Can we have a “stand down without pay” clause in our employment contract?

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This was a question posed to me recently by a client who employs staff on a casual basis. My client risks a number of good staff leaving him, if he cannot offer them permanent employment.

However, the problem is that my client’s business goes through various periods of quiet. He wanted to know if he could stand down permanent employees without pay, during these periods.
While an employer could potentially include a “stand down without pay clause” in their employment contract, it would be unenforceable from a practical perspective. This is because the whole point of full time employment is the security of regular and systematic pay, which can only be cut in circumstances of under-performance or genuine redundancy. Consequently, in order to standing down a permanent employee without pay, the employer would have to first follow a consultation process and providing reasonable notice – as in the case of genuine redundancy.

This isn’t great news for employers and brings me to the next question I was asked.

Can we force our employees to take annual leave during quiet periods?

As a general rule, it is up to each staff member when they wish to take annual leave. Some industrial instruments allow the employer to dictate when a staff member must take annual leave, which is usually during a period of shut down (i.e. Christmas and New Year) or if the staff member has an excessive amount of accrued annual leave.

Employment contracts can stipulate that the employer may direct the employee to take annual leave provided it is reasonable to do so. Of course, that is not to say that the employee could not refuse to take annual leave on the grounds of unreasonableness. In this regard, the following test would be applied to address reasonableness:

  • the needs of the employee and the employer’s business
  • any agreed arrangement with the employee
  • custom and practice of the business
  • timing of the direction to take leave
  • if the period of notice given is reasonable.

This puts a financial burden on employers, particular if their business goes through periods of busyness for say three weeks and then a period of quiet for the next week or so.

The Solution?

I recommend that employers calculate how many ordinary hours and “over-time” hours their full time staff work each month, on average and what that equates to in terms of pay. The employer should then set the salary for their full time staff with that figure in mind.

Remember, at all times, the employee must be “better off overall” compared to his or her minimum entitlements i.e. the end figure when considering the actual hours worked.

This way, even though the employer is paying staff every week, even if no work is being performed, the employer will arguably not be at a loss because that work has already been performed in the previous two weeks, or as the case may be.

I recommend including a clause in the contract which stipulates that the staff member will be expected to work “X” amount of hours per week but that they may be expected to work additional reasonable hours to suit the needs of the business. Employers should advise each staff member that these additional hours have been taken into account when deciding on an appropriate salary.
Employers can also stipulate that these additional hours will not exceed a certain number of hours per week and that staff will be provided with paid time off during quiet periods to make up for the additional hours worked.

Please contact me if you have any questions about your employment contracts, as I would be more than happy to help.