Not many of us could have anticipated how 2020 played out. Employers all over the country were struggling to survive the forced restrictions on movement and travel and the closure of certain industries. Such restrictions resulted in employers either ‘standing down’, terminating or making redundant some or all of their employees.
Employers faced with the reality of reducing their workforce in an attempt to mitigate the adverse effects on their businesses want to know “what is the difference between a ‘stand down’, ‘termination’ and a ‘redundancy’?”
What does being ‘stood down’ mean?
If a business is required to temporarily cease all or part of its operations as a result of government direction, an employer has the right to stand down employees that cannot usefully be employed as a result.
For example, once things returned to ‘normal’ post COVID-19 restrictions, employers could issue their employees with a stand down direction in accordance with section 524 of the Fair Work Act 2009 (Cth) (as temporarily varied by the JobKeeper scheme). This is a simple method of lawfully standing down an employee where the employee cannot be usefully employed because of three circumstances: industrial action; breakdown of machinery equipment; and stoppage of work – in each case where the employer is not responsible. Of these three circumstances, only the third (stoppage of work) was applicable during the COVID-19 pandemic. The stand down notice may be effective immediately.
During the stand down period the employer is not required to make payments to the employee. However, the employee’s continuity of service will not be affected and they will continue to accrue leave entitlements (annual leave, long service leave and personal/carer’s leave).
What does ‘redundancy’ mean?
A redundancy is triggered when an employer reduces their workforce because a certain job or jobs are no longer needed because of the changes to the operational requirements of the business. Essentially, the employee’s role disappears or is distributed to various other employees in the business.
When an employee is made redundant the employer must consider the reasonable possibilities for redeployment and follow any consultation processes under awards or enterprise agreements. The employee must be provided with all the minimum entitlements on or before the last day of their employment. These entitlements include their accrued unused leave (annual leave or long service leave), notice period, and the redundancy pay (if applicable) in accordance with the National Employment Standards.
Caution must be exercised when making an employee redundant. An examination of recent cases has suggested that ‘redundancy’ was used as a synonym for dismissal. If this is the case, an unfair dismissal or a general protection claim may be brought against the employer. Also be aware that redundancy pay does not apply to a small business employer.
What does being ‘terminated’ mean?
Termination of employment occurs when your employment relationship with your employee ends because an employee is dismissed or ‘fired’. Employers must be careful to follow the usual rules about procedural fairness when dismissing an employee to avoid a costly breach of contract, adverse action, unfair dismissal or unlawful termination claims. As a rule, you will need a legitimate reason to dismiss an employee. Not having enough work for them is not a legitimate reason to dismiss someone – terminating their employment because you don’t have enough work for them is redundancy (see above).
At the conclusion of the employment relationship, the employer must provide the employee with all the minimum entitlements such as any accrued leave entitlements and notice in lieu (this is the case if the employee is not required to work out their notice period).
Effects on Employers
Employers are making difficult decisions for the survival of their businesses. It is important to remember that the principles of the employer-employee relationship have not changed – reasonableness and consultation. Get advice before acting, and avoid the pitfalls.
What to do next
The information contained in this post is current at the date of publishing – 26 July 2023.