Six Employment Risks as Australia Reopens


Employment claims are surging as employers consolidate, restructure and reduce wage costs to meet the challenges of COVID-19.

This article identifies 6 employment risks as the fallout from COVID-19 continues and will help you manage them.

Navigating employment risks as Australia reopens is also the subject of our next free Webinar & FAQ on 25 June 2020.

1. Unfair Dismissals

The Fair Work Commission has reported a 60% increase in unfair dismissal claims as job losses continue because of COVID-19.

💡 Manage the risk: redundancies   

If you are faced with the difficult decision to dismiss an employee because their role is redundant, consider whether they are able to bring an unfair dismissal claim.

An employee is protected from unfair dismissal if they have been employed for more than 6 months (12 months for small businesses), and:

  • earn below the high income threshold ($153,600 excluding superannuation for the 2020/21 financial year); or
  • are covered by a Modern Award or Enterprise Agreement.

You will successfully defend an unfair dismissal claim if the dismissal occurred because of a genuine redundancy.   However, you must be able to prove it by demonstrating you:

  • do not require the role to be performed by the employee or anyone else;
  • have considered redeployment opportunities (including in roles of lesser/higher status and which the employee could perform with some training); and
  • have offered these opportunities to the employee.

A trap for employers is to decide to dismiss the employee and then reverse engineer the redundancy of the role.  First, make the decision to make the role redundant and record the operational reasons for it.  Then consider and offer redeployment opportunities.

The redundancy process must also follow any applicable Modern Award or Enterprise Agreement requirements, including consultation.

💡 Manage the risk: misconduct or underperformance

Dismissing an employee for underperformance or misconduct will be riskier over the coming months for a couple of reasons:

  • Employers may be under pressure to save costs and inadvertently rush a dismissal or act more harshly than usual. This will create unfairness even if there is a valid reason for the dismissal.
  • An employee may (rightly or wrongly) claim their dismissal has been contrived to cut costs (including redundancy costs). This may throw the employer’s valid reason for the dismissal into doubt.

A detailed record of reasonable performance/conduct management which gives the employee the opportunity to improve is a good defence to an unfair dismissal claim.

There is no such thing as a “three strikes” rule but unless the conduct is serious misconduct (a high threshold) employees should be given the opportunity and support to improve.

Rushing the performance/conduct management process, or exaggerating the seriousness of the behaviour, is unlikely to save money.  It’s more likely to result in a costly dismissal.

2. Reduced Hours or Pay

The JobKeeper directions permit qualifying employers to unilaterally reduce their employees’ hours of work, but only if strict conditions are met.

However, many employers reduced their employees’ hours or pay rate outside the JobKeeper scheme or before the JobKeeper scheme was implemented.  This reduction varied from a considered, consultative approach to a “take it or leave it” message.

Regardless of the approach, outside the JobKeeper scheme the legal principle is the same: employers cannot reduce an employees’ hours or pay without voluntary agreement.

As businesses reopen employees may lose patience with reduced hours and pay and may claim the reduction:

  • was not by agreement;
  • is not binding because it was obtained through undue influence; or
  • triggered an entitlement to redundancy pay, which they now call upon.

💡 Manage this risk

If you are relying on the JobKeeper directions to reduce employees’ hours, make sure you meet the strict conditions to avoid a dispute: see our article here and checklist here.

If you agreed on a reduction to pay or hours with your employees outside the JobKeeper scheme, carefully consider the terms of that agreement to gauge the risk of a breach of contract claim.  For example, could the employee argue there was no agreement, or that it was involuntary?  If so, it’s better to seek advice now rather than be taken by surprise.

Further, employers should be aware of a hidden liability in these circumstances: redundancy pay.  If your business cannot return the employee to their full rate of pay or previous hours, the employee’s role may be redundant, triggering an entitlement to redundancy pay.

You can reduce the amount of redundancy pay if you have found other acceptable employment for the employee – but only with an application to the Fair Work Commission.

Finally, as outlined below, if an employee makes a complaint or inquiry about their pay or redundancy entitlement they have exercised a workplace right.  Carefully consider and respond to that complaint or inquiry to manage the risk of a general protections claim.

3. Picking and Choosing employees

If you are restructuring your business to deal with the operational and financial impacts of COVID-19 you may face a difficult choice: two employees fill the same two roles, but only one role is now required.

This creates a higher risk of a claim because the employee who loses their job will usually know they are being treated less favourably than their colleague.

The employee may find it difficult to accept they were unsuccessful on their merits and claim there was some other, unlawful reason for the dismissal.

