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23 Dec 2020

Full Federal Court confirms certain leave entitlements cannot be taken during a lawful stand down period

By Dan Trindade, Matt Garozzo and Jared Mintz

While employees will still be able to take annual leave during a stand down, they are not entitled to take paid personal/carer’s or compassionate leave during that same period.

In the wake of the COVID-19 pandemic and the continued downturn on business, there has been considerable concern about whether employers who stand down employees still bear the cost of certain forms of leave.

A recent decision of the Full Federal Court has confirmed that employees who are subject to a lawful stand down will not be entitled to all forms of leave provided by the Fair Work Act (Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Qantas Airways Limited [2020] FCAFC 205).

That means there is no obligation on employers to pay sick leave, carer's leave, or compassionate leave to workers who have been stood down.

Background to the dispute

Section 524(1) of the Fair Work Act 2009 (Cth) (FW Act) allows an employer to stand down employees when, amongst other reasons, a stoppage of work occurs for which the employer cannot reasonably be held responsible. However, section 525 specifies that employees are not taken to be stood down under section 524(1) during a period when the employee:

  • is taking paid or unpaid leave that is authorised by the employer; or
  • is otherwise authorised to be absent from his or her employment.

In mid-March 2020, and in response to the COVID-19 pandemic's impact on travel, Qantas announced its intention to stand down approximately 20,000 employees.

In response, a number of Unions, on behalf of Qantas' employees, sought a declaration that employees were entitled to access paid personal/carer’s or compassionate (PC&C) leave during their stand down. Qantas denied this entitlement was owed. Notably, the right to take annual leave during the stand down was not in dispute.

The case turned on the proper construction of section 525 of the FW Act where it was accepted that the employees had been lawfully stood down using the powers conferred by section 524(1). At the heart of the issue was the purpose of PC&C leave: to protect against loss of income during periods of emergency or illness (see sections 97 and 104 of the FW Act).

Authorised vs unauthorised paid personal/carer’s or compassionate leave during a stand down

In brief, the Unions argued an employee was not taken to be stood down under section 524(1) during periods where the employee was taking leave, including PC&C leave. They argued that the statutory entitlement to PC&C leave would provide a reason why the employee was "otherwise authorised" to be absent from work.

Qantas, on the other hand, contended that section 525 provided for a more limited exclusion from the operation of section 524 stand downs; any absence which would result in the employee being not taken to be stood down was subject to a requirement that the leave be authorised by the employer.

A majority of the full Federal Court preferred Qantas' interpretation of the FW Act, finding it a "more natural reading of the statutory language" than the Unions' "strained" and unjustified position. It held that the stand down provisions provide "authority to an employer to be relieved of the requirement to make payments to employees during a period when the employees cannot usefully be employed". The majority agreed with Qantas in saying that it would be:

"paradoxical if a provision that relieved an employer from making payments to employees during a period when they [could] not usefully be employed operated in a manner that meant that employees could take paid leave even though there was no work for them to perform and no potential to earn income."

The majority held that section 525 "means that an employer is not required to pay for leave during a stand down unless the exercise of the entitlement is authorised", and dismissed the appeal.

A pathway to appeal

In a lengthy dissenting judgment, Justice Bromberg would have ordered that a declaration be made to the effect that Qantas was not authorised to stand down and withhold payment to employees during a period in which the employees were taking PC&C leave.

While we prefer the reasoning of the majority, Justice Bromberg’s dissent suggests the possibility that this could be another interesting industrial relations issue which is headed for the consideration of the High Court, of which there have been an unusual number in recent times.

On the morning of publication of this article there were reports that four of the unions representing Qantas workers had sought special leave to appeal the matter to the High Court.

Lesson for employers

While employees will still be able to take annual leave during a stand down, they are not entitled to take PC&C leave during that same period. It will be up to the employer's discretion to authorise PC&C leave during a stand down. This is subject to a different application arising from a particular enterprise agreement that applies to your business.

This is an area that will be subject to intense scrutiny as the impact of COVID-19 continues to be felt. Employers should keep an eye on our Insights publications for any updates in this area, including the outcome of the unions’ High Court appeal.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.