Employment Law and Covid-19
Due to the rapidly evolving situation involving the novel Covid-19 disease (Coronavirus) many workplaces and individuals are implementing and taking precautions to minimise the risk of infection. One such precaution is a period of self-isolation when an individual has come into contact with an infected person. Isolation may also be necessary when a partner or family member has been exposed.
It is important to understand the implications this may have for an individual in terms of employment, particularly employee entitlements, employer obligations and protections for both parties. This is important as the Fair Work Commission and Courts are still operating meaning an application can be bought against an employer at this time.
This article will answer some common questions that may be causing uncertainty during this time.
Relevant materials
The primary source for all specific rights and obligations in an employment relationship is the employment agreement. This may take the form of an individual agreement, enterprise agreement or award. Prior to taking any action you should check your relevant award and agreement.
Aside from the employment agreement, the minimum standards are provided for in the Fair Work Act 2009 (Qld) (FWA) and the Industrial Relations Act 2016 (Qld) (IRA).
Leave Entitlements
There are several kinds of leave available to employees but this article will only focus on sick leave and annual leave.
In terms of sick leave, which is also known as carers leave, there is a statutory entitlement for full-time workers under both the FWA and IRA for 10 days sick leave per year, accrued progressively throughout the year. Part-time workers are entitled to a pro-rata of 10 days in accordance with their hours of work.
Similarly, there is a statutory entitlement under both Acts for four weeks of annual leave for full-time and part-time workers. An additional week of leave may be available if you fulfil the criteria to be considered a shift worker.
When is leave taken?
Sick leave can be taken because the employee is not fit for work because of personal illness or injury; or to provide care or support to a member of the employee’s immediate family or household who requires it because of personal illness or injury or unexpected emergency. Leave may bet taken for a whole or part of a day.
The procedure for taking sick leave will be dependant upon the terms of your relevant employment instrument, however section 41 of the FWA requires at least that the employee promptly notifies the employer of the illness and period of time they are away as well as giving evidence of the illness.
Similarly, the procedure to take annual leave will be governed by the relevant employment instrument. Pursuant to section 88 of the FWA, paid annual leave may be taken for a period agreed between an employee and his or her employer.
Accordingly taking any form of leave must follow the procedures established in either an employment instrument or in accordance with the relevant Acts.
Will isolation count against leave?
This will depend on what arrangement is made between yourself and your employer. While an employer may direct you to see a doctor or stay home you cannot be forced to use any accrued leave. However, if you do not elect to take a form of paid leave, your employer has no legal obligation to pay your wages. You must therefore carefully consider your personal circumstances before electing to take unpaid leave.
If possible, look to make alternative arrangements with your employer such as working remotely or a compromise in terms of the amount and type of leave taken. You may have a formal right under your employment agreement to request a flexible or alternative working arrangement. In addition, full or part-time employees with 12 months of continuous service may also have a right to request a flexible or alternative working arrangement under the FWA.
Requests for flexible work arrangements must be seriously considered by the employer and can only be refused on reasonable business grounds. Workplace regulators have encouraged employees and employers to work together to find solutions to meet the needs of workplaces and staff.
Can I be directed to take leave?
Employers cannot direct employees to take sick leave. An employer may direct an employee to leave the work place or attend a doctor if they suspect they are suffering from an illness.
In regard to annual leave, under the FWA an employer can direct an employee to take annual leave, but only when the request is reasonable. In assessing whether a direction is reasonable, the following factors are relevant:
- The needs of the employee and the business;
- Any arrangements in place;
- Custom and practice of the business;
- Timing of the direction or requirement to take leave; and
- The length of the period of notice to take leave given.
Directions to take leave during shut down periods have been held to be reasonable. On this basis it appears that a direction issued at this time may be reasonable.
Can an employee be dismissed while on leave?
An employee may be dismissed while on leave provided that the reasons for termination are not based on or related to the employee taking leave.