💡 Manage this risk

You can manage the unfair dismissal risk in these circumstances by ensuring the dismissal is because of a genuine redundancy, as outlined above.

A more difficult risk to manage is a discrimination or general protections claim where the employee claims they were selected for dismissal because of an unlawful reason, for example because they:

  • made a complaint (including during the redundancy process);
  • have a leave entitlement – such as upcoming parental or long service leave;
  • have family or carer’s responsibilities; or
  • have a disability or illness.

If you have to choose between employees for the same or similar role(s) it is crucial to make your choice based on their merits alone, i.e. their performance and conduct in the role.

An effective approach is to use a score-sheet to compare the employee’s performance, based on the position description or KPIs for the role, and record your decision based on these results alone.

This will help defend a claim there was an unlawful reason for the decision.

4. Complaints and inquiries   

As each State and Territory loosens their home confinement directions employers may direct their employees return to their offices or worksites.

Employers must delicately handle employee inquiries and complaints about a direction to return to work.  This is because:

  • an employee exercises a workplace right every time they make a complaint or inquiry in relation to their employment; and
  • employers are prohibited from taking adverse action against an employee because they exercised a workplace right.

Consider a scenario where your employee has been working from home for the last couple of months.  You want the employee to return to the office, but the employee questions says they want to keep working from home and may raise a safety concern.  What to do?

💡 Manage this risk

First, ensure the request to return to the office or worksite is safe, reasonable and compliant with the relevant State/Territory Department of Health home confinement directions.

Second, consider the inquiry or complaint – expect a regulator, tribunal or Court to be sympathetic towards an employee who makes a good faith complaint or inquiry about a direction to return to work or safety issue.

Ask yourself:

  • Is the direction safe?
  • Is the direction reasonable?

The safety of the direction should be measured against your strict work health and safety duties.  It may be appropriate to conduct an individual risk assessment in relation to the employee’s return to office/site.

The reasonableness of the direction involves weighing the operational requirements of the business against the issues raised by the employee.  Take particular care if the employer raises a protected attribute as a reason for the request, such as family or carer’s responsibilities, physical or mental disability (including a vulnerability to COVID-19) or age.

Third, if you are satisfied the direction to return to the office is reasonable and safe, communicate your reasons to the employee.

If the employee continues to refuse the direction, and you are satisfied it is an unreasonable refusal, ensure your next steps are reasonable and proportionate.  If you take disciplinary action against the employee it must not be because the employee has made a complaint or inquiry, but because of an unreasonable refusal to comply with a reasonable and lawful direction.

5. Leave underpayments

Pre-COVID-19, another “epidemic” dominated headlines: employee underpayments.

Employers risk an underpayment claim if they do not understand how leave accrued during COVID-19 related stand-downs.

💡 Manage this risk

There are two important rules to be aware of:

  • employees stood down under section 524 of the Fair Work Act (i.e. “non-JobKeeper stand downs”) continue to accrue leave as normal – they are still employed; and
  • employees on a JobKeeper enabled stand-down (including reduced hours) continue to accrue leave as if the direction had not been given.

The employee is entitled to take this accrued leave as normal and it must be paid out upon termination of employment.  An employee’s right to long service leave may also crystallise during a stand-down.

6. The end of the JobKeeper scheme

The JobKeeper directions allow qualifying employers to direct employees to reduce their ordinary hours, work alternative duties/ from alternative locations and take annual leave – but only until 28 September 2020.

When the scheme ends employers who cannot afford to keep employees on their pre-JobKeeper terms may be forced to let them go, exacerbating the risks outlined above.

💡 Manage this risk

If you are using the JobKeeper directions to manage wage costs for certain roles, it is important to begin considering whether your business will require those roles after 28 September 2020 sooner rather than later.

If you make the difficult decision to make roles redundant, early planning will ensure the redundancies are implemented when they are required and the proper process is followed.  This will avoid incurring unnecessary wage costs, ensure fairness to your employees and manage the risks outlined above.

Calculating the cost of dismissals early on (including redundancy pay and leave) will also help you plan how to get through the end of the JobKeeper Scheme.

Webinar & FAQ

The last thing employers need as the fallout from COVID-19 continues is a time consuming and costly employment claim.

You can help avoid these claims by being aware of the risks, including the 6 covered above, and taking steps now to manage them.

To learn more, and for the opportunity to ask any employment or safety related question as Australia reopens, please join us for our free Webinar and Q&A: Employment risks as Australia Reopens on 25 June 2020 by registering here.

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