Chung Yin (Kelvin) Lai v Lynkz Pty Ltd T/A Lynkz
[2020] FWC 5933
•10 NOVEMBER 2020
| [2020] FWC 5933 |
| FAIR WORK COMMISSION |
DECISION |
Fair Work Act 2009
s.526—Stand down
Chung Yin (Kelvin) Lai
v
Lynkz Pty Ltd T/A Lynkz
(C2020/5294)
COMMISSIONER BISSETT | MELBOURNE, 10 NOVEMBER 2020 |
Application to deal with a dispute involving stand down.
[1] Mr Chang Yin (Kelvin) Lai (Applicant) was employed by Lynkz Pty Ltd T/A Lynkz (Respondent) until he resigned his employment effective from 10 July 2020.
[2] On 1 March 2020 the Applicant was promoted to the position of Lead Consultant with effect from 1 April 2020.
[3] On 27 March 2020 the Applicant (along with some other employees of the Respondent) was given notice that he was stood down from his employment with the Respondent until 27 August 2020.
[4] The Applicant subsequently notified a dispute to the Commission pursuant to s.526 of the Fair Work Act 2009 (FW Act). The Applicant said that the stand down was not authorised by the legislation and that the stand down was not fair.
[5] The Applicant represented himself before the Commission. The Respondent was represented by Mr Braden Voigt, CEO of the Respondent.
LEGISALTION
[6] Section 524 of the FW Act deals with stand downs. It states:
524 Employer may stand down employees in certain circumstances
(1) An employer may, under this subsection, stand down an employee during a period in which the employee cannot usefully be employed because of one of the following circumstances:
(a) industrial action (other than industrial action organised or engaged in by the employer);
(b) a breakdown of machinery or equipment, if the employer cannot reasonably be held responsible for the breakdown;
(c) a stoppage of work for any cause for which the employer cannot reasonably be held responsible.
(2) However, an employer may not stand down an employee under subsection (a) during a period in which the employee cannot usefully be employed because of a circumstance referred to in that subsection if:
(a) an enterprise agreement, or a contract of employment, applies to the employer and the employee; and
(b) the agreement or contract provides for the employer to stand down the employee during that period if the employee cannot usefully be employed during that period because of that circumstance.
Note 1: If an employer may not stand down an employee under subsection (a), the employer may be able to stand down the employee in accordance with the enterprise agreement or the contract of employment.
Note 2: An enterprise agreement or a contract of employment may also include terms that impose additional requirements that an employer must meet before standing down an employee (for example requirements relating to consultation or notice).
(3) If an employer stands down an employee during a period under subsection (a), the employer is not required to make payments to the employee for that period.
[7] Section 526 of the FW Act allows the Commission to deal with a dispute in relation to such matters. Section 526 states as follows:
526 FWC may deal with a dispute about the operation of this Part
(1) The FWC may deal with a dispute about the operation of this Part.
(2) The FWC may deal with the dispute by arbitration.
Note: The FWC may also deal with a dispute by mediation or conciliation, or by making a recommendation or expressing an opinion (see subsection 595(2)).
(3) The FWC may deal with the dispute only on application by any of the following:
(a) an employee who has been, or is going to be, stood down under subsection 524(1) (or purportedly under subsection 524(1));
…
(4) In dealing with the dispute, the FWC must take into account fairness between the parties concerned.
[8] The application was made to the Commission by the Applicant on 8 July 2020. At that time the Applicant was an employee of the Respondent (his resignation did not take effect until 10 July 2020) and the application is therefore properly made to the Commission in that the Applicant was, at that time, an employee who had been stood down.
THE DISPUTE
Submissions and evidence of the Applicant
[9] The Applicant submitted that he received a notice of stand down from the Respondent on 27 March 2020 and, whilst it did not explicitly state under which paragraph of s.524(1) of the FW Act he had been stood down from his employment, he understood that the stand down was pursuant to s.524(1)(c) – that is that he could not be usefully employed because of a stoppage of work for which the Respondent could not reasonably be held responsible.
