Reduction of employees’ wages – COVID-19
A huge number of businesses have been severely impacted by COVID-19 and are looking to secure their ongoing viability. This includes investigating reducing employees’ pay to assist with cash flow and longevity.
Generally, it is not possible to unilaterally reduce employees’ wages below the contractually agreed rate. Purporting to do so can often cause disputes about whether employment has been terminated, resulting in claims for unfair dismissal.
The JobKeeper scheme has introduced temporary changes to the Fair Work Act 2009 which allows eligible employers to unilaterally reduce an employees days or hours of work, (including to “nil”) and for the employee to be paid for the hours worked at their base hourly rate of pay. This is known as a “JobKeeper enabling stand down”.
To be valid, the main requirements are:
- the Employer must be eligible for JobKeeper;
- the Employee cannot be usefully employed for the ordinary hours of work due to COVID-19 or government measures to reduce the spread;
- the Employer must not reduce the base hourly rate of pay for the employee;
- the direction must be reasonable, and there must be a reasonable belief that the direction is necessary to continue the employee’s employment; and
- notice of the Employer’s intention to give the direction must be given in writing at 3 days before the direction takes effect.
Outside of the JobKeeper provisions there are very limited circumstances which would allow a business to unilaterally reduce an employee’s wages (whether for COVID-19 reasons or otherwise) and hence a business which does not qualify for the JobKeeper enabling stand down provisions, or fails to apply them properly, will risk claims from employees if attempts are made to do so.
Case note – future work promises on resignation?
In De Menezes Ribeiro v Casino Canberra Limited [2020] FWC 1713 the Fair Work Commission was required to determine whether a full time employee was dismissed or resigned as a result of an alleged promise that he was given to be offered casual employment after his resignation.
The employee was a full time Security Officer with the employer when the employee was offered a full-time job with another business. The employee alleges that in discussions with the employer, he agreed to offer his resignation on the basis that he would be offered casual work after his resignation and would also be able to accept the full time employment with the other business. The employee says that it was on this basis that the employee:
- offered his letter of resignation where he noted “[t]his will allow 1 month of remaining full-time duties, terminating on the 1st of September 2019, where I will then continue my duties as a casual officer when required.”;
- later, signed a separation agreement noting that he had resigned from his employment.
As it happens, the employee was not offered any casual employment and commenced an unfair dismissal claim alleging that he was not terminated on his initiative but on the instigation of the employer on the basis that he would not have resigned if the employer was not going to offer casual employment.
The Fair Work Commission considered the evidence of the parties and determined that no agreement to offer casual employment was ever made and hence the employee’s resignation was at his own initiative. In this matter the extraneous documentation was quite clearly in the favour of the employer however it does underline that conversations, intimations or promises between and employee and an employer about future work can be the basis for the provocation of an unfair dismissal claim.
If you have any questions, please contact:
Joe Mullavey
Principal
M: 0416 794 061
E: jmullavey@pageseager.com.au
Published: 22 April 2020
