08 April 2020

Help is coming: Fair Work amendments announced

This article was written by Jamie Wells and Charlotte Fenton.

The Federal Government is introducing urgent amendments to the Fair Work Act 2009 (Cth), to deliver JobKeeper benefits by way of wage subsidies and increased employment flexibility, in the wake of the COVID-19 pandemic.

The pandemic has exposed the inflexibility of the Act to deal with the current circumstances, and the Federal Government has reacted by acknowledging that the situation cannot be addressed by applications to the Fair Work Commission on an instrument by instrument basis. The Coronavirus Economic Response Package Omnibus (Measures No 2) Bill 2020 and the Coronavirus Economic Response Package (Payments and Benefits) Bill 2020 are before Parliament today.

What will the amending Bills do?

Businesses seriously impacted by the Coronavirus will be given access to the new JobKeeper scheme.  Under that scheme, the Federal Government will subsidise the wage budget of qualifying employers, based on $1500 per employee per fortnight.

A business will qualify for the JobKeeper payment if:

  • the business (with a turnover less than $1 billion) has suffered a reduction in turnover of at least 30%; or 
  • the business (with a turnover of $1 billion or more) has suffered a reduction in turnover of 50%.

The process for working out the loss of turnover has some complexity, requiring a comparison between current revenue and revenue in a prior period. The ATO is working through the various challenges in assessing turnover in the wide variety of possible scenarios. A KWM alert dealing with the ATO’s likely approach will follow in due course.

The JobKeeper payment is designed as a safety net. It works by topping up an employee’s wage to ensure they receive $1500 fortnightly.  Employees earning less than $1500 a fortnight, including if they have already been stood down, get topped up to $1500 a fortnight. If an employee is earning $1500 or more a fortnight, they will be paid as normal.

The JobKeeper scheme, once passed, will be backdated to 30 March so that payments can be claimed with effect from that date.

Significantly, an employer qualifying for JobKeeper payments will also be able to give JobKeeper enabling directions to employees, varying the employee’s terms of employment on a unilateral basis. This will include a broad discretion in relation to hours of work (including to stand down entirely), timing of work, location of work, the taking of annual leave, and the allocation of work tasks. Since the pandemic began, employers have lacked the necessary certainty to manage these matters with confidence.  In some instances, there has been no capacity for the employer to act without employee agreement. 

A JobKeeper enabling direction will prevail over any existing employment terms under a contract, award, or enterprise agreement.   

Are there limits on JobKeeper enabling directions?

The power to give a direction is not unlimited:

  • The direction must be responsive to ‘changes of business attributable to the COVID-19 pandemic or government initiatives to slow the transmission’.
  • The employer can only give a direction if the affected employee cannot usefully be employed for their normal hours during the period of the direction.
  • A direction must be reasonable, and based on the employer’s ‘reasonable belief that the direction is necessary to continue the employment of one or more employees’.
  • The employer must continue to pass on the JobKeeper payments.
  • The employee’s rate of pay cannot be reduced, for the hours which they actually work once a direction has been given.
  • The direction must ensure work can be performed safely, and within the employee’s skills and competencies.
  • Before giving the direction, the employer must consult with the employee regarding the proposed changes, and keep a written record of the consultation process.
  • The direction must be in writing and give effect to the changes with at least 3 days’ notice.
  • In response to a direction, an employee can request approval to take on a second job, or to be provided with training or professional development. The employer must consider that request and not unreasonably refuse the request.
  • Any standing directions will lapse on 28 September 2020.

If the employer asks the employee to take annual leave, the employee cannot unreasonably refuse. However, if leave is taken the employee must retain a leave balance of 2 weeks.

The Fair Work Commission will have a role to play. An employee will be able to challenge a JobKeeper enabling direction, and the Fair Work Commission can intervene and set aside a direction, taking into account ‘fairness between the parties concerned’.  

Some questions about the JobKeeper enabling directions remain

Given the flexibility allowed, disputes are likely to be common. Questions that are not yet clear are:

  • How will ‘necessity’ be applied, given that most directives will not necessarily be given to avoid insolvency? How will the employer’s reasonable belief as to necessity be assessed?
  • How will the reasonableness of the employer’s direction be assessed, given the inevitable balancing of interests between the employer and the employee? It is likely that the employer will be given significant latitude; but there will be scrutiny to combat opportunistic abuse.
  • Noting the measures assume a degree of urgency, how much consultation is sufficient before giving a JobKeeper enabling direction?
  • If the Fair Work Commission intervenes in a particular case, what approach will it take and will the employer remain protected by the JobKeeper enabling direction for the period it was in place?

Additionally, a direction will not work retrospectively, to protect anything done before the Bills are passed. This remains the case, even if an earlier response to the pandemic would have been reasonable and consistent with the new scheme.

Employers will need to consider the evidence before them when giving a direction, and ensure that the direction is adapted to the circumstances. An employer which knowingly gives an unauthorised direction faces a civil penalty.

COVID-19: Implications for Business

The spread of Coronavirus (COVID-19) has forced us to think and act differently. Beyond the human response, now is the time to think about what the consequences may be on your business, and how best you can prepare for those.

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