In regard to personal/carers leave, section 352 of the FWA provides the protection for employees temporarily absent because of illness or injury. There are however two exceptions: where the employee’s absence extends beyond three (3) months; or where the total absences over a 12-month period equate to more than three (3) months and the employee is not on paid person/carer’s leave.
There is not a similar protection for those on annual leave. However, a dismissal effected while an employee is on annual leave may give rise to certain general protections such as the protection against unfair dismissal. Employers should be careful in complying with their termination obligations in this regard.
Can an employer make directions to an employee?
Yes, an employer is entitled to make a number of directions in regard to an employee’s work provided the direction is reasonable and do not place an employee at imminent risk.
Directions that can be made include:
- A direction to work from home;
- A direction to continue working;
- A direction to leave the workplace and attend a medical facility;
- A direction to take annual leave;
- A direction to cease work.
Typically, when a direction is made, the employer will bear a continuing obligation to pay wages and entitlements. In circumstances where business is stopped, this may not be financially viable. Employers should accordingly consider their circumstances.
Can employees refuse to attend work?
This is a complicated question and there is no simple yes or no answer.
Whether refusing to attend the workplace is a legitimate exercise of a workplace right or undertaking of industrial action is highly dependent on all the circumstances surrounding the refusal. There is no clear answer that will apply to all types of employees. Best practice in this situation is for the employee to communicate their concerns with their employer and attempt to make alternate arrangements such as working from home.
Can workers be stood down without pay?
Usually when an employee is stood down, they are still considered ‘employed’ and accordingly are paid salary and receive entitlements, however in certain circumstances, a worker can be stood down without pay.
If an employment agreement does not include stand down provisions, the circumstances in which a stand down is permitted are outlined in section 524 of the FWA. This section provides that an employee may be stood down during a period where they cannot usefully be employed during one of three situations. Most relevant to the current situation is “a stoppage of work for any cause for which the employer cannot reasonably be held responsible.”
Whether a particular employee can be usefully employed is a question of fact to be determined having regard to the circumstances that face the employer. Previously the provision has been held to apply to incidents such as inclement weather which may indicate that a pandemic would be viewed as a stoppage of work that cannot be reasonably deemed as employer caused.
Alternatively, under section 525, an employee and employer may agree for the employee to take leave (paid or unpaid) instead of being stood down during this period.
Aside from the stand down powers of employers, the State and Federal Governments also have the power to make an enforceable government order, determination or direction to prevent an employee from attending a workplace. When such an order is made, an employer is not required to pay the employee. This has occurred in Queensland following the ordered shutdown/limitation of many ‘non-essential’ businesses such as restaurants, gyms and pubs.
Can an employer change an employee’s roster or hours of work?
Yes, a variation in hours or roster may occur. Employers must consult with the employee and their relevant employment agreement before making a variation. This includes a consideration of the employee’s views on the change and cannot be affected unilaterally.
The parties may also choose to enter into an ‘individual flexibility agreement’ (IFA) which allows the variation of employment agreement terms relating to hours or rosters. An IFA does have some formalities that must be satisfied before the agreement becomes effective.
Alternatively, employees may wish to agree to a variation in the span of their hours which may assist them avoiding peak times. Again, this will require a consultation of the employee and their existing employment agreement.
Dismissal/Redundancy
An unfortunate side effect of the situation is a down turn in business and by extension a loss of jobs. While employers are able to terminate employers, they must follow proper protocols and comply with their obligations under the relevant employment agreements and the FWA.
Termination
Employees must be paid their accrued entitlements. A party may lawfully terminate the employment in one of two ways: through giving notice in accordance with the terms of the employment agreement, or in response to conduct in breach of the employment agreement.
Section 117 FWA provides that an employer must not terminate the employment of an employee without first giving the employee a minimum period of notice in writing. The minimum period starts at one week and may be up to five weeks depending upon the employee's length of service and age. The statutory minimum can be satisfied by payment in lieu of giving notice.
