Published 9 April 2020
On Tuesday, we published our Covid-19 Update: JobKeeper Payment – What we know so far newsletter. Yesterday, 8 April 2020, parliament sat in a special session to pass the Coronavirus Economic Response Package (Payments and Benefits) Bill 2020 and the Coronavirus Economic Response Package Omnibus (Measures No. 2) Bill 2020. The bills include the framework under which payments will be made and administered by the Commissioner of Taxation (the Commissioner), but also included a number of amendments to the Fair Work Act 2009 (Cth) to support this framework. Both of these elements will be discussed in detail below.
Key Takeaways for Employers
Key Takeaways – Payment Framework:
- Payments may only be made by the Commissioner and must relate to the period between 1 March 2020 and 31 December 2020.
- The Rules regarding the eligibility, amount, timing and obligations for the payment have yet to be determined by the Treasurer.
- Critically, the mechanism for proving eligibility has not yet been established, as parliament has delegated this function to the Treasurer. This will leave some employers in doubt as to their eligibility until more information is provided, and employers should remain cautious of making firm agreements with or promises to employees until this information is provided.
- Any overpayments must be repaid to the Commissioner. Other entities, including employees, may be held jointly and severally liable for any overpayments.
- Employers are to create and retain records both before, during and after payments.
- Rules will be put into place to avoid businesses modifying their business arrangements for the sole or dominant purpose of obtaining the payment. These arrangements will not need to be criminal or fraudulent in nature to attract sanctions under the scheme.
Key Takeaways – Amendments to Fair Work Act 2009 (Cth)
- Eligible employers must ensure that eligible employees are paid at least the amount of the JobKeeper payment.
- Eligible employers can give to employees stand down directions.
- Eligible employers must guarantee to employees that have been stood down, their hourly rate of pay that they would have received if they had not been stood down.
- Eligible employers can direct eligible employees to perform other duties within their skills and competency.
- Eligible employers can direct eligible employees to perform duties at a different place from their normal place of work.
- Eligible employers and employees can enter into a written agreement to change the employees’ days and times of work.
- Eligible employers can direct eligible employees to take annual leave, and eligible employers and employees can agree for eligible employees’ to take annual leave at half pay to double the leave period.
- Eligible employees can request to undertake secondary employment or training.
- Before implementing any JobKeeper direction, eligible employees must comply with strict consultations requirements.
- During any JobKeeper direction period, employees’ service continues, and they continue to accrue leave entitlements.
- JobKeeper directions will cease to have effect from 28 September 2020.
Under the JobKeeper Payment, businesses significantly impacted by the Coronavirus pandemic will be able to access a subsidy from the Government to continue paying their employees. The Government will provide $1,500 per fortnight per employee for up to six months.
The Coronavirus Economic Response Package (Payments and Benefits) Bill 2020 (the Bill), approved by both houses, establishes a framework for the Treasurer to make rules to provide for Coronavirus economic response payments to be made to eligible entities by the Commissioner. Under the framework, the Commissioner has general administration of payments established under the rules made by the Treasurer. Any payments must relate to the period from 1 March 2020 until 31 December 2020 (inclusive). Payments can only be made prospectively after the commencement of both the Bill and the rules providing for the payment.
The framework also sets out:
- the payment method (Clause 8 of the Bill);
- rules for overpayments (Clauses 9 to 11 of the Bill);
- the review of decisions made by the Commissioner (Clauses 12 and 13 of the Bill); and
- the record keeping requirements (Clauses 14 to 18 of the Bill).
Rules will be made by the Treasurer to establish the JobKeeper Payment, including details of eligibility of employers and employee benefiting from the payments as well as the amount and timing of payments and the obligations on recipients of the payments (Clause 7 of the Bill).
The Commissioner will make payment to the financial institution account nominated by the entity under the Taxation Administration Act 1953 (Cth), that is generally the account where tax refunds are received. If no such account has been nominated, payments will be made to the account nominated in the entity’s most recent income tax return. The Commissioner can also direct that payment will be made to an entity in another way. If an account has not been nominated, the Commissioner is not obliged to make the payment until the entity does so, or the Commissioner directs the payment to be made in another way.
Rules for Overpayments
If the Commissioner has overpaid an entity (i.e. if the entity was not entitled to the whole or part of the payment or if the entity was paid more than the correct amount), the entity must repay the overpaid amount to the Commissioner. The Bill also provides that in some circumstances, another entity (such as an employee) may be jointly and severally liable for an overpayment (and any associated interest) with the entity that received the payment. This would be the case if the employee provides false or misleading information to the employer or if the employee made a careless statement to the employer.
These provisions allow the Commissioner to recover amounts obtained as a result of fraud. Entities that engage in fraud about payments would also be liable for a broader range of administrative and criminal sanctions under the tax law and general criminal law.
