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.

JCL Director 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 not 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’ times. 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

Wiebke Herrmann

Wiebke Herrmann is a Director at James Conomos Lawyers where she practices in the areas of insolvency, bankruptcy and commercial litigation. If you or your business needs assistance navigating a legal dispute, please do not hesitate to contact her. 

3004 8214 |    |  wiebke@jcl.com.au