Redundancy
Redundancy is slightly different to a standard termination. Redundancy occurs when an employer no longer requires the job to be done by the employee or anyone else. If an employee is made redundant, the employer must pay redundancy pay in accordance with the statutory entitlement in section 119 FWA. Redundancy may also be voluntary or involuntary. In terms of involuntary redundancy, it must be demonstrated that the redundancy is “genuine”, otherwise any termination may attract protections under the FWA.
There are three elements to the meaning of genuine redundancy:
- The employer must no longer require the employee’s job to be performed by anyone because of changes in operational requirements;
- The employer must comply with any consultation obligations it has under a modern award or enterprise agreement; and
- Redeployment within the employer’s business or an associated entity must not be reasonable in the circumstances.
Demonstrating satisfaction of these elements requires a factual examination of the circumstances leading up to the decision to make the employee redundant. In a recent case note, we examined redundancy in the context of a downturn in business.
Termination Protections
A range of protections exist for employees. These include unfair dismissal and the general protections which prevent dismissal on a discriminatory basis (which may include sickness or injury) or for exercising workplace rights.
For example, an employee cannot be dismissed because simply because they fall ill or are unable to attend their workplace due to family or caring obligations.
Protections at work
Aside from protection against dismissal, the general protections provisions of the FWA also apply to work generally and protect workers against: adverse action (an employer or industrial association taking action, threatening to, or organising action against an employee), coercion, misrepresentation, and undue influence or pressure.
These acts may arise in a huge variety of circumstances including termination, the payment or non-payment of entitlements or salary, discussion about workplace conditions, entitlements or rights, the making or variation of agreements, and the effects of workplace decisions.
COVID-19: Unprecedented Times, Desperate Measures
The coronavirus pandemic has caused governments across the world to take measures that impact the movement of people rarely, if ever, seen in peacetime before. Understandably, this has adversely affected businesses and created a host of employment law issues in every country.
When the first case of coronavirus – or COVID-19 – was reported in Wuhan, China in December 2019, nobody could have guessed that within three months it would spread across the globe at lightning speed. Indeed, from the start of March hundreds of thousands of cases of the disease have been reported in more than 160 countries and territories, resulting in thousands of deaths.
The speed of the spread of the virus – declared a pandemic by the World Health Organization on March 11 – caught governments across the world off guard. And many have since reacted with draconian action. This includes travel restrictions, quarantines, curfews and event cancellations, and advising people to avoid all but essential contact with each other for the foreseeable future.
Of course, this has had a tremendous impact on employment and with employment law in ways that have never been seen before. For instance, with employees being told to stay at home, flexible working has become more common than ever, although in some professions it just isn’t feasible. What this means for employers and employees – especially in terms of payment for those employees who have to take time off because they are sick, to quarantine or self-isolate, or to take care of dependents – has never been tested and different jurisdictions are reacting in different ways.
With the Covid-19 crisis and the response to it among different countries evolving daily, employment lawyers are advising employers on what they can or cannot do to safeguard their businesses and their employees under existing legislation. And the disease is spreading faster than laws can be adopted – although some countries are starting respond quickly to take care of workers and ensure that businesses stave off bankruptcy.
Wiebke Herrmann recently joined 8 fellow IR Global members from jurisdictions around the world to discuss the challenges COVID-19 is posing for employment law. Ms Herrmann's responses are outlined below:
The coronavirus is moving faster than the law – how are lawyers responding and adapting to this evolving crisis?
Rapid spread of the virus in Australia has meant that the government has had to implement strong measures. The government has forced many industries to close doors including restaurants (except for takeout) bars, beauty services, cinemas, entertainment venues, fitness and recreation centres, museums, and libraries. There can be no more than five people at a wedding and no more than 10 people at a funeral. The government's message is to stay at home unless it is essential. Essential means for groceries, medical supplies, exercise and work. The government considers that anyone who has a job as an essential worker has to keep working, but the government is also encouraging people who can work from home to do so. People are being urged to social distance themselves by staying 1.5 metres away from others. Australians can no longer leave the country and many Australian State borders have closed unless travel is essential.