[10] The Applicant submitted that the statutory requirements for a valid stand down have not been met.
[11] The Applicant was given an opportunity to provide further evidence, in the form of evidence from Slack Channel [which I understand to be a chat room/messaging function] that he said was evidence of available work. Despite being given this opportunity the Applicant did not produce such material.
No stoppage of work
[12] The Applicant said that the business activity of the Respondent is information technology consulting and software development. He said that this activity had not ceased at the time he was stood down.
[13] In his evidence the Applicant said that at the time he was stood down he understood that there had been a downturn in work but not a stoppage of work as required by the FW Act. He said that following his stand down there were still consultants working for the Respondent. He understood that the Respondent had 9-10 consultants but that only two had been stood down – himself and Dimitri, a colleague. He said that the remaining consultants remained at work although he was not aware of the work they were performing.
[14] The Applicant said that he continued to attend regular meetings with other employees of the Respondent and continued to engage with his colleagues via Slack Channel.
[15] The Applicant said that, at the time he was stood down, he was working on the SMT Camera project. He said that there was a “huge pipeline” of work for the project. On being stood down he was advised to handover his work to another colleague who had not been stood down.
[16] The Applicant said that the SMT Camera project was not being carried out for a client but rather was a product the Respondent was developing and that a company called Matrix had nothing to do with it. He agreed that Matrix was a client of the Respondent and said that he had previously worked on a project called “Matrix”, but it had nothing to do with SMT Camera.
[17] Alternatively the Applicant said that there were other projects he could have been working on if there was no work available on the SMT Camera project.
[18] Further, the Applicant gave evidence that, during the period of his stand down, the Respondent introduced a profit share scheme for employees to work extra hours. Instead of being paid for extra hours of work employees would receive a share of the profit from the project that they contributed to. He said that, in this way, the Respondent had “incentivised” employees to continue to work on the SMT Camera and other projects of the Respondent. He suggested this is evidence of there being “so much work” available at the Respondent that he could have continued to work and that there was no stoppage of work.
[19] The Applicant’s evidence is that on 24 June 2020 he gave notice that he intended to resign from his employment effective from 10 July 2020. He said that on 26 June 2020 it was “announced” that Dimitri would be reinstated from his stand down effective from 1 July 2020.
[20] The Applicant said that the Respondent acquired further work and employed two new consultants during the period in which he was stood down. Further, he said that the Respondent chose not to provide any of the additional work to him but rather he remained stood down.
[21] For these reasons the Applicant said that there no stoppage of work as required by s.524(1)(c) of the FW Act.
Employer responsible for the stoppage
[22] The Applicant said that, if there was a stoppage of work, the Respondent was responsible for that stoppage. He said that the Respondent “consciously allowed multiple customers to cancel their contracts” such that the Respondent is responsible for any subsequent downturn in work.
[23] The Applicant also submitted that Mr Braden Voigt, CEO of the Respondent, had control and influence over SMT Camera, such that any downturn in work on that project was controlled by the Respondent. Further, he said that SMT Camera has a number of employees as evidenced by its LinkedIn page.
The Respondent did not behave in a fair manner
[24] The Applicant said that the stand down was not done in good faith and the conduct of the Respondent made it unfair.
No consideration of the alternatives
[25] In particular the Applicant said that the Respondent did not take reasonable steps to avoid the stand down including by spreading the available work amongst employees and had not provided any evidence to support a claim that this was not possible. He said that it was a contradiction by the Respondent to consider that standing him down was fair but that it would not be fair to reduce other employees’ wages.
[26] Further, the Applicant said that the Respondent could have, but did not apply for JobKeeper, did not seek any independent legal advice before instigating the stand down and employed two new consultants.
Submissions and evidence of the Respondent
[27] The Respondent was represented in proceedings by Mr Braden Voigt. Mr Voigt said that shareholders of the Respondent are himself, Mr James Voigt and Ms Narelle Spiller.
[28] Mr Voigt said that the Respondent was undertaking a project for a company called Matrix. Matrix shareholders are Mr Martin Prowse (who owns 95% of the company) and two others who hold the remaining 5% of that company.
