Stand-Down vs Termination — Which One Applies?

In Simple TermsIf you can’t open the kitchen because the gas has been cut off, that’s probably stand-down. If business is just slow and you don’t need staff this week, that’s not stand-down — you either have to keep paying them, agree on reduced hours, or make the role redundant.

When Can You Stand Down Employees in Australia?

An employer can only stand down employees under section 524 of the Fair Work Act where the employees cannot be usefully employed due to industrial action, equipment breakdown, or a stoppage of work outside the employer’s control — not because business is slow.

The three section 524 grounds are exhaustive. If the cause of the stoppage falls outside those three categories, stand-down is not available, and the employer must use one of the alternatives covered later in this post (paid hours, reduced hours by agreement, directing accrued leave, redundancy, or termination on notice).

What Stand-Down Actually Is

Stand-down under section 524 of the Fair Work Act 2009 (Cth) is a temporary direction by an employer that an employee not attend work and not be paid, in circumstances where the employee cannot be usefully employed because of a specific cause set out in the section. The employment relationship continues during the stand-down period — the employee remains employed, accrues leave, and is expected to return when the stoppage ends.

Section 524(1) authorises stand-down only in three specific circumstances:

1. Industrial action — other than industrial action organised or engaged in by the employer
2. A breakdown of machinery or equipment — if the employer cannot reasonably be held responsible for the breakdown
3. A stoppage of work for any cause for which the employer cannot reasonably be held responsible

The third ground is the broadest and the most contested. It covers events like floods, fires, severe weather, mandatory government closure orders (such as those during the COVID-19 pandemic), and other force majeure-style stoppages. It does not cover business circumstances within the employer’s control or commercial judgement, including a downturn in customers, a loss of a major contract, or seasonal slowness.

The “Cannot Be Usefully Employed” Test

Even where one of the three section 524 causes exists, stand-down only applies where the employee “cannot be usefully employed” in the circumstances. This is a question of fact decided on a case-by-case basis.

Examples from Fair Work Commission decisions illustrate the threshold:

• If a kitchen fire closes the kitchen but the front-of-house remains operational, only the kitchen staff cannot be usefully employed — FOH staff cannot be stood down
• If a power outage prevents service but back-of-house cleaning and prep work could still be done, the employees cannot be stood down for those tasks they could perform
• If alternative duties are available (delivery service when sit-down dining is suspended, for example), the employees cannot be stood down for the period they could have been deployed to those alternative duties

The duty falls on the employer to consider whether useful work is available before invoking the section. Standing down a head chef when the kitchen is closed but offering them ordering and admin work would, if accepted, defeat the stand-down basis. Standing them down without considering alternatives is the kind of arrangement that gets reversed in the Fair Work Commission.

Why a Downturn Doesn’t Qualify

The Fair Work Ombudsman’s position on this is clear: employees cannot be stood down just because there is not enough work. A drop in revenue, a quiet trading week, or even a sustained downturn in business is not a section 524 cause — it is the ordinary commercial risk of operating a business.

Federal Court and Fair Work Commission decisions have consistently distinguished between a “stoppage of work” (something that prevents work from being performed at all) and “less than ideal business circumstances” (lower revenue with which to pay staff, but the business itself is operational). Section 524 applies to the former, not the latter.

For pubs and restaurants experiencing a downturn, the lawful options are:

• Pay employees for their contracted hours (the default obligation)
• Negotiate a written reduction in hours by mutual agreement (a contract variation)
• Direct the employee to take accrued annual leave (within the Award/NES limits — see annual leave rules)
• Make positions redundant under section 389 (genuine redundancy with redundancy pay)
• Terminate by giving notice and paying out entitlements (where the position remains but the role is unviable to fund)

Suspension During Investigation Is Not Stand-Down

The Fair Work Commission’s decision in Manthos v Dental Health Services Victoria [2013] FWC 6218 made clear that section 524 does not apply to suspension pending a misconduct investigation. The case concerned an employee who was “stood down” while an investigation into Code of Conduct breaches was conducted. The Commission found that the employer had not actually invoked section 524 (the language was withdrawn), and that the section is not the appropriate framework for disciplinary suspension.

