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ALERT: Accrual of entitlements and payment of public holidays during stand down

As the implications of COVID-19 for employers slowly become clearer in some respects (and less so in others), Aitken Legal thought it appropriate to confirm a couple of now generally accepted positions on common questions that some employers are asking.

Paid leave entitlements will accrue for permanent employees during stand down

If a permanent employee has been stood down without pay under the provisions of section 524 of the Fair Work Act 2009 (‘Act’), the now generally accepted position is that they will continue to accrue annual leave and paid personal / carer’s leave entitlements during the period of the stand down.  This is because a period of stand down under section 524 of the Act is still defined as ‘service’ for the purposes of the Act.  Relevant to both annual leave and paid personal/carer’s leave, the Act says that those leave entitlements will accrue during ‘each year of service’.  Accordingly, because a stand down still counts as ‘service’, and the Act says these paid leave entitlements accrue during ‘service’, and despite both sections dealing with this leave referring to such leave being accrued on ‘ordinary hours worked’, we recommend that employers accrue annual and personal leave entitlements for permanent employees during a stand down period.

Employers should be aware that the accrual situation is different for employees who are on leave without pay, because a period of leave without pay is not considered to be ‘service’ under the Act, and so leave cannot accrue during such a period.

Employers should seek advice regarding the difference between a stand down under section 524 of the Act and leave without pay and ensure that they understand the distinction and their ability to utilise either option, before making decisions relating to these two options.

What about access to annual leave, long service leave and paid personal / carer’s leave during a stand down?

This is another difficult situation for employers.  Whilst it is clearly a potentially ‘harsh’ position for an employer to take, we consider there is no actual legal requirement that an employer must allow an employee to access paid annual leave or long service leave during a stand down period initiated by an employer under section 524 of the Act.  Employers are certainly encouraged to look favourably on employee requests to use accrued annual leave and long service leave entitlements during a period of stand down and may be encouraged to do so by looking at the situation as one where there is an opportunity to reduce a liability that is payable on termination (and so with some financial benefit in doing so).

The question of accessing paid personal / carers leave during a stand down is also a difficult one.  If an employee is already stood down and then provides a medical certificate for an illness or injury that occurred after the stand down, then it may be ineffectual.  The employee was already stood down with no work to do and could not have attended work in any event.  Each employer will need to decide its position on paid personal/carers leave during a stand down and take advice at that time.  Note that if an employee is using paid annual leave during a period of stand down and a personal leave ‘event’ occurs, then the accrued personal leave can be accessed as a substitute for the annual leave (subject to the usual medical certificate proof being provided).

Please call us if you wish to discuss the issue of employees using leave entitlements during a stand down and what your obligations are.

Payment of public holidays while on stand down

With the Easter public holidays coming up in under 2 weeks, the question of whether permanent employees should be paid for public holidays has surfaced.  The currently held view is that if a permanent employee, who would not have otherwise worked the public holiday but would have received payment for the public holiday, is stood down, then that employee is still entitled to be paid for the public holiday (at their usual wage / salary and for their usual ordinary hours of work) despite being stood down.

This is because if the employee was going to be absent for the public holiday and paid in any event, then the public holiday is not a day the employer can stand the employee down for – because there was meant to be no work and the employee was to be paid in any event.

We advise that this is the current position of the Fair Work Ombudsman, and we consider that there are reasonable prospects that a Court or Commission who is asked to consider this scenario will take that view.  We consider that, at this time, the safest position for employers is to still pay permanent employees for those public holidays.  The exception would be for part-time employees whose agreed days of work did not include the day of the public holiday, and so it is not an ordinary day of work for which the part-time employee would otherwise have been paid.

Disclaimer: The information contained this article is general and intended as a guide only. Professional advice should be sought before applying any of the information to particular circumstances. While every reasonable care has been taken in the preparation of this update, Aitken Legal does not accept liability for any errors it may contain. Liability limited by a scheme approved under professional standards legislation.

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