[29] The project being undertaken for Matrix was to deliver a platform for video surveillance of motor vehicles. SMT Camera is a registered company that is the holder of the intellectual property rights of product developed as part of the Matrix project. SMT Camera and Trinity were part of that product development.
[30] The SMT Camera company shareholding is held jointly by Mr Braden Voigt and Mr Prowse. Mr Voigt said that SMT Camera does not employ anyone or conduct any business or trade.
[31] Mr Voigt said that the Applicant was employed by the Respondent. He was not employed by Matrix or by SMT Camera.
[32] Mr Voigt said that on 17 March 2020 the Respondent was advised by the General Manager of Matrix via an email that, with the impending shut down due to the coronavirus, a large number of schools would close and employees would be working from home. This would result in a substantial downturn in traffic that would then result in a downturn in demand for the Matrix product (traffic flow information). The General Manager said that for the “foreseeable future” he anticipated little or no work coming in and therefore Matrix would need to “watch our cashflows very carefully.” Matrix advised that “[w]ith regards to Trinity this means we need to go with what we have…without incurring any more expenses.”
[33] Mr Voigt said that the Respondent had five consultants working on the Matrix project in March 2020. The project officially stopped on 27 March 2020 and the stand down notices were given to four (out of a total of 10) consultants working for the Respondent which took effect from 27 March 2020. The Applicant worked only on the Matrix (SMT Camera) project.
[34] Further, Mr Voigt said that multiple (other) projects being undertaken by the Respondent, in addition to the Matrix project, were placed on hold by clients around the time of the stand downs. The decisions of individual clients are not controlled by the Respondent and the decision to suspend certain projects was not a decision of the Respondent.
[35] Mr Voigt said that the Applicant was asked to handover his work to Mr James Voigt. James Voigt went on extended leave without pay commencing early April 2020 but, prior to leaving and with the assistance of another employee (Pim), was required to document the completed work on the Matrix project.
[36] Mr Voigt explained that the clients determine the number of consultants required to work on their projects and confirm the specific consultants. He said that the Respondent does not have the right to add or change those consultants without approval of the relevant client.
[37] Mr Voigt said that on 26 June 2020 a contract was secured with a new client. This was after the Applicant had notified his resignation. This project required two consultants and, while it had been intended to place the Applicant on this project, his resignation meant that this could not occur. Dimitri (another stood down employee) was placed on the project and a recruitment was undertaken to employ the second consultant for the project. Had the Applicant not resigned he would have been placed on this project and returned to work at the time Dimitri returned.
[38] Mr Voigt observed (and the Applicant did not refute) that the Applicant did not engage in regular meetings with the Respondent but rather attended only one meeting after his stand down.
CONSIDERATION
[39] In Independent Education Union of Australia v The Peninsula School T/A Peninsula Grammar School 1 (IEU v PGS) I said that:
In summary, the decision-making process in dealing with a dispute under s.526 of the FW Act is clear once the provisions of s.524 are properly understood. The first question the Commission must ask itself (in dealing with the current dispute) is if there was a stoppage of work. If the answer is no, no further enquiry is necessary. Without a stoppage of work no stand down under s.524 is possible. If the answer is yes, the next question is if the cause of the stoppage was for a reason for which the employer could not reasonably be held responsible. Again, if the answer is no (that is, the employer could be reasonably held responsible for the stoppage) then the inquiry ends. If the answer is yes, the third inquiry is whether the employee could be usefully employed because of that stoppage. Of course, in dealing with the dispute the provisions of s.526 of the FW Act, including fairness as expressed in s.526(4) must be taken into account. 2
[40] It is my intention to follow the same approach in relation to the matter before me.
[41] In IEU v PGS I also considered a number of authorities directly relevant to the matters to be considered in the application currently before me as set out below.
[42] In City of Wanneroo v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union-Western Australian Branch3 the meaning of “stoppage” was considered and defined as:
[30] The Macquarie Dictionary Online 2008 relevantly defines "stoppage " as:
1. the act of stopping; cessation of activity, etc. ….
