9 April 2020

JobKeeper Payment – A Comprehensive Overview

Lachlan Thorburn, Michael Coates
Lachlan Thorburn Litigation Lawyer
Michael Coates Intellectual Property Lawyer

As we set out in our prior article, COVID-19/Coronavirus – What Happens If You’re Ordered To Shut Down?, one must consider that at the time of drafting the Fair Work Act 2009 (Cth) (the “Act”), the legislature had not anticipated that the provisions therein would be applied to what is effectively a national shut down (or partial shutdown as the case may be) affecting all businesses.

The Federal Government has responded by accepting that the current provisions of the Act are not appropriate or adequate to deal with these unprecedented events and circumstances.  Moreover, most modern awards have now required significant temporary amendments enacted by the Fair Work Commission to allow employers and employees to reach an agreement about the temporary reduction of ordinary hours and roster changes.

Yesterday, the Federal Government introduced urgent amendments to the Act (“Amendments“), to allow access to the JobKeeper scheme by way of significant wage subsidies and increased employment flexibility for employers (and employees) to agree to temporary changes to an employee’s ordinary employment conditions (where the normal employment conditions cannot be performed as a direct result of the COVID-19 pandemic).

Importantly, and as we set out in detail below, the wage subsidy payment is not an upfront payment to eligible employers to pass onto their employees, but rather reimbursement for payments already made by the employer to their employees.

What Will The New JobKeeper Legislation Provide?

Businesses affected by direct State and/or Federal Government directions or alternatively, out of economic necessity to ensure the survival of the business and the preservation of jobs, will be, if eligible, able to access the new JobKeeper scheme.  Under that scheme, the Federal Government will subsidise the wage liabilities of qualifying employers, based on $1500 per employee per fortnight.

A business will be eligible for the JobKeeper payment if:

  1. the business (with a turnover less than $1 billion) has suffered a reduction in turnover of at least 30% compared to the same period last year; or
  2. the business (with a turnover of $1 billion or more) has suffered a reduction in turnover of 50% compared to the same period last year.

The process for working out the required threshold loss of turnover may be challenging for many reasons including but not limited to the nature of the business, acquisitions made by the business in the preceding 12 months, alternative accounting practices undertaken to record turnover, et cetera.

We strongly recommend that you speak with your business’ accounting experts to ascertain whether your business will likely be eligible for the scheme, as the cash flow exposure to the business will be significant (and potentially catastrophic) if it is ultimately determined that your business is ineligible to receive the JobKeeper scheme.  An employer’s eligibility for the JobKeeper scheme will also have a direct impact on whether the employer can apply for the new Commercial Tenancy Code.  To learn more about the Commercial Tenancy Code, refer to the articles below:

The JobKeeper scheme will be backdated to 30 March so that payments can be claimed with effect from that date. However, the employer, in order to receive the wage subsidy, will be required to have paid the $1,500 payment to the employee prior to the ATO reimbursing the employer (section 789GD of the Amendments). Again, we strongly recommend that you obtain independent accounting advice about your business’ eligibility to receive the wage subsidy prior to making payments to your employees.

789GDA Minimum Payment Guarantee 

If a JobKeeper payment is payable to an eligible employer (for an eligible employee), the employer must ensure that the total amount payable to the employee in respect of a fortnight period is not less than the greater of the following:

  1. the amount of JobKeeper payment payable to the employer for the employee for the fortnight (the $1,500);
  2. the amount payable to the employee in relation to the performance of work during the fortnight (effectively, if the employee works over and above the $1,500, the employer must make payment of the additional wage earned by the employee for that period – we consider that this provision relates to employees that are working their ordinary hours or at least, a reduction of their ordinary hours (by agreement) which results in remuneration over and above the fortnightly wage subsidy).

789GDB  Hourly Rate of Pay Guarantee

This Amendment provides that an employee’s base hourly rate of pay is to be no less than the base hourly rate of pay that would have been applicable to the employee in the ordinary course of their employment. The base hourly rate of pay is the amount specified in the workplace instrument governing the employee’s minimum employment conditions or the amount worked out using the method set out in that workplace instrument.  As such, this guarantee is simply a confirmation of minimum hourly rates provided for in an Award or other workplace instrument – that is, employees must not be paid below these rates for the hours they actually work.

A workplace instrument is a modern award or registered agreement (such as an Enterprise Agreement) and any State or Federal law regulating employment relationships (such as legislation dealing with Workers’ Compensation, Workplace Health and Safety, Discrimination, et cetera).

An employment contract is not a workplace instrument, so the base rate may be different to the rate provided in the contract of employment.

789GDC JobKeeper Enabling Direction – Stand Down/Partial Stand Down

We consider that this Amendment is essentially for there to be more flexible stand down arrangements than were allowed by section 524 of the Act (the relevant pre-existing stand down provision). Importantly, it appears that stand down arrangements have been extended to allow a ‘partial stand down’ of an employee’s employment as opposed to the full stand down mandated by section 524 of the Act (where the employee cannot be usefully employed to perform the entirety of his/her ordinary position).

The ‘partial stand down’ appears to now permit a JobKeeper enabling direction to be made by the employer to reduce the number of hours the employee is required to work, by reason that the employee cannot be usefully employed for the entirety of their normal days and/or hours, but can be usefully employed for a reduced number of hours (due to circumstances beyond the business’ control and which are directly attributable to the COVID 19 pandemic and/or government initiatives to slow the transmission of COVID 19).

