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Cafes, restaurants and bars – what to do if the Government closes your doors

Libby Pallot, Walter MacCallum, Anthony Massaro, Ben Tallboys, Abbey Burns, Caitlin Walsh, Caitlin Meers, Natasha Sim and Grazia Guida

Usually, it's the change of season that influences people’s plans to head out and eat. Restaurant, bar and café owners are prepared for a rainy day as summer turns to autumn. But nothing has quite prepared the hospitality industry for the unprecedented effects of COVID-19.

The global economy has been unforgivingly disrupted by COVID-19.Restaurant, bar and café owners are suffering from a significant drop in casual trade as customers move towards “social distancing” and avoid eating out and socialising. Employers all over the world are faced with hard decisions on staffing as business decreases day by day and there are less and less customers to serve.

As the hospitality industry faces thousands of closures all over the world and government restrictions limiting service capacity, it is safe to assume that the Australian Government will have to consider taking the same measures. “Non-essential” gatherings may soon include going to a restaurant.

There has been much conjecture about the use of the “stand down” provisions in the Fair Work Act 2009 and how they will apply for forced closures of businesses by the Government (i.e “Lockdown”), and even more so around whether or not they apply in the interim.

Under section 524 of the Act, an employer may stand down an employee during a period in which the employee cannot usefully be employed, due to circumstances beyond the employer’s control which results in a stoppage of work. If an employee is stood down in those circumstances, the employer is not required to pay the employee for that period of time.Section 524 applies to all Australian employees whether covered by an Award or not.

If the Government forces closures on the hospitality industry, it is likely that section 524 will apply, and hospitality industry employers will be able to stand employees down without pay.

The key question is whether based on the information available today, employers can rely on section 524 to stand down employees without pay. The World Health Organisation (WHO) has advised that all countries should prepare by implementing prevention measures that include containment and isolation. WHO’s advice has led to sweeping restrictions all over the world forcing restaurants, bars and cafes to close their doors prior to their government’s forced closure announcements. 

So what are the rights of the employers?

Obviously it is becoming increasingly difficult for hospitality businesses to stay open.However, employers can only stand down employees without pay if the stoppage is for reasons which are genuinely outside their control.Making a commercial decision to close the doors may be a hard decision, but it is still a decision.While the factors leading to the decision may be out of the control of the business, the employer is still responsible for the decision itself.Accordingly, standing down staff without pay is not legally an option at this stage.

If you stand down staff without pay outside the circumstances in section 524 of the Act, you risk claims for unpaid wages, breach of industrial instruments and significant penalties, as well as adverse publicity.

To avoid any doubt, you are not required to pay an employee who has made their own decision to self-isolate, as they are not ready, willing or able to work.You can agree with them to use a form of paid (or unpaid) leave to cover the period of absence.

If you are considering reducing shifts and/or staff numbers, you will need to consider your obligations around consultation and the possibility of redundancy payments.It is also necessary to consider whether delivery/takeaway services are a viable option for your business, and whether your staff can be utilised in other ways. Retaining good staff during these times is also important and employers must tread a difficult tightrope in these times of great uncertainty.

Each employer should consider their circumstances on a case by case basis and seek legal advice before making decisions to stand down employees.

For further advice on managing your legal obligations in relation to the COVID-19 pandemic, please contact the Russell Kennedy Workplace Relations, Employment and Safety team. 

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