We anticipate that further restrictions will be imposed shortly requiring any worker who is able to work from home, to do so.
Initially many Australian companies and businesses were implementing new workplace policies including a focus on hygiene and avoiding all face-to-face interactions unless necessary. If an employee is unwell, they must go home and stay home. If an employee has been in contact with someone who has tested positive for coronavirus or is suspected of having the virus, they must self-quarantine at home for a period of 2 weeks.
However, as the virus continues to spread implementation of technology has been the focus. Over the past week, the majority of businesses in Queensland, particularly law firms and accountants, are now already working remotely.
The most notable implication arising from these shifting work practices is what happens to employees who conduct work of a nature that is not able to be done remotely. This has raised questions regarding leave entitlements, especially where the employee is off work, but not sick themselves. In Australia, full time employees are entitled to a minimum of 10 days paid sick leave each year which can be used if an employee is caring for a sick family member and a minimum of 4 weeks paid annual (holiday) leave.
The question now for businesses is whether employees should be able to take paid leave and if that leave should be deducted from their ordinary sick leave entitlements, or whether the pandemic gives rise to the creation of a new leave classification.
For casual workers, the position is dire. They are employed on a daily basis when the need arises, with no guaranteed hours of work and they are not entitled to receive paid sick or annual leave. At the moment, the Government is yet to answer what solutions it is putting in place for the unsecured workforce or provide any guidance to businesses about leave entitlements. While we have a social security system to assist the unemployed, the system has been unable to cope with the amount of inquiries and applications.
To assist businesses, the Queensland State Government is creating a $500 million loan facility, which will comprise of loans of up to $250,000 with an initial 12 month interest free period to prevent businesses from collapsing during the coronavirus crises. Australian Banks are deferring loan repayments and offering interest free loans to small businesses. The Australian Taxation Office is providing relief options for businesses including payment deferrals & instalment variations for income tax, GST, PAYG instalments, FBT & excise by up to 4 months, low interest payment plans and potential remission of interest and penalties on tax liabilities incurred after 23 January 2020.
How are specific industries or sectors and their employees impacted and what are the potential legal consequences?
At the moment the position with respect to leave entitlements remains as is under Australian law and businesses are having to consider and formulate their own policies. The Government is yet to provide any certainty to businesses as to how leave entitlements should be managed if an employee is sick with coronavirus, or has been in contact with someone suspected of having the virus and needs to be quarantined for 14 days. We anticipate a rise in demand for employment lawyers over the coming months.
However, the Australian Federal Government has already passed temporary amendments to insolvency and corporations laws in light of the challenges that will be faced by business due to COVID-19 which provide temporary relief for financially distressed businesses and individuals. The changes made are contained in Schedule 12 of the Coronavirus Economic Response Package Omnibus Act 2020 (Cth). The changes came into force on 25 March 2020 and will remain in for a period of six months. An example of some of the changes that will apply include:
- directors will be temporarily relieved from the risk of personal liability for insolvent trading, where the debts are incurred in the ordinary course of business;
- the threshold at which creditors can issue a statutory demand has increased from $2,000 to $20,000; and
- companies will now have 6 months in which to respond to a statutory demand rather than the previous 21 days.
- the threshold for a creditor to initiate bankruptcy proceedings against an individual has increased from $5,000 to $20,000; and
- Individual debtors will now have 6 months to respond to a bankruptcy notice rather than the previous 21 days.
How are specific industries or sectors and their employees impacted and what are the potential legal consequences?
All industries are affected in Australia. While some industries have not been forced to close, other industries are still very much feeling the pressure.
The fate of specific industries such as hospitality, tourism, entertainment, and beauty is unknown. Currently, they present severe ramifications for casual employees and independent contractors who are only legally entitled to be paid for work that is performed. This is particularly problematic in Australia given that one in four workers are categorised as casual.
