Can You Stand Down Employees During Supply Disruptions?

Priya runs a small food manufacturing business in Melbourne. One Monday morning, her main packaging supplier tells her a shipment has been delayed at port and there won't be enough materials to run the production line for at least a week.

Her team is ready to work, wages are due, and customer orders are piling up. Priya's first thought is a practical one: can she stand staff down until the materials arrive?

Supply shortages, site closures and equipment failures can put you in a difficult spot very quickly. Australian workplace laws do allow stand downs in some situations, but only if the legal test is met and you've handled the process properly.

Can You Stand Down Employees During A Supply Disruption?

Yes, you can sometimes stand down employees during a supply disruption, but only if they can't be usefully employed because of a stoppage of work that your business can't reasonably be held responsible for.

The main rule sits in section 524 of the Fair Work Act 2009. It allows you to stand an employee down without pay in limited circumstances, including where there is:

• industrial action, other than industrial action organised by your business
• a breakdown of machinery or equipment, if you can't reasonably be held responsible for the breakdown
• a stoppage of work for any cause that you can't reasonably be held responsible for

For supply disruptions, you're usually looking at the third category: a stoppage of work for a cause outside your reasonable control. In some equipment failure cases, the machinery or equipment breakdown category may also be relevant.

This doesn't mean every shortage gives you a right to stand staff down. The disruption needs to stop work, not just make the business slower, less profitable or harder to manage.

For example, if a cafe runs out of its usual coffee beans but can buy alternative beans locally, keep serving food, clean the premises, take bookings and do stocktake, a full stand down may be hard to justify. But if a manufacturer has no safe or lawful way to operate a production line because an essential imported component is unavailable, a stand down may be more realistic.

What Counts As A Stoppage Of Work?

A stoppage of work means work has genuinely stopped, not just reduced or become inconvenient.

This is where many stand down decisions go wrong. You need to look closely at what part of your business has stopped, why it stopped, and whether that stoppage is connected to the employees you want to stand down.

A stoppage of work could include situations like:

• a warehouse closing because a flood has made the site unsafe
• a factory line stopping because a critical machine has broken down
• a construction site closing because materials can't be delivered and no other work can safely continue
• a restaurant closing temporarily because a council direction or utilities failure means it can't operate
• a distribution business pausing shifts because a port delay means there's no stock to receive, pack or dispatch

On the other hand, these situations may not be enough on their own:

• sales are lower than expected
• you have too many staff rostered for the level of demand
• your supplier is late, but there's still other work available
• you chose not to order stock early enough
• cash flow is tight and payroll is difficult to manage

The cause matters too. The Fair Work Act test asks whether your business can reasonably be held responsible for the stoppage.

If a disruption is caused by a sudden global shipping issue, an unexpected government closure, a natural disaster or a third-party equipment fault you couldn't have prevented, that may support a lawful stand down. If the disruption comes from poor planning, under-ordering, missed maintenance or a commercial dispute you could have managed, the position is much riskier.

When Are Employees Unable To Be Usefully Employed?

An employee is unable to be usefully employed only if there's no useful work they can reasonably do during the disruption.

This is a practical test. Before standing anyone down, ask yourself whether there's other meaningful work available within their skills, role, location and employment terms.

Useful work might include:

• safe cleaning, maintenance or stocktake tasks
• online training that benefits the business
• admin work, customer calls or order updates
• helping another team or site, if their contract allows it and it's reasonable
• preparing marketing materials, procedures or systems
• packing, dispatch or customer service work if stock is still available

The work doesn't need to be the employee's usual job. But it does need to be genuinely useful to your business. You also need to consider whether the employee is qualified, trained and physically able to do it safely.

Example: A Partial Supply Shortage

Say you run a bakery in Brisbane and your flour delivery is delayed for two days. Your bakers can't make the usual product range, but they can prepare fillings, clean equipment, help with customer orders and make items that use other ingredients.

In that case, standing everyone down for two days may be difficult to justify because there's still useful work available.

Now change the facts. A serious equipment failure shuts down the only oven, a technician confirms it can't be used safely, and there's no other productive work for the baking team after reasonable checks. A temporary stand down for the affected employees may be more likely to meet the test, assuming the breakdown wasn't caused by your failure to maintain the equipment.

Do You Have To Pay Employees During A Stand Down?

No, you generally don't have to pay wages for the period of a lawful stand down under the Fair Work Act.

That said, a stand down isn't the same as ending employment. Your employees remain employed, and you still need to meet your other obligations.

During a stand down, you should think about:

• Work already performed: you must pay employees for any work they have already done.
• Paid leave: employees may ask to take accrued annual leave or long service leave, and you can usually agree if the leave is available.
• Directing leave: you generally need a legal basis under an award, enterprise agreement, contract or the National Employment Standards to direct an employee to take leave, and the direction needs to be reasonable.
• Public holidays: employees stood down without pay under the Fair Work Act are generally entitled to be paid for a public holiday that falls during the stand down if they would normally have ordinary hours on that day. Check the employee's award, enterprise agreement and contract before making a decision.
• Leave accrual and service: a lawful stand down under the Fair Work Act generally doesn't break continuous service, and Fair Work guidance treats leave as continuing to accrue during this kind of stand down.

