Commission confirms strict meaning of ‘stoppage of work’ for unpaid stand downs

The Fair Work Commission (FWC) has confirmed a strict interpretation of the concept of ‘stoppage of work’ under s 524 of the Fair Work Act 2009 (Act), which provides:

1. An employer may, under this subsection, stand down an employee during a period in which the employee cannot be usefully employed because of the following circumstances:
   • Industrial action (other than industrial action organised or engaged in by the employer);
   • A breakdown of machinery or equipment, if the employer cannot reasonably be held responsible for the breakdown;
   • A stoppage of work for any cause for which the employer cannot reasonably be held responsible.

In Stelzer v The Trustee for the Ideal Acrylics Unit Trust [2020] FWC 4129, a long-term employee of a small manufacturing business was stood down without pay under s 524 of the Act (i.e. not a JobKeeper Stand Down) due to the impacts of COVID-19 on the employer’s business. The employee’s employment was subsequently terminated for redundancy.

The employee challenged the stand down on the grounds that it was not authorised by s 524 of the Act because there was no ‘stoppage of work.’

DP Anderson held that the only reason the employer stood the employee down was to mitigate against the impacts of the COVID-19 pandemic on its business for which it could not be held responsible. However, the issue in contention was whether there was a ‘stoppage of work’ and whether the employee could not be usefully employed as a result of that stoppage.

The DP held that a ‘stoppage of work’ under s 524 of the Act should not be broadly construed to include a mere downturn in business, nor be so narrowly applied as to require the entire cessation of business activity. 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 the business activity entirely.

In this instance, the FWC held that what occurred was a slowing of demand rather than cessation of the business activity of manufacturing benchtops. For this reason, the DP concluded there was no ‘stoppage of work’ within the meaning of s 524 of the Act and ordered that the employer pay the employee compensation for his loss of income during the stand down period.

Employers should carefully review any existing stand down arrangements and ensure that any future s 524 stand downs are consistent with the Act.

EMA Legal can assist employers with stand downs or any other employment related matters.