Last week Parliament passed the Jobkeeper legislation to give effect to the Federal Government’s new Jobkeeper payment scheme to deliver the flat rate wage subsidy of $1,500 per fortnight per eligible employee to qualifying employers, in addition to making a number of temporary changes to the Fair Work Act 2009 (FW Act) to address the economic impacts of the COVID-19 pandemic.
The Jobkeeper legislation is contained in two pieces of new legislation, including:
- the Coronavirus Economic Response Package (Payments and Benefits) Act 2020 (Payment and Benefits Act); and
- the Coronavirus Economic Response Package Omnibus (Measures No. 2) Act 2020 (Omnibus No.2 Act).
Payment and Benefits Act
Whilst the Payment and Benefits Act legislates financial support is to be provided to employers affected by COVID-19, much of the crucial ‘fine print’ for the operation of the scheme (particularly regarding an employer’s eligibility for the Jobkeeper payment) is contained in the accompanying Coronavirus Economic Response Package (Payments and Benefits) Rules 2020 (Rules).
Which businesses qualify for Jobkeeper payments?
The Rules confirm employers will be eligible or qualify for the subsidy if, at the time of applying:
their business has a turnover of less than $1 billion (and if part of a group for income tax purposes, the group has a combined turnover of less than $1 billion) and estimate their turnover has fallen or will likely fall by 30% or more; or
- their business has a turnover of $1 billion or more (or if part of a group for income tax purposes, the group has a combined turnover of $1 billion or more) and estimate their turnover has fallen or will likely fall by 50% or more; or
- their business is not subject to the Major Bank Levy.
For registered charities registered, they will be eligible for the subsidy if they estimate their turnover has or will likely fall by 15% or more.
Omnibus No.2 Act – COVID-19 changes to the Fair Work Act 2009
The second piece of Jobkeeper legislation passed last week (via the Omnibus No.2 Act) amends the FW Act by inserting a new, temporary, Part 6-4C into the FW Act which (amongst other things) provides that qualifying employers will have the right to make ‘Jobkeeper-enabling directions’ enabling stand down of workers and changes to their duties, location and days of work.
Available for qualifying employers only
Again, we must stress however that these new Jobkeeper-related rights for employers under the amendments to the FW Act are currently only available to qualifying employers (within the meaning of the Rules).
In that context, we would recommend that employers resist the pressure to hurriedly implement these changes until qualification under the Rules is known with a fair degree of certainty, particularly given the amending legislation provides for civil penalties of up to 600 penalty units ($126,000) for employers that breach Jobkeeper requirements, such as by failing to pass on the full $1,500 Jobkeeper payment, or knowingly misusing a Jobkeeper enabling direction.
It’s also worth noting that just because an employer may qualify for Jobkeeper subsidies under the scheme, there is no requirement for an employer to necessarily take advantage of the other options available to stand employees down (such as working reduced hours or days) under these new legislated changes.
We otherwise summarise the key changes to the FW Act under the amending legislation (ie. the Omnibus No.2 Act) as follows:
Obligation to satisfy wage condition
If an employer qualifies for the Jobkeeper scheme and is entitled to a Jobkeeper payment for an employee, the legislation requires that they ensure that the wage condition has been satisfied (ie the Jobkeeper payment paid to the employee) by the end of the fortnight.
This is a civil remedy provision which means that penalties of up $126,000 could apply for qualifying employers that fail to pass on the $1500 payment to an eligible employee by the end of relevant fortnight.
Minimum payment guarantee
Where a Jobkeeper payment is payable to an employee for a fortnight, the employer must ensure that the total amount payable in respect of the fortnight is not less than the greater of either:
- the full fortnightly value of the Jobkeeper payment; or
- the amount payable in relation to the performance of work during the fortnight.
This is also a civil remedy provision which means that penalties of up $126,000 could apply for breaching the minimum payment guarantee.
Hourly rate of pay guarantee
If a Jobkeeper enabling stand down (discussed further below) applies to an employee, the employee’s rate of pay cannot be less than the base rate of pay (worked out on an hourly basis) which would have applied if the direction had not been given.
Similarly, if a direction has been given regarding an employee’s work duties (also discussed further below), the hourly base rate cannot be less than the greater of:
- the base rate of pay on an hourly basis which would have applied if the direction had not been given; and
- base rate of pay on an hourly basis applicable to the duties performed.
If an employee’s base rate is provided by a workplace instrument, such as an Enterprise Agreement, then the base rate of pay will be the amount specified in that instrument or determined by the method set out in the instrument.
Again, this is a civil remedy provision which means that penalties (ie. up to $126,000) could apply for breaching the hourly rate of pay guarantee.
Jobkeeper enabling directions
The new, albeit temporary provisions in the FW Act, allow qualifying employers to give a Jobkeeper enabling direction to an employee in respect of the following.
Jobkeeper enabling stand down
This includes requiring employees to not work on a day or days which the employee would usually work or to work for a lesser period or fewer hours than they ordinarily would.
