Standing Down Employees...

During Times of Financial Uncertainty

The current global financial crisis has resulted in businesses experiencing considerable downturns in production levels and reduced revenue. Accordingly, many employers are considering standing down their employees – or shortening the working week - to reduce costs but retain staff. The current legislation (and the new Fair Work Act) allows employers to stand down staff, particularly where there is an express or implied term of a contract permitting the employer to stand down its employees.

In the absence of a contractual term, stand down is permissible during periods of “serious disruption” to the business. However, the Courts are hesitant to include in the definition of ‘serious disruption’, the fact that work just dried up. It is unclear whether they would be more sympathetic when the downturn in business derived from a global economic catastrophe such as we are experiencing. In our view, the courts are likely to view such measures benignly where there is consultation and some measure of notice given.

Ultimately, good faith and a good relationship with staff is the best lubricant through difficult negotiations, such as these.