In the short term, businesses have assistance. We are encouraging business owners to review their insurance policies, communicate as much as possible with their staff and speak to their landlords and bank now to implement a plan. To take advantage of loan deferrals and the banks and governments interest free loans. The new temporary changes to insolvency will also offer much relief.
The real concern is what will happen in six months' time. What happens when loan repayments recommence, interest rates kick in, insolvency laws return to a compliance period of 21 days and the ATO ceases to provide tax incentives and deferrals of payments?
Once a business re-opens they can anticipate much slower trade and income than prior to the coronavirus and additionally be faced with significant debt.
Whether the assistance being provided by the government will be enough to save these businesses in the long term is not yet known.
This article is an excerpt from the IR Global Employment Virtual Series publication on COVID-19: Unprecedented Times, Desperate Measures. A full copy of the publication can be accessed here.
Corporate Law and COVID-19
Treasurer Josh Frydenburg has announced a series of potential temporary economic measures in response to the fluid COVID-19 situation. This temporary package has implications for bankruptcy, insolvency and corporate law.
We have summarised the proposed measures below.
Bankruptcy changes
- Increase in the minimum debt threshold for a creditor-initiated bankruptcy procedure from $5000 - $20,000;
- The time to respond to a bankruptcy notice increased from 21 days to 6 months;
- An extension of the protection period for individual’s declaring an intention to present a debtor’s petition extended from 21 days to 6 months.
Insolvency Changes
- Increase in minimum amount for a statutory demand from $2000 - $20,000;
- Increase in time to respond to a statutory demand from 21 days to 6 months;
- Temporary suspension of directors’ personal liability for insolvent trading for six months (egregious cases of dishonesty will still attract criminal liability);
- Insertion of s 588GAAA which provides an additional temporary safe harbour provision during the six-month period.
According to the Bill, the amendments to times for compliance will only apply to procedures commenced on or after the commencement of the amending Schedule. The temporary increase in the monetary threshold will be repealed at the end of the six-month period which starts on the date of commencement.
In addition to the above relief, the Australian Investment and Securities Commission has announced it has adopted a ‘no-action’ position in regard to company AGM’s including:
- a two-month ‘no-action’ position in regard to entities with a financial year end of 31 December that have not held an AGM by 31 March 2020;
- the holding of virtual AGM’s;
- sending supplementary notices of AGM electronically;
- non-compliance with section 249J of the Corporations Act.
ASIC encourages the use of technology to facilitate virtual AGMs and electronic communication, however the company constitution will determine whether or not this is possible. ASIC cannot amend the constitution to allow this, however irregularities may be addressed via other methods.
No changes to financial reporting obligations have been announced yet, however ASIC is monitoring the situation.
While ASIC is entitled to indicate that it will not exercise its regulatory powers in a certain way, this does not prevent third parties from taking action against a company or a Court ruling that conduct has breached legislation. It is highly advisable to seek legal advice prior to undertaking a course of action.
Tax agent deregistered after overlooking personal affairs
In the recent matter of Madz and Tax Practitioners Board [2019] AATA 4773, the Administrative Appeals Tribunal upheld a decision of the Board after it cancelled a tax agent’s registration for overlooking his personal affairs.
Mr Stephen Madz was a tax practitioner, who in May 2019 had his registration terminated by the Tax Practitioners Board for breaching the Code of Professional Conduct pursuant to section 30-30 of the Tax Services Act 2009. Mr Madz was also prevented from applying for registration for a period of 18 months pursuant to section 40-25(1) TASA. Mr Madz subsequently applied to the AAT seeking that he be reinstated.
In doing so, Mr Madz contended that his failure to lodge two income tax returns was the result of a ‘perfect storm’ of events, which ensued after he moved house in November 2015. Namely, upon his move, Mr Madz had no telecommunications facilities for 57 days and thereafter, continued to suffer poor connectivity until early November 2019. Further, there was a period in which Mr Madz did not receive mail from the ATO, as it was being sent to his former address. Mr Madz emphasized that he continued to lodge his clients returns during this period.