Employers must qualify for the Jobkeeper scheme at the time when the Jobkeeper enabling stand down direction was given.
Importantly, employers can only give a Jobkeeper enabling stand down direction if the employee cannot be ‘usefully employed’ for their ordinary days or hours because of changes to the business relating to the COVID-19 pandemic or government initiatives to slow the transmission of COVID-19.
It is not presently clear what ‘changes to the business’ will encompass but we are of the view that it could now extend to cases of slackness in trade due to the COVID-19 pandemic or government restrictions so long as the particular employee cannot be usefully employed (in contrast to stand down under s.524 of the FW Act which requires a stoppage of work).
Interestingly, the legislation also requires that the Jobkeeper enabling direction must be safe having regard to (without limitation) the nature and spread of COVID-19. The objects of the legislation include ensuring the continuing effective operation of the occupational health and safety laws (OHS laws) during the Coronavirus pandemic and yet the requirement of a “safe” direction applied strictly without the type of reasonably practicable qualification as exists in the OHS laws or in line with the Government directives of social distancing, hygiene etc, is problematic (and certainly in a pandemic situation).
Where the Jobkeeper enabling stand down direction applies to an employee, the employer is also still required to comply with the following for the duration of the stand down:
- the obligation to satisfy the wage condition;
- the minimum payment guarantee; and
- the hourly rate of pay guarantee,
but is otherwise not required to make any other payments to the stood down employee.
Jobkeeper enabling stand down does not apply if an employee is taking paid or unpaid leave authorised by the employer (i.e. annual leave) or is otherwise authorised to be absent (i.e. public holiday). It seems to us this would extend to a period of pandemic leave entitlement (ie the entitlement inserted into the 99 first stage modern awards by the Fair Work Commission (FWC).
In the event that stand down directions under section 524 of the FW Act have been previously issued by an employer, in order to take advantage of the new Jobkeeper options (such as working reduced hours or days) under these new legislated changes, employers will need to issue new Jobkeeper stand down directions in accordance with these new changes. This will require employers to comply with the obligations outlined in this update, such as the wage condition, hourly rate of pay guarantee and any notice and consultation obligations (discussed further below).
Work duties direction
A qualifying employer can also direct an employee to alter their duties of work, if the duties are safe, the employee is licenced and qualified to perform those duties (if necessary), and the duties are reasonably within the scope of the employer’s business operations.
Location of work direction
A qualifying employer can direct an employee to perform duties at a place that is not their normal place of work if the place is suitable for employee’s duties, if it does not require the employee to travel an unreasonable distance, and the place is safe then employers can reasonable relocate an employee’s place of business. Our comment above regarding the safe requirement equally applies here.
Altering days or hours of work
A qualifying employer may also request that an employee agree to perform work on different days or different times during a period.
This agreement must take into consideration that performance of the duties on the different days or different times is safe and it does not have the effect of reducing the employee’s hours of work compared with the employee’s ordinary hours of work.
An employee cannot unreasonably refuse the request to make an agreement to alter days or hours.
What constitutes an unreasonable refusal under this provision is unclear. If an agreement cannot be met, the FWC can deal with disputes.
Paid annual leave
The amending legislation further facilitates an employee to consider an employer’s request to take paid annual leave, and allows (via agreement) for the employee to take a period of annual leave at half pay for twice as long.
However, when making this request, employers must be aware that taking the leave should not result in the employee’s balance of paid leave being less than 2 weeks.
Requirements for Jobkeeper enabling directions
To have effect, a Jobkeeper enabling direction (ie Jobkeeper enabling stand down, duties of work, location of work) to an employee, must satisfy the following requirements:
- Reasonableness test – any direction must not be unreasonable in all the circumstances. If a direction is found to be unreasonable, it will not apply to the employee. The legislation is limited in description about what would constitute an unreasonable direction and only provides an example of the impacts on an employee’s caring responsibilities. Given dispute resolution by the FWC, we have serious concerns that this just amounts to “unfair dismissal” albeit over every Jobkeeper direction while still in employment;
- Continuing employment – the employer must have information that leads it to believe a Jobkeeper enabling direction to change an employee’s duties or location of work, is necessary to continue the employment or one or more employees;
- Consultation – the employer must give 3 days’ written notice (in a prescribed form) of the intention to give a Jobkeeper enabling direction or lesser period by genuine agreement with the employee and must consult with the employee (or the employee’s representative) about the direction before giving the direction. The employer must keep a written record of the consultation. The 3-day notice period is clearly an opportunity for unions to become involved and slow things down – the employer being required to consider any views expressed by the employee or representative of the employee.
Duration – Jobkeeper enabling direction – sunset to occur on 28 September 2020
A Jobkeeper enabling direction continues in effect until it is withdrawn or revoked by the employer, or replaced by a new Jobkeeper enabling direction given to the employee.