4. a cessation of work as a protest; strike: a twenty-four hour stoppage.
[43] Whilst this was in the context of industrial action it remains apposite to the matter before me.
[44] In Australian Federation of Air Pilots v Bristow Helicopters Australia Pty Ltd4 (Bristow Helicopters) CommissionerCambridge said:
[53] …the mere existence of a stoppage of work for which the employer cannot reasonably be held responsible, is not sufficient to establish the circumstances which satisfy subsection 524 (1) of the Act. There must be a direct causal connection between …the stoppage of work, and the absence of useful work for the employee who is stood down. Thus, the absence of useful work created by a breakdown of machinery or equipment and/or a stoppage of work must be the cause of any stand down.
[emphasis in original]
[45] Commissioner Cambridge also said that “[t]he circumstances contemplated by subsection 524(1)(c) of the Act would require identification of some event which involved work being consciously halted for some reason and ordinarily for some identified period of time.”5 [Underlining added]
[46] In Marson v Coral Princess Cruises (N.Q.) Pty Ltd T/A Coral Expeditions6 (Coral Princess Cruises) Deputy President Lake concluded that an event such as COVID-19 came within the ambit of s.524(1) of the FW Act. That is, it is an event for which the employer could not reasonably be held responsible.
[47] In Coral Princess Cruises Deputy President Lake said:
[10] While the events that could cause a stoppage have not been prescribed to a finite list, the requirement of a genuine stoppage has been interpreted strictly. In Bristow Helicopters, Cambridge C stated:
[62] … The circumstances contemplated by subsection 524 (1) (c) of the Act would require identification of some event which involved work being consciously halted for some reason and ordinarily for some identified period of time. A reduction in the available work for the EC 225 helicopters, for whatever reasons, does not represent a stoppage of work in satisfaction of the terms of subsection 524 (1) (c) of the Act.
…
[12] A mere reduction in available work can not constitute a stoppage – this would go against the ordinary definition of a ‘stoppage’, as is required by statutory interpretation. Such an interpretation would develop a perverse outcome where s 524(1)(c) could be applied so liberally as to deprive employees their fundamental entitlement to work under an employment relationship. In Bristow Helicopters it is clear that the employer still had trade in which it could engage and the examples set down by the Full Bench indicate that there was sufficient useful work that could be undertaken.
[13] However, there remains a question of whether a genuine stoppage of work occurs when an employer’s business is not trading, but there still exists some limited functions that can be performed. This is not a question of whether there is a stoppage of work: a stoppage exists where there is a cessation of trade. ‘Work’, according to the dictionary definition applies to the ‘activity’ of the business, which in this case relates to the carriage of passengers on various cruise holidays. This activity has entirely halted and should, therefore, be properly characterised as a stoppage of work. This continues to be the case regardless of whether some administrative or caretaker functions of the business continue to be required - these functions do not properly represent the ‘activity’ of the business.
[Endnotes omitted]
[48] In Stelzer v The Trustee for The Ideal Acrylics Unit Trust T/A Ideal Acrylics7 (Stelzer) Deputy President Anderson said:
[57] …what constitutes a “stoppage of work”…should not be so broadly construed as to include a mere downturn in business activity nor be so narrowly applied as to require the entire cessation of business activity. The statutory phrase is a stoppage of work, not a stoppage of the business. For there to be a stoppage of work some defined business activity with respect to which work is performed needs to cease, but not the cessation of business activity entirely. Whilst in certain circumstances both may apply, a business might still be operating notwithstanding an external event causing distinct areas of work to be sufficiently impaired so as to warrant stand downs due to a stoppage.
[Endnotes omitted]
Was there a stoppage of work?
[49] The Respondent in this case said that there was a stoppage of work and this occurred when a variety of its clients paused or withdrew their projects following the changes brought about by COVID-19. At this time each of the projects stopped. As it relates to the work of the Applicant, the Respondent said that the stoppage of work occurred when Matrix stopped the project on which the Applicant was working.
