Stand Down Decision Keeps Cruise Company Afloat

A recent Fair Work Commission (FWC) decision has provided employers with more clarity regarding the circumstances in which they can lawfully “stand down” employees. The decision has provided guidance for employers on the application of the stand down provisions in the Fair Work Act 2009 (Cth) (the Act) in light of the COVID19 pandemic.

Stand down provisions are designed to relieve employers of the obligation to pay wages to employees who cannot be usefully employed in certain circumstances, such as a stoppage of work.

The Circumstances – A COVID Stand Down

In this case, a Marine Superintendent (the Employee) worked for cruise line company Coral Expeditions (the Company). The employee was one of more than 100 employees who were stood down when the Government-mandated COVID-19 restrictions halted all of the Company’s cruising operations.

The Employee argued that as there was still work he could do, and that some of his ordinary duties were now being performed by others, the stand down had not satisfied the requirements of the Act. The Employee sought reinstatement.

Deputy President Lake of the FWC observed that three “primary criteria” must be satisfied for a stand down to be lawful under s524(1) of the Act. The Deputy President stated the relevant criteria:

  1. “First, the employee must be stood down during a time in which they cannot be usefully employed.
  2. Second, one of the three sub-criteria must be present* . . . In the present case, s524(1)(c) has been argued: a stoppage of work for which the employer cannot be held responsible.
  3. The third criteria dictates that the employee cannot be usefully employed because of the stoppage.”

Let’s unpack the decision in more detail…

Cannot Be Usefully Employed

Deputy President Lake found it to be a question of fact whether an employee “cannot usefully be employed” and that the “economic consequences” for the employer are relevant.

The decision provides a two-tier test for employers to consider when assessing whether the relevant employees can be “usefully employed”.

Firstly, an employer must consider the work available, and how many employees are required to complete the work. In this instance, while there was administrative work available, it was limited and could be effectively redistributed to employees who were not stood down. The employee therefore could not be “usefully employed”.

Secondly, an employer should ensure that its decision reflects “notions of good faith and fairness”. The FWC found that the Companies decision to stand down nearly 50% of its workforce was a “business necessity” which was “not done maliciously, but in good faith, when contemplating the economic strain on the employer.”

Deputy President Lake observed that the decision by the Company to stand down its employees was a result of the necessity to navigate the crushing impact of COVID-19 on its business.

The Company was accordingly entitled to maintain some administrative roles but still lawfully stand down other employees.

Stoppage of Work

Turning to the question of “stoppage of work”, the FWC rejected the notion that a “mere reduction” in work satisfies the requirement. The FWC held that the question of whether there is a “stoppage of work” refers to a cessation of the “core activity” of the business, rather than a mere reduction in general or incidental business activity.

The FWC held that the Company’s “work” was the carriage of passengers on various recreational cruise holidays. In that regard, the FWC reasoned that even though incidental and general business activity continued, as the core activity had entirely halted due to COVID-19, this left the Company with no choice but to suspend its operations.

How Does This Decision Affect Employers?

This decision directly addresses one key question that has arisen throughout the COVID-19 pandemic – can an employer stand down employees when a business has ceased its usual operations, but some limited functions still exist for a small number of employees to perform?

According to this decision, the answer, in short, is YES provided the relevant criteria is met, including that the core “work” or “activity” of the employer has “entirely halted”. This decision may offer a lifeline to some struggling employers whose businesses are under significant economic stress.

If you have any questions relating to the stand down provisions of the Act and how they may apply to your business during the COVID-19 pandemic, please do not hesitate to contact Nick Stevens, Jane Murray or Bernard Cheng.

Michael Marson v Coral Princess Cruises


*Other permissible criteria for a stoppage of work includes industrial action (other than industrial action organised or engaged in by the employer); and/or a breakdown of machinery or equipment if the employer cannot reasonably be held responsible for the breakdown.

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