Suspension during a misconduct investigation must be authorised by the employment contract or enterprise agreement. If the contract is silent and the employer suspends the employee, the general legal position (subject to specific facts) is that the employee remains entitled to be paid during the suspension period — the employer is electing not to use the employee’s services, not facing a stoppage.

This distinction matters because:

• Calling a suspension a “stand-down” doesn’t make it one — the employee may still be entitled to pay
• The Fair Work Commission will look at the substance, not the label
• A misclassified suspension can become an unauthorised deduction from wages, breaching section 323

What Stand-Down vs Termination Look Like — Side by Side

Pay, Leave & Accruals During Stand-Down

Under section 524, the employer is not required to make payments to the employee for the stand-down period. However, several other obligations continue:

• Leave accruals generally continue — the stand-down period typically counts as service, so annual leave and personal/carer’s leave generally continue to accrue during the stand-down. The precise accrual position can depend on the circumstances and applicable industrial instrument
• Service continues — the stand-down period counts as service for purposes including notice of termination, redundancy pay calculation, long service leave, and the unfair dismissal Minimum Employment Period
• Section 525 — Authorised leave during stand-down — an employee is not stood down during a period when they are taking authorised paid or unpaid leave. An employee may apply to take accrued annual leave during what would otherwise be a stand-down period to receive paid leave income
• No personal/carer’s leave during stand-down — an employee who has been stood down cannot use paid sick or carer’s leave for the days they have been directed not to work, because they are not required to work those days in the first place
• Restrictions on outside work depend on the contract — the employee remains employed and may be restricted from working elsewhere depending on their employment contract and duties (e.g. conflict of interest or exclusivity clauses). There is no universal prohibition on outside work during stand-down, but the contract terms apply
• Superannuation — super is generally not payable on stand-down periods because there are no ordinary time earnings during the stand-down

The s526 Dispute Process at the Fair Work Commission

Under section 526 of the Fair Work Act, an employee or their union may apply to the Fair Work Commission to deal with a dispute about whether the employer was lawfully entitled to stand down the employee under section 524. The Commission’s role:

• Conciliation, mediation, recommendation, expression of opinion
• Arbitration (if all parties agree)
• Issuing a determination on whether the section 524 power was correctly invoked

Section 526(4) requires the Commission to consider fairness between the parties when dealing with the dispute, alongside the legal framework. The Commission has weighed the fairness consideration in cases where the employer has the financial capacity to provide paid leave entitlements but has chosen not to.

Important limitation: the FWC generally cannot order back-pay for an unlawful stand-down under section 526 — back-pay claims are typically pursued through the Federal Court or Federal Circuit and Family Court of Australia. But an FWC finding that a stand-down was not authorised under section 524 paves the way for a Federal Court underpayment claim under sections 323 and 545.

Contracts and Enterprise Agreements Override the Default

Section 524 is the default statutory stand-down power. But section 524(2) makes clear that where an employment contract or an enterprise agreement contains a stand-down provision, that provision takes priority, and section 524 does not apply to the same circumstances. Many modern employment contracts and EAs include broader stand-down rights (subject to consultation, notice, or other conditions).

For a hospitality operator considering stand-down, the first step is always to check:

1. The employment contract — does it contain a stand-down clause? What does it permit and require?
2. Any enterprise agreement — is there one in force, and does it have its own stand-down provisions?
3. The applicable Award — modern awards generally do not contain stand-down clauses, but check the specific Award (MA000009 or MA000119 do not have separate stand-down clauses)
4. If none of the above provides a stand-down right, section 524 is the only available power

Contractual stand-down clauses commonly include consultation requirements, notice periods (typically 24-72 hours), the option for the employee to take paid leave instead, and review/end-date provisions. These are operational protections for the employee that the bare s524 power does not require.