[50] The Applicant said that there was no stoppage as work on the SMT Camera continued and that this work was done by employees of the Respondent on their own time and in exchange for some share of profit.
[51] For there to be a stoppage of work it is not necessary that all of the work of the employer stop and it is certainly not necessary that work within the industry more broadly cease. That there continued to be work in the information technology consulting area more broadly is not a relevant consideration as to whether work of the Respondent ceased in the necessary sense. That some consultants of the Respondent continued to have work to do is not evidence necessarily that work on which the Applicant was engaged did not stop.
[52] The Applicant has sought to portray the state of work of the Respondent as having been caused by the Respondent “allowing” clients to put a hold on the work being undertaken by them. I am not convinced that this is a correct portrayal of the relationship between the Respondent and its clients. To the extent that a client might be able to put any further work on hold is a function of the contract between the Respondent and its clients.
[53] The evidence before me supports a conclusion that a number of clients of the Respondent sought to defer or stop work on their projects. This included Matrix.
[54] I am satisfied that the Applicant was, at the time of his stand down, working on the Matrix project. I do not accept the Applicant’s claim that SMT Camera was a separate project but rather am satisfied that it was part of the Matrix project.
[55] I accept the evidence of Mr Voigt that SMT Camera is a company established for the purpose of holding the intellectual property developed as part of the Matrix project but is otherwise not a company that has any contracted project work with the Respondent. It follows that I do not accept the LinkedIn information tabled by the Applicant as demonstrative that SMT Camera is a business that employs anyone or engages in business activities. The information necessary to reach such a conclusion does not come from social media. I would observe that to the extent SMT Camera, as a product, may be available to other projects does not alter my finding that SMT Camera was not a project the Respondent was contracted to work on.
[56] I am further satisfied that each project of the Respondent is a defined and stand-alone part of the business. The Matrix project was therefore a defined part of the business and the decision of Matrix to suspend the project meant that this work, as required, ceased. That is, the activity of the business in relation to this distinct project, stopped
[57] For these reasons I am satisfied that there was a stoppage of work as contemplated by s.524(1)(c) of the FW Act.
Was the cause of the stoppage for a reason for which the employer could not reasonably be held responsible?
[58] I am satisfied that COVID-19 is the type of event contemplated by s.524(1)(c) of the FW Act. This however does not answer the question as to whether COVID-19 was the cause of the stoppage I have found to have occurred.
[59] I am satisfied on the basis of the evidence before me that the Respondent was not responsible for the stoppage of work. The work in question stopped because the client chose to suspend the work that was being done on the Matrix project by the Respondent. The client reacted to a downturn in demand for its product resulting from decisions of the Victorian Government in response to COVID-19 to close schools and require employees to work from home wherever possible.
[60] I accept that Matrix was not the only client that decided to defer a project being undertaken by the Respondent. To the extent the Applicant said that the Respondent chose to stop the work – suggesting it was not a decision of the client – the evidence does not allow me to draw that conclusion. Further, such an action by the Respondent makes no sense. In an environment where many employers were searching for work to keep their business afloat it beggars belief that an employer would decide, for no apparent reason, to cease work on a project that was delivering income to the business.
[61] Given that the work on the Matrix project ended because the client deferred further work on the project I am satisfied that the reason for the stoppage was not one for which the Respondent could reasonably be held responsible.
Could the Applicant be usefully employed?
[62] The evidence before me does not allow me to conclude that the Applicant could have been usefully employed on other work for the entire period of the stand down. However, that is not the end of the consideration. The Applicant cites the case of his colleague, Dimitri, who was stood down at the same time he was stood down and who returned to work on 1 July 2020 as evidence that he, too, could have been usefully employed, at least for part of the stand down period.
[63] The Respondent did gain new project work and determined that Dimitri should be returned to work prior to the end of his (and the Applicant’s) stand down period to work on that project. I accept that by the time the project commenced the Applicant had resigned from his employment with the Respondent and was working out (to the extent this has meaning during a stand down) his notice period.
