man discussing with employees

Boards want to do the right thing by their employees; however, for many, wages are the single most significant cost and a call on cash at a time when cash flow may be tight.

MinterEllison has published a handy FAQ answering questions many directors might have on their legal rights under the Fair Work Act. These include whether employees may be eligible for personal leave when self-isolating or unable to work from home and whether businesses may have the right to stand their employees down. We encourage all interested directors to read it. The Fair Work Ombudsman has also set up a website providing information for employers that directors may wish to study.

Legal arrangements around employee relations are very complicated – they can be governed by both state and federal laws and employers may then also need to comply with obligations set out in enterprise agreements, Modern Awards, individual contracts and potentially policies and procedures.

There may be a range of different contractual arrangements within the one workplace as standard contracts have changed over the years and records may be patchy. It’s difficult to provide generic advice that can cover all those situations.

The best advice for boards and managers confronting these issues over coming months is not legal advice but practical advice. Employers should take their employees into their thinking, be open and honest and trust in the response of their workers. Rather than purely looking at what legal options are available to compel employees to take specific actions, employers should look to bring those results about through consultation and discussion.

Every Australian has seen the queues outside Centrelink that have formed in this last week. Many people are concerned about their livelihoods and those of family and friends. In those circumstances, workers and their representatives are likely to be open to a discussion about what steps may need to be taken to keep a business afloat, to keep some income coming in through this time and to maintain a job that will be available once the crisis passes. Consultation with affected employees that takes them into the businesses’ thinking on these issues is likely to be well received. We have already seen Australian unions working collaboratively with businesses to agree to these approaches in sections of the economy – for example, the Hospitality Award has been varied by consent to allow short term stand downs.

Most Awards, enterprise agreements and employee contracts allow all sorts of arrangements to be struck if done by consent. This will ultimately depend on the terms in the governing industrial instruments. Generally, there is no problem with staff using up accrued annual leave, long service leave or other entitlements (but not personal/carer's leave) if they agree to do so. Shift patterns can be changed, and workers can move from full time to part time, or reduce their hours, all by consent.

As the MinterEllison FAQ states, the law on standing down workers is less clear and dependent on the circumstances being faced by the particular business and the governing industrial instruments. Explicit consent of employees and their representatives to those changes significantly reduces any risk attached to those actions.

Changes to remuneration levels are also very complicated, for example, no business can pay less than the minimum rates set out for a classification in an Award. Contractual rates may be varied by consent. Enterprise agreement rates may not; however, if consent to vary an agreement is made with employees and their representatives, an urgent application to the Fair Work Commission may be possible.

If employers want to bring their staff with them as they take these steps, they will need to be prepared to be open in those discussions around other cost control measures they plan to take. Employees will likely ask questions that many boards and managers might find uncomfortable around executive salaries, variable remuneration and board fees. Boards and managers might need to be prepared to answer those questions and take employees’ views into account in a way that would have been unlikely before this crisis.

An approach that avoids command and direction and opts for consultation and agreement is likely to benefit businesses beyond the immediate crisis. Employers who have maintained the trust of their staff and demonstrated a level of mutual respect will be better placed to take advantage of any economic upswing. An investment now may yield dividends later.

Questions that boards might want to discuss among themselves or put to management include:

  • How will we approach communication with our workforce at this time?
  • How do we plan to engage with unions or other worker representatives?
  • What are the employment arrangements that we can vary with employee consent?
  • What options are available if we cannot obtain employee consent?
  • What steps can we take to build trust with our workforce at this time?


The contents of this article do not constitute legal advice. You should always obtain specific advice relevant to your circumstances before taking any action. The arrangements for individual employees may be affected by a range of statutory and contractual terms as well as State and Federal laws that may affect the general comments made in this article.

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