The Tribunal accepted that Mr Madz had serious telecommunications difficulties which affected his ability to conduct his business after his move. In doing so, it acknowledged that this resulted in him reasonably prioritising meeting the needs of his clients and the requirement of the ATO in relation to those clients.
However the Tribunal relied on Su v Tax Agent’s Board of South Australia (1982) 13 AR 192, noting that this could not excuse his failure to appropriately conduct his own affairs. In Su, the court noted that:
“If a doctor is convicted of a serious offence relating to drugs, his name may be struck from the register because the offence is inconsistent with the task which medical practitioners perform. If a tax agent is convicted of an offence of tax evasion, his name may be taken from the register, for tax evasion is inconsistent with the role which tax agents are called upon to perform.”
As such, the Tribunal held that the Board was justified in cancelling Mr Madz’s registration, noting that his non compliance was exacerbated by his failure to comply with an Outstanding Lodgement Order issued by the ATO pursued to s 30-20 of the code and that the outstanding returns and BAS’s had still not been lodged by the date of the hearing.
Despite this, the Tribunal reduced the period for which Mr Madz was prohibited from reapplying for registration from 18 months to 12 months.
Fugitive sentenced to 3 years jail for $200k tax fraud
A 56-year-old man has been sentenced to three years and three months in jail and ordered to pay over $150k in reparations after he fraudulently obtained and attempted to obtain more than $200,000 from the ATO.
Peter Garven appeared before the Sydney District Court on 30 May 2019, which heard that between October 2002 and July 2004, Mr Garven lodged three income tax returns in which he fraudulently obtained $102,504 in refunds and attempted to obtain a further $41,758. In doing so, Mr Garven claimed to have received more than $150,000 in salary and wages from the University of New South Wales, despite the university having no record of such payments.
The court also heard that between August 2002 and July 2004, Mr Garven fraudulently obtained $51,684 in GST refunds in his capacity as the sole director of Peter Garven Consulting and Garven Resources.
The hearing follows a tumultuous series of events which ensued after Mr Garven admitted his claims were false and vowed to lodge amendments in 2004. Namely, the ATO commenced an audit after the amended returns were never received. Mr Garven then failed to appear for his trial in March 2009, with a warrant later issued for his arrest. Mr Garven subsequently went into hiding and was registered on the missing persons list, before being arrested in 2017 in the Watagan Mountains.
Ultimately, the decision serves as an important reminder of the implications of failing to comply with tax obligations.
Close but no cigar: taxpayer jailed after creating fake business to obtain $1.5M tax refund
A 39-year-old South Australian man has been sentenced to 2 years and 4 months imprisonment after he attempted to obtain almost $1.5 million in tax refunds.
On 31 July 2019, Adam Hamshere appeared before the Adelaide District Court which heard that in January 2016, Mr Hamshere registered a fake business which purported to sell cigars. In doing so, Mr Hamshere obtained an ABN and later registered for GST and Wine Equalisation Tax (WET), backdating the GST registration to commence in January 2015.
In March 2016, Mr Hamshere lodged five business activity statements (BAS) in which he claimed an entitlement to $1,444,069 in GST and WET refunds.
After becoming the subject of an ATO audit, Mr Hamshere frequently phoned the ATO demanding immediate payment of the refund and claiming that his paper and electronic records had been stolen. However, despite thorough investigations into Mr Hamshere’s affairs, the ATO found no evidence to substantiate his business activity or his claims that his records had been stolen.
Ultimately, Judge Muscat found that Mr Hamshere had attempted to dishonestly obtain a financial advantage from the Commonwealth, pursuant to sections 11.1 and 134.2(1) of the Criminal Code 1995.
Acting ATO Assistant Commissioner David Mendoza asserted that the strong sentence is a timely reminder of penalties facing those who attempt to cheat the tax system. In doing so, he asserted that “those people who try to evade or cheat the tax and super system will get caught and we will take firm action. We will not tolerate this type of behaviour.”
