancing arrangements implemented by the company.

[58] Ms Reynolds did not call as witnesses either of the two new sales representatives which commenced at, or around, the time Mr Carter was stood down to contest Mr Carter’s assertion that they continued to service customers during the period he was stood down. Nor did she tender any evidence of their sales records or activity. Mr Carter and Ms Hutchinson’s evidence is that the business tracks the movements of its sales staff. If it was in fact the case that its sales staff were not visiting clients it is surprising that such evidence was not produced. Mr Carter has provided a credible explanation as to why he did not call the two new sales representatives. In the circumstances I have favoured the evidence of Mr Carter that the two new sales representatives continued to visit client premises during the period of the stand down.

[59] In his role as State Sales Manager, Mr Carter had individual sales territories which made up approximately 45% of the branch’s monthly revenue. In addition to maintaining and establishing new accounts he was responsible for coaching other sales representatives. The evidence is that the business activity in which Mr Carter was engaged, namely sales and coaching continued to occur during the period in which he was purportedly stood down.

[60] Clearly in this case there was no stoppage of business. APG on its own admission continued to trade. Of the fourteen staff employed by APG in Western Australia, Mr Carter and Mr King, who were at that time both on first and final warnings, were the only employees stood down. The evidence is that other employees performing similar duties to Mr Carter and Mr King continued to perform their work, albeit for a relatively short period of time in a slightly modified way. Based on the evidence I am not satisfied that there was a ‘stoppage of work’ for the purposes of the FW Act which might form the basis upon which Mr Carter might lawfully have been stood down

Was there no useful work for Mr Carter to perform during the Stand Down Period?

[61] In RE Carpenters and Joiners Award 1967 [1971] CAR 479, the Full Court of the Federal Court stated:

“It cannot be said that an employee cannot be usefully employed on a particular day if there is a day’s work available for him which if performed on that day, will, having regard to the probable course of the employer’s business, contribute beneficially to the reasonable and efficient conduct thereof.”

[62] It is clear from the authorities that an employee may be usefully employed for the purposes of section 524 of the FW Act although as a matter of convenience the employer would prefer the employee not to be at work.

[63] Ms Reynolds says that both APG and its customers had closed their premises to visitors and that APG had directed only essential workers to attend its premises. Ms Reynolds also says that in light of the social distancing requirements and economic downturn all marketing and training initiatives had been suspended. She asserts that there was therefore no useful work for Mr Carter to do visiting customers and/or supervising other employees.

[64] Mr Carter submits that he could have been usefully employed during the period he was purportedly stood down:  27

“Given there was no stoppage I could have continued to do exactly what I had been employed to do which was to achieve sales targets in my assigned territories and manage other sales representatives as per my job description.”

[65] He characterises his duties as primarily visiting customers and training and supervising other sales staff. This is consistent with his position description. 28

[66] Mr Carter says that in addition to servicing his own sales territory, two new sales representatives had started in March. According to Mr Carter one representative started the week he was stood down and was assigned a number of his customers the following week. Given that both had never worked in the accident repair industry and one had never been a field representative he says that there was work to do supervising and guiding them. For example, Mr Carter gave evidence of a conversation with one of the newly appointed sales representatives who he says called him from outside of Kingsley Smash Repairs (one of Mr Carter’s customers) seeking background on the customer before visiting the client’s premises.  29

[67] It is inexplicable why the business would have a new sales representative commence employment when it has only days earlier stood down a senior seasoned sales representative because there was allegedly no useful work for the sales representative to perform.

[68] The evidence suggests that there was sales and coaching work to perform. To the extent that the amount of available work was reduced (although there is no empirical evidence of this before me) the allocation of available work appears to be unfair given Mr Carter’s experience in the industry. The failure to allocate Mr Carter work appears to be a continuance of the behaviour prior to the COVID19 Epidemic which saw Mr Carter unfairly targeted and which caused Ms Hutchinson to resign.

[69] On the evidence before me I am not satisfied that there was no useful work for Mr Carter to perform during the period he was purportedly stood down. Consequently, I am also satisfied that the Causation Requirement could not have been met.

Fairness Considerations

[70] A stand down under section 524 of the FW Act is a statutory tool available to a business (if pre-conditions are met) in situations where an employer temporarily does not have work for an employee to perform for reasons beyond the control of the employer but wishes to preserve the employment of an employee. While on stand down an employee must hold themselves ready, willing and able to return to work, yet they are not entitled to payment of wages.

[71] As a matter of fairness before taking the drastic step of refusing to pay an employee’s wages the employer should explore what alternative arrangements might be entered into. For example, exploring the options for agreed reduction in hours and/or days of work or allowing employees to take leave at normal or reduced pay rates.

[72] In this case Mr Carter says that he was unreasonably denied the opportunity to explore such options. While Ms Reynolds says that she instructed managers to explore such arrangements before standing down employees there is no evidence before me to suggest that this occurred in Mr Carter’s case or Mr King’s case. Ms Reynolds chose not to call the relevant manager to contest the evidence of Mr Carter and Mr King. In the circumstances I favour the evidence of Mr Carter and Mr King.

[73] The evidence is that Mr Carter had accrued leave available to him. It is unfair that APG did not explore with him alternatives to being stood down without pay.

[74] I am not satisfied that even if Mr Carter’s stand down was lawful that it would have in all of the circumstances of this Application been fair.

Remedy

[75] Of the remedies sought by Mr Carter in his Form F13 – Stand Down Dispute the outstanding items not addressed in his subsequent retrenchment are:

  1. Restraint of trade removed.
  2. Payment during the period of stand down (other than public holidays).

[76] Mr Carter has not identified any legal basis upon which I might vary the contractual terms of his now terminated contract of employment.

[77] In Schell v Ensign Australia Pty Ltd 30 Commissioner Johns observed:

“[2] … Each of the original applications sought an order that the applicants be paid an amount referable to the period from when they were stood down to when their employment was terminated. In essence the original orders sought had all the hallmarks of a claim for back payments in respect of the identified period. On the face of the original applications it seemed, more likely than not, that the applicants, by way of remedy, wanted the Commission to enforce a past right. That is to say they wanted the Commission to exercise judicial power rather than arbitral power. That would have been beyond the jurisdiction of the Commission.”

[78] Applying this analysis to the matter before me, it is not within my power to order APG to pay Mr Carter his wages for the Stand Down Period. Only a Court may declare a purported stand down null and void and make such orders. 31”

Application to deal with a dispute involving stand down – Carter v Auto Parts Group Pty Ltd (2020) FWC 4348 delivered 25 September 2020 per Binet DP