If your business has an enterprise agreement, modern award or employment contract with its own stand down rules, those rules may change the process or entitlements. Always check those documents before relying on the Fair Work Act default position.

For casual employees, be especially careful. If a casual hasn't accepted a future shift, you may simply have no work to offer. But if a shift has already been accepted or the casual has a regular pattern of work, cancelling shifts without checking the award, contract and rostering rules can create problems.

What Process Should You Follow Before Standing Employees Down?

You should follow a clear, documented process before standing employees down, even though the Fair Work Act doesn't set a fixed notice period for every stand down.

In practice, a careful process helps you show that the stand down was lawful and reasonable. It also helps your team understand what is happening, which can make a stressful period much easier to manage.

Step 1: Identify The Cause

Write down exactly what has happened and why work has stopped. Keep evidence such as supplier emails, delivery notices, repair reports, closure directions, safety assessments or photos of the affected site.

You're trying to answer two questions:

• has work actually stopped?
• is the cause something your business can't reasonably be held responsible for?

Step 2: Check Employment Documents

Before making a decision, check each employee's:

• employment contract
• applicable modern award
• enterprise agreement, if one applies
• workplace policies
• roster and accepted shifts

Some awards and agreements include consultation obligations, especially where there are major workplace changes or changes to rosters and ordinary hours. If you skip consultation where it applies, an otherwise sensible decision can become exposed.

Step 3: Look For Useful Work

Check whether there's other work available before standing anyone down. This should be more than a quick thought. Look at other sites, teams, tasks, training and admin work.

If you decide there's no useful work, make a short written note explaining why. This can be valuable if the decision is questioned later.

Step 4: Communicate In Writing

Give employees written notice of the stand down as soon as you can. Your notice should explain:

• the reason for the stand down
• when the stand down starts
• who is affected
• whether the stand down is unpaid
• whether paid leave can be requested
• how you'll keep employees updated
• who they can contact with questions

Plain English is best. You don't need a long legal letter, but you do need the message to be clear.

Step 5: Review The Stand Down Regularly

A stand down should only last while the legal basis continues. If stock arrives, equipment is fixed or other useful work becomes available, you need to reassess the position.

Set calendar reminders to review the situation. Keep employees updated, even if the update is simply that nothing has changed yet and you're waiting on a confirmed delivery date.

What Are Your Options If The Disruption Keeps Going?

It depends on how long the disruption is likely to last and whether the work will return.

Stand down is usually a temporary tool. If the disruption keeps going, you may need to consider other lawful options.

Depending on your circumstances, options may include:

• Temporary redeployment: temporarily transferring employees to other useful work if their contract allows it and the change is reasonable.
• Agreed reduction in hours: asking employees to agree to temporary reduced hours, confirmed in writing.
• Paid annual leave: allowing employees to use accrued leave during the disruption.
• Unpaid leave by agreement: agreeing to unpaid leave where that suits both sides.
• Changing rosters: using rostering flexibility under an award, agreement or contract, while giving any required notice.
• Redundancy: if the role is no longer required on an ongoing basis, you may need to consider a proper redundancy process instead of continuing a stand down.

Redundancy is a different legal pathway. It usually involves consultation, notice, final pay and potentially redundancy pay under the National Employment Standards, depending on the size of your business and the employee's service. Don't treat redundancy as an informal extension of a stand down.

If you're looking at changing hours, duties or work locations, get the employee's agreement where needed. A stand down doesn't give you a general right to rewrite the employment contract.

Common Mistakes To Avoid

The biggest mistake is using stand down as a payroll fix when the legal test hasn't been met.

Here are the issues we commonly see employers run into:

• Standing employees down when work has only slowed: a quieter week isn't the same as a stoppage of work.
• Forgetting to check for other useful work: if there were reasonable tasks available, the stand down may be challenged.
• Relying on a disruption you caused: poor maintenance, late ordering or avoidable supplier issues can weaken your position.
• Ignoring awards or enterprise agreements: these may include stand down, consultation, rostering or leave rules.
• Not putting the decision in writing: without a clear paper trail, you may struggle to show why the stand down was lawful.
• Standing down some employees unfairly: if only some employees are affected, make sure your selection is based on the work stoppage, not personal characteristics, complaints, leave requests or other protected reasons.
• Letting the stand down drift: you need to keep checking whether the stoppage still exists and whether useful work has become available.

If an employee disputes the stand down, the Fair Work Commission can deal with stand down disputes under the Fair Work Act. A finding that the stand down wasn't lawful can lead to back pay and other consequences, so it's worth getting the decision right before you act.

Key Takeaways

• You can only stand employees down without pay in limited situations, including a genuine stoppage of work outside your reasonable control.
• A supply disruption isn't enough by itself. Work needs to have stopped, and the affected employees must be unable to be usefully employed.
• Check employment contracts, awards, enterprise agreements and rosters before making a decision.
• Put the stand down in writing, explain the reason clearly and keep employees updated.
• Review the stand down regularly and consider other options if the disruption becomes long term.

If you'd like help with assessing a stand down, preparing employee communications, reviewing your employment contracts and checking your award obligations, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.