[64] The question to be answered is not if it was more or less convenient for the Respondent to return the Applicant to the new project for the eight days prior to the end of his employment but rather whether the Applicant could have been usefully employed. Based on the evidence of Mr Voigt it was intended, was it not for his resignation, to move the Applicant onto the new project, along with Dimitri. For this reason it must be concluded that the Applicant could have been usefully employed for the eight working days from 1 July - 10 July 2020.
[65] The Applicant has said (and the Respondent did not refute) that employees were undertaking work on the SMT project in their own time because they recognised some ulterior benefit of further development of that product. The Respondent agreed that those employees had been offered some profit share for the unpaid work they undertook but said that the employees wanted to undertake that work. On the basis of the evidence before me it is not possible to conclude that the Respondent required the work on SMT Camera to be undertaken and in this respect my conclusion with respect to whether, and for what period, the Applicant could be usefully employed does not change.
[66] The Applicant also suggested that the Respondent had employed two consultants in the period he was stood down. On this matter I accept the submissions of the Respondent that neither of these consultants were employed during the period the Applicant was stood down.
[67] The Applicant did not otherwise provide any evidence of work that he could have undertaken for the Respondent beyond broad assertions. These do not allow me to conclude other than I have.
Fairness
[68] In resolving a dispute in relation to the operation of s.524 of the FW Act the Commission is required to take into account fairness between the parties concerned.
[69] In this case I am satisfied that, given the Applicant could only have completed eight working days on the new project on which Dimitri worked if he returned and that the Respondent would then have had to replace him, and in circumstances where the Respondent knew at that time the new project commenced that the Applicant was to finish his employment on 10 July 2020, fairness tilts the resolution of this matter in the favour of the Respondent.
[70] I consider it would have been onerous for the Respondent, knowing that the Applicant was about to finish his employment, to have returned the Applicant to work. It was known that the Applicant would, almost immediately on his return, have to be replaced. The Applicant would have barely come up to speed on the new project in such a short period of time. The burden imposed on the Respondent in such circumstances cannot be ignored.
[71] I am mindful that issues of fairness also should be considered for the Applicant in this case. He was stood down and was without income from his employer for a lengthy period of time and the effect of the stand down on him should also be taken into account.
[72] I have carefully balanced the effect of the stand down on the Applicant against the burden that would be imposed on the Respondent in bringing the Applicant back to work for eight working days. In circumstances where the Commission’s power extends to determining if the stand down occurred in accordance with the FW Act and where the Commission’s power does not extend to ordering any payments, I consider that, in all of the circumstances, issues of fairness tell against the granting of the application.
[73] In reaching my conclusion I have not considered whether it was unreasonable that the Respondent did not apply for JobKeeper payments. I do not have any evidence that would allow me to draw any conclusion on this matter and no evidence in relation to the matter was provided.
[74] I should mention that I do not consider it any great concession of the Respondent to not have required the Applicant to “work” out his full notice period. The Applicant was stood down and was not undertaking any work for the Respondent. A true concession of the Respondent would have been to allow the Applicant to leave without being required to serve the notice period under his contract.
CONCLUSION
[75] In this case I am satisfied:
• that there was a stoppage of work;
• the employer could not reasonably be held responsible for the cause of the stoppage;
• the Applicant could have been usefully employed during the eight working days prior to his resignation from employment taking effect.
[76] In all of the circumstances however I have decided not to determine that the stand down notice be withdrawn. In balancing all of the issues and considering matters of fairness as outlined above, I consider this outcome to be balanced.
[77] I therefore dismiss the application.
COMMISSIONER
Appearances:
Mr C.Y. Lai appearing on his own behalf.
Mr B. Voigt appearing for the Respondent.
Hearing details:
2020.
Melbourne by video.
October 6.
Printed by authority of the Commonwealth Government Printer
<PR724303>
Endnotes:
1 [2020] FWC 5180.
2 Ibid at [37].
3 [2008] AIRC 135.
4 [2016] FWC 8515.
5 [2016] FWC 8515 at [62].
6 [2020] FWC 2721.
7 [2020] FWC 4129.
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