The employer will be required to pay the employee the base hourly rate of pay for the actual hours the employee works. Moreover, if the actual hours worked by the employee during a fortnight exceeds the $1,500 wage subsidy, the employer will be required to pay the amount over and above the wage subsidy –put simply, the employer will be required to ‘top-up’ the difference.

Section 789GDC (1) provides as follows:

  1. after the commencement of this section, an employer of an employee gave the employee a direction (the job keeper enabling stand down direction) to:
  2. not work on a day or days on which the employee would usually work; or
  3. work for a lesser period than the period which the employee would ordinarily work on a particular day or days; or
  4. work a reduced number of hours (compared with the employee’s ordinary hours of work);

  during a period (the JobKeeper enabling stand down period).

If the JobKeeper enabling stand down direction applies, the employer is still required to pay at least the full amount of the wage subsidy to the employee, taking into consideration the minimum payment guarantee and the hourly rate guarantee – but the employer is not otherwise required to make payments to the employee.

For the purposes of subparagraph 789GDC(1)(a)(iii), the reduced number of hours the employee is required to work may be zero – that is, the employee may not be required to attend work during this period and still receive the wage subsidy (effectively, a complete stand down of the employees’ employment because they cannot be usefully employed in any capacity).

Most simply, the employer can only give a Jobkeeper stand down enabling direction if the affected employee cannot be usefully employed for all or part of their ordinary hours of work during the period of the direction (whether that is a full stand down or partial stand down).

In light of the Amendments, we consider that a JobKeeper enabling direction will prevail over any existing employment terms under a contract, modern award, or Enterprise Agreement.  Other JobKeeper enabling directions available to employers include:

  1. alternative duties of work to be performed by the employee (section 789GE);
  2. alternative locations of work (789GF);
  3. varied the days/hours of work (section 789GG – although this section relates to employees retained in their fulltime employment but required to work alternative hours and/or days to that of their ordinary hours and days of work);
  4. taking of authorised annual leave (section 789GJ – authorised annual leave can be taken at half pay, although the employee must retain a leave balance of no less than 2 weeks).

Other Considerations to Make When an  Employer Intends to Make a JobKeeper Enabling Direction

  1. The direction must be reasonable and based on the employer’s reasonable belief that the direction is necessary to preserve the ongoing employment of the employee and/or its entire (or part thereof) workforce;
  2. The employer must pay at least the full amount of the JobKeeper subsidy directly to the employee – noting, again, that the employer must pay such amounts to the employee out of its own pocket and then (hope to) be reimbursed by the Government;
  3. The employee’s rate of pay cannot be reduced for the hours which the employee actually works once a direction has been given. The employee must be paid for the hours they work at least at the relevant minimum rate of pay;
  4. The employer has a duty of care to ensure the direction can be performed safely and any ‘new’ assigned duties are within the employee’s skills, competencies and mandated qualifications to perform such duties.

780GM Consultation

A JobKeeper enabling direction will not apply unless the employer:

  1. gave the employee written notice of the employer’s intention to give the JobKeeper enabling direction; and
  2. the employer gave notice:
    • at least three days before the direction was given; or
    • the employee genuinely agreed to a lessor notice period; and
  3. the employer consulted the employee about the proposed JobKeeper enabling direction;
  4. the employer must keep a written record of a consultation with the employee;

Importantly, it remains unclear whether a prior stand down direction or agreement to reduce hours of work will apply retrospectively (notwithstanding that the earlier steps taken by the employer out of economic necessity were reasonable and consistent with the new scheme).

Accordingly, we recommend that the employer again consults with their employees about the proposed JobKeeper enabling direction they intend to make. We also recommend that employers who have already taken prior steps which are consistent with the new scheme, seek the reimbursement for those payments made.  However, until further direction from the Federal Government and/or the ATO is provided (about prior consistent steps taken by employers), there is no certainty that prior amounts equal to the wage subsidy paid by an eligible employer will be reimbursed until the further consultation has been undertaken in accordance with the new JobKeeper scheme.

789GU Employee Requests for Secondary Employment, Training, etc

In response to a direction, an employee can request approval to take on a second job, or to be provided with training or professional development. The employer must consider that request and not unreasonably refuse that request.

The Role of the Fair Work Commission (“FWC’)

The FWC will have a significant enforcement/arbitration role to perform in the implementation of the Amendments. An employee will be able to challenge a JobKeeper enabling direction, and the FWC will have the jurisdiction intervene and set aside a direction, only after considering the ‘fairness between the parties concerned’.

If the FWC intervenes, one may reasonably query how will the ‘fairness’ and ‘reasonableness’ of the employer’s direction will be assessed, given the inevitable balancing of interests between the employer and the employer. We consider that the employer will likely be given necessary liberty to establish that the directions were given to ensure the preservation of the employee’s job and that of the employers’ entire workforce. However, there will likely be substantial scrutiny if the FWC considers that the employer has engaged in opportunistic abuse of the JobKeeper scheme.

Employers must be mindful that when deciding to enact a JobKeeper enabling direction, that they may face significant fines (civil penalties) if it is ultimately determined that they have engaged in opportunistic abuse of the JobKeeper scheme.

 

 


Individual liability limited by a scheme approved under professional standards legislation (personal injury work exempted).

 

 

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