The Stand-Down Decision Tree

If you’re considering stand-down, work through these questions in order:

1. Is the trigger an actual stoppage of work? Not a downturn or commercial pressure — an event that prevents work from being performed at all (kitchen fire, flood, government closure order, equipment failure, industrial action). If no — stand-down is not available; consider reduced hours by agreement or termination
2. Is the cause something the employer cannot reasonably be held responsible for? A breakdown caused by failure to maintain equipment is the employer’s responsibility; a breakdown caused by a manufacturing defect or supplier failure may not be. If the cause is within the employer’s control — stand-down is not available
3. Can any of the affected employees be usefully employed in some capacity? Cleaning, ordering, training, prep work, alternative service modes, deep cleaning of the venue while reopening preparations are made. If yes — stand-down is not available for those employees for those periods
4. Does the employment contract or EA address stand-down? If yes — follow that framework instead of relying on s524
5. Is the stoppage genuinely temporary? If the cause is permanent (a kitchen damaged beyond economic repair, for example), the right framework is redundancy under section 389, not indefinite stand-down
6. Have you consulted the affected employees? Even where s524 applies, fairness principles favour consultation about timing, duration, and alternatives. Lack of consultation can be a factor in a s526 dispute
7. Have you communicated the stand-down in writing? Section 524 doesn’t require written notice, but a written notice stating the cause, the start date, the expected duration, and the employee’s right to take accrued leave is best practice and often required by contracts

If the Trigger Doesn’t Qualify — Alternatives

For pubs and restaurants where stand-down is not legally available (the most common situation — quiet trade), the alternatives are:

Reduced Hours by Agreement

Agree in writing with affected employees to a temporary reduction in hours. The employee retains employment, retains accruals on the reduced hours, and is paid for the reduced hours. The agreement should specify the new hours, the period of reduction, and the date of return to original hours. This is a contract variation requiring the employee’s consent — they cannot be required to accept it.

Annual Leave Direction (Limited)

Where a permanent employee has an excessive leave balance, the employer can direct them to take leave with appropriate notice. See the annual leave guide for the framework.

Genuine Redundancy

If the position no longer exists because of a permanent change in operational requirements, the role can be made redundant under section 389. This triggers redundancy pay under sections 119-123 of the NES. Genuine redundancy is a defence to unfair dismissal under section 385(d).

Termination on Notice

Where redundancy doesn’t apply but the position cannot be sustained, termination on notice (with the appropriate notice period under s117 and the Award’s clause 35 of MA000119 or clause 41 of MA000009) is available. Notice periods are typically 1-5 weeks depending on length of service plus an additional week for employees over 45 with more than 2 years’ service.

For more on termination procedures, see the probation termination guide and the warning before firing guide.

Common Stand-Down Mistakes in Hospitality

• Standing down because business is quiet — not a section 524 cause. The Fair Work Ombudsman’s position is unequivocal: a downturn doesn’t justify stand-down
• Standing down all staff when only a function is affected — if the kitchen is closed but the bar is operational, bar staff cannot be stood down. Each employee’s situation is assessed individually
• Failing to consider alternative duties — the “cannot be usefully employed” test requires considering whether other useful work is available. Skipping this consideration creates dispute exposure
• Calling a suspension a stand-down — suspension during a misconduct investigation is not section 524. The label doesn’t change the substance, and the employee may still be entitled to be paid
• No written notice or consultation — while s524 doesn’t mandate either, contractual stand-down provisions typically do, and the absence creates exposure in a s526 dispute
• Indefinite stand-down for an effectively permanent stoppage — if the cause is permanent, the situation is a redundancy, not a stand-down. Indefinite stand-down is challengeable in the FWC under fairness principles
• Not using the employee’s accrued leave option — under section 525, the employee can elect to take accrued leave during stand-down. Failing to inform them of this option (or refusing it) is poor practice and generates grievances
• Treating stand-down as a termination — the employment continues. Stopping leave accruals, ceasing to count service, or refusing to allow return is treating it as a termination, which exposes the employer to unfair dismissal claims if the employee was, in substance, terminated

Related Termination & Compliance Guides

Frequently Asked Questions

Stand-down decisions made in haste are reversible only at substantial cost — back-pay claims, unfair dismissal claims, FWC disputes. Confirm the s524 grounds, consider alternatives, and document the decision before issuing the direction.