A Jobkeeper enabling direction that meets the requirements as explained above has effect subject to any FWC order made under Division 11 of the Omnibus No.2 Act and the sunset date of cessation of the direction on 28 September 2020.
Service and accruals during the Jobkeeper enabling direction period
During a Jobkeeper enabling direction period, such period counts as service for the purpose of s22 of the FW Act including for the purpose of calculating any subsequent redundancy pay and payment in lieu of notice. The employee subject to the direction, accrues leave entitlements during the period the direction is in effect.
An employee who takes annual leave at half pay in accordance with an agreement under subsection 789GJ(2) accrues leave entitlements as if the direction had not been given, and any entitlements to redundancy pay and payment in lieu of notice of termination are calculated as if the direction had not been given.
Employee request for secondary employment, training, professional development
If an employee subject to a Jobkeeper enabling stand down direction requests permission from the employer to engage in reasonable secondary employment, training or professional development, the employer must consider and not unreasonably refuse the request. This is a civil remedy provision which may result in penalties and compensation orders.
What would constitute an unreasonable refusal under this provision is unclear in the legislation drafting. Considerations of costs and course content that enhances skills and experience in the role for which the employee was employed may be relevant in assessing the reasonableness of a refusal. If an employee seeks secondary employment with a competitor which would constitute a breach the non – compete clause in the contract of employment, this would likely be a valid reason for refusal. However, there is no clear guidance on how an employer should go about this assessment so far.
Disputes and the FWC’s role
The FWC has been given power under this legislation to deal with (including arbitrate) disputes about the operation of the Coronavirus economic response (new Part 6‑4C introduced into the FW Act by this legislation). It is required to take into account fairness between the parties concerned. A dispute application can be made by an employee, employer, an employee organisation or an employer organisation. The unions are given standing in their own right to raise a dispute in the FWC and protract or prevent implementation of a Jobkeeper enabling direction.
The FWC may make orders:
- it considers desirable to give effect to a Jobkeeper enabling direction;
- setting aside, or substituting, a Jobkeeper enabling direction; or
- it considers appropriate.
Any order ceases to have effect on or after 28 September 2020.
Given the breadth of the FWC’s powers to make any order it considers appropriate, this could conceivably result in a Jobkeeper award for a workplace rather than just an order in respect of individual employee or even a Jobkeeper award for an industry that may be imposed on all businesses operating in that industry without regard to the specific circumstances of each affected business. Note: a contravention of a term of a FWC order is a civil remedy provision.
Specified employers excluded by regulations
The legislation provides the Minister with the right (in regulations) to exclude one or more specified employers from the operation of provisions in the legislation that authorise a Jobkeeper enabling direction or agreement. This can be actioned by the Minister in circumstances where an employer contravenes a civil remedy provision. It is unclear whether this contemplates a contravention of provisions of the legislation, or more generally under the FW Act.
Protections of workplace rights
The legislation specifies the following are workplace rights for the purpose of the general protections part (Part 3-1) of the FW Act:
- benefit arising because of their employer’s obligation to satisfy the wage condition for the fortnight Jobkeeper payment;
- agreement or disagreement to perform duties on different days or at different times compared with the employee’s ordinary days or times of work);
- agreement or disagreement to take paid annual leave),or to take annual leave at half pay); and
- requests in relation to secondary employment, training, professional development.
Adverse action cannot be taken against an employee because of the employee’s workplace rights as set out above.
As you know, the employer has the reverse onus of establishing that the reason it took or is taking action is not because an employee:
- has a workplace right;
- has, or has not, exercised a workplace right; or
- proposes, or proposed not to, exercise a workplace right.
The legislation’s relationship with other laws
This proposed new Part 6-4C of the FW Act operates subject to:
- Division 2 of Part 2-9 (payment of wages etc);
- Part 3-2 (unfair dismissal);
- Part 3-1 (general protections) and section 772 (employment not to be terminated on certain grounds) of the FW Act;
- a Commonwealth, State or Territory anti-discrimination law;
- a Commonwealth, State or Territory law that deals with health and safety obligations of employers or employees, or with workers’ compensation; and
- a person’s right to be represented, or collectively represented, by an employee organisation or employer organisation.
It is unclear how the new part is intended to work in conjunction with other parts of the FW Act, for example a reduction in hours of work and duties is a demotion and therefore actionable and may precipitate an unfair dismissal claim.
An independent review of the operation of this new Part of the FW Act must start on or before 28 July 2020 (or later date specified in regulations) and must be completed by 8 September 2020 (or later date specified in regulations). The review report must be tabled in each House of Parliament within 5 days of the report being given to the Minister.
We trust the above provides a useful overview of the Jobkeeper legislation and some practical insight into areas where we see the drafting may give rise to potential disputation and traps for employers and how to prepare for these situations.
Please reach out and contact us if you have any queries regarding the above and if you want to chat about the application of the provisions in your specific circumstances.