Q+A with Jack Corry-Navigating Employment Challenges through COVID-19

As part of our Webinar series, Jack Corry, Solicitor at James Tuite and Associates from one of our legal panels joined us recently to uncover some of the complex scenarios and common questions around employment that have risen in the last 10 months due to COVID-19. As times have been unprecedented and workplaces have scrambled to adapt to changing employment conditions, it’s important to note that employment law still applies. Employers should always seek legal advice when making decisions that affect their employees.

1. JobKeeper has been extended, what employment challenges do you think this will have on businesses?

Whilst JobKeeper (albeit a modified version) has been extended, the reality is that some businesses will not be able to not be able to keep paying their employee’s wages when the scheme does eventually end.

Its crucial for businesses that rely on the assistance of JobKeeper (however small that assistance may be) start planning and preparing now to ensure the business maintains viability. Businesses should be honest and open with their employees as to what lies ahead and what will be required from them. That may involve requesting that employees agree to remain on reduced hours or a reduced salary as the business gains its feet post Jobkeeper.

Businesses want to avoid the immediate financial impact that large scale redundancies bring. If your business is not exempt from making redundancy payments (seek advice on this) and you are unlikely to be able to afford your wage bill once JobKeeper ends, that exposure should be identified and planned for now. Something that must be considered is whether redundancies should be made sooner rather than later as entitlements will continue to accrue throughout the JobKeeper period.

2. As businesses slowly return to the workplace, what are the obligations companies have to provide a COVID-19 safe environment?

It is a primary duty for employers to provide a safe workplace for their employees. First and foremost, Government and Health advice should be followed. Beyond that, businesses should implement plans to make the workplace as safe from COVID-19 as reasonably possible. There is a wealth of information available from the government and health agencies that detail what measures can be taken to provide a COVID-19 safe workplace, which can include (but is not limited to):

a) social distancing;

b) hygiene processes;

c) limiting client interaction to virtual processes; and

d) avoiding large meetings of employees

Essentially, the intention of your COVID-19 plan should be to make your employees feel comfortable in returning to the workplace.

3. COVID-19 has highlighted the need for contract revisions at a large scale for many companies and many face challenges of outdated contracts. How often should a company review contracts?

It is very common for businesses to have inconsistently drafted employment contracts across the company. Some employment contracts may have been drafted by different law firms, some employment contracts were drafted 10 years ago and are still on foot, and some employment contracts were drafted very recently.

In our view it is important to have consistent employment contracts, at the very least across different levels of staff (executive, non-executive, casual) so that there is a clear outline across the business of the relevant employment rights, benefits and conditions.

In our view, employment contracts should be reviewed across the board at least once every two years to ensure terms remain applicable and to include any new provisions in response to developments in employment law.

4. Given the economic challenges, can businesses reduce salaries or benefits to adjust for the new environment?

It is important that any changes to employment terms are not made unilaterally by the employer. There is typically an express provision in employment contracts that any variations must be in writing and signed by both the employer and employee. It must be a collaborative approach, otherwise the employer will be exposed to a claim by the employee that the employer has repudiated the contract. Accordingly, it is best to seek professional advice prior to seeking to amend any employment contract.

In our experience, it is best to have open and honest conversations with your employees regarding where the business is at and what is needed to maintain viability. Employees will typically be forthcoming in agreeing to reduce salaries or hours to ensure the business (and their job) survives. Employers should always encourage employees to seek independent legal advice as to the effect of any proposed amendments.

5. Managing staff through COVID

An issue that we see arising currently is businesses not recognising that the fundamentals of employment law still apply during the pandemic. Whilst we appreciate the unprecedented conditions that the pandemic has created, and note the various temporary amendments to the Fair Work Act that have been made in response, the rules around unfair dismissal and the requirements with respect to genuine redundancies still apply.

It is important to continue to performance manage employees to ensure any dismissal is fair. We strongly recommend you seek professional advice, as your business may be subject to the Small Business Fair Dismissal Code as opposed to the usual fair dismissal regime mandated by the Fair Work Act.

6. Employee challenges

As always, the biggest challenge that faces employees is not being aware of their employment rights. Unfortunately, sometimes employers exploit the power imbalance in the employer/employee relationship and seek unfair outcomes. For example, employees can feel bullied into agreeing to salary reductions. Employees should seek legal advice prior to agreeing to any variations to their employment contract or when they have been dismissed or made redundant to ensure fair outcomes.

Another relevant example is employees earning over the high-Income threshold ($153,600 in 2020) who are dismissed. Such employees are not subject to the unfair dismissal protections afforded by the Fair Work Act and accordingly often accept their dismissal without seeking proper advice. Whilst an unfair dismissal application is not possible, there are still a number of legal avenues, such as a breach of contract claim or a general protections claim, that an employee can explore to ensure its dismissal is fair and above board.

Three case study examples of employment issues that have arisen during the COVID-19 pandemic.

Case Study 1 - Legal Guidance for WH&S in the workplace

A business sought legal advice on WH&S, namely whether it can send someone home if they are sick; make employees take a COVID-19 test and make the employee show their test results.

As discussed above, a business has a primary duty to provide a safe workplace for its employees. The employees also have an obligation to follow the lawful and reasonable directions of his or her employer. Whilst we reiterate that government and health advice should be followed at all times, and every situation must be assessed on a case-by-case basis, sending an employee home and requiring the employee to present a medical certificate to return to work is in our view a lawful and reasonable direction.

Case Study 2 - Job Keeper stand down direction – Do entitlements accrue?

A travel agent reduced its hours for employees to nil under a valid JobKeeper enabling stand down direction. One employee resigned approximately 2 months into the stand-down and a dispute arose between the employer and the employee as to the entitlements due to the employee.

It was the employers position that entitlements did not accrue whilst the employee is subject to a valid stand down direction. This is incorrect, as employee entitlements continue to accrue throughout JobKeeper and most importantly, they continue to accrue according to the employee’s pre-JobKeeper salary.

This obviously has implications for businesses that are relying upon JobKeeper to pay their employees. If entitlements are accruing at pre-JobKeeper rates, any redundancy payment due to an employee (if the business cannot afford to pay the employee following the scheme concluding) is only going to grow. Businesses need to consider whether employees should be made redundant sooner rather than later to protect the financial viability of the business going forward.

We note that an application can be made to the Fair Work Commission by a business if it is unable to afford redundancy payments. We would strongly recommend seeking professional advice prior to making such an application.

Case study 3 - Temporary salary reduction to employee over High-Income Threshold – unfair dismissal protection?

A business negotiated a company wide salary reduction with its employees. An employee, as a result of the temporary salary reduction, was brought under the High Income Threshold ($153,600). The business sought advice as it was planning to dismiss the employee, however wanted first to confirm that the employee was not subject to unfair dismissal protections.

Our advice, which was recently confirmed in a Fair Work Commission decision, was that the relevant salary at the time of dismissal would apply, and not the salary the employee was paid pre-COVID. It was a good result for the business as the decision to seek legal advice prior to dismissal avoided an inevitable trip in the Fair Work Commission .

There are many complex issues in the legal spectrum that are not always straight forward. It is best to seek legal advice on any issues that arise between employers and employees. Legal Expense Insurance can provide a quick solution to speak to a lawyer for advice with access to a legal helpline and document centre. Find out more about our Business Legal Expense Insurance Policy here.