Review of the Decisions Made by the Commissioner
An entity who is dissatisfied with a decision made by the Commissioner under the framework may object against the decision in the manner set out in Part IVC of the Taxation Administration Act 1953 (Cth).
Record Keeping Requirements
The Bill requires that entities create and retain records and provide the records to the Commissioner in relation to payments unless the Commissioner provides otherwise. There are record keeping requirements prior to payment and post-payment. The Commissioner may make determinations on how records should be kept for the purposes of the obligation on an entity to retain records under the rules. All records must be kept for five years after the payment was made. If an entity does not satisfy both the pre-payment and the post-payment record keeping, the entity will not be entitled to the payment, even though the entity has complied with all other requirements.
Contrived Schemes and Consequences
The Bill also provides provisions allowing the Commissioner to make determinations in case one or more entities enter into or carry out an arrangement for the sole or dominant purpose of obtaining payment or an increased amount of a payment for an entity. The arrangement does not need to be criminal in nature. The Explanatory Memorandum illustrates that for example, the Commissioner could make a determination to deny payment to an entity if the entity has deliberately modified its business arrangements to reduce its turnover in order to allow the entity to meet the turnover requirements to receive the payment.
Rules Under the Framework
As mentioned above, the rules to establish the JobKeeper payment will be made by the Treasurer. The Explanatory Memorandum states that this will allow the framework to be modified and updated so that the payments respond appropriately to rapidly changing circumstances. According to the Explanatory Memorandum, the use of rules rather than regulations to reinforce flexibility and responsiveness, and this is necessary to effectively address the impacts of the Coronavirus in a situation of significant uncertainty.
Therefore, we reiterate our concerns about the eligibility requirements set out in our newsletter ‘Covid-19 Update: JobKeeper Payment – What we know so far’. Employers should wait for the rules made by the Treasurer before making any agreements with employees relating to the JobKeeper Payment.
Amendments to the Fair Work Act 2009 (Cth)
The Coronavirus Economic Response Package Omnibus (Measures No. 2) Bill 2020 makes temporary changes and inserts a temporary Part 6-4C – Coronavirus Economic Response into the Fair Work Act 2009 (Cth) (the FW Act). The purpose of the new Part 6-4C is to assist those employers who meet the eligibility criteria of the JobKeeper scheme to deal with the impact caused by COVID-19.
Below is a summary of the key amendments:
Minimum Payment Guarantee
An employer must ensure that an eligible employee is paid at least the JobKeeper payment, or if greater, the amount payable to an employee for the work they complete in the fortnight, including any incentive-based payments and bonuses, loadings, monetary allowances, overtime or penalty rates or leave payments.
For example, if an eligible employee has been stood down or is working hours so that their wage would be less than the JobKeeper Payment, the employer must ensure that the employee is paid the total amount of the JobKeeper Payment. However, if an employee is working hours so that their wage for the fortnight is more than the JobKeeper Payment, the employer is required to pay them for their actual hours worked, even if it is more than the JobKeeper Payment. This obligation will also extend to the ‘Wage Condition’ which will be defined by the Treasurer, and include the typical employer obligations relating to superannuation guarantee and tax withholding.
Hourly Rate of Pay Guarantee
If an employee has been directed to stand down – their base rate of pay is not to be less than what they would have received if not stood down.
If an employee is directed to perform other duties that are within the employees skill and competency – the employee is to be paid the greater of their normal base rate of pay or the base rate of pay applicable for the new duties they have been directed to perform.
Critically, the Minimum Pay Guarantee, the Wage Condition, and the Hourly Rate of Pay Guarantee are all civil penalty provisions. The maximum penalty for a breach of these obligation is 60 penalty units for an individual and 300 penalty units for a body corporate.
JobKeeper Enabling Stand Down
If an employee cannot be usefully employed due to changes caused by COVID-19 or government initiatives in response to COVID-19, an eligible employer is able to direct an eligible employee to:
- not work on a day or days they would normally work;
- work for a lesser period than the period they would normally work; or
- work less hours then the employee would normally work, including reducing their hours to zero
However, a direction to stand down does not apply if the employee is on paid or unpaid leave or is otherwise authorised to be absent from work.
For example, an eligible employer is able to direct an employee to work half of their ordinary hours, not to work on certain days, or to stand down an employee to zero hours.
Duties of Work
An eligible employer is able to direct an eligible employee to perform duties other than their normal duties, if those duties are:
- within the eligible employee’s skill and competency;
- safe, including in regard to the nature and spread of COVID-19;
- the employee has the required licence or qualification for the duties; and
- reasonably within the scope of the operation of the business;
For example, a forklift driver in a factory who is eligible for the JobKeeper payment may be directed by their eligible employer to undertake general data entry duties from home if the forklift driver has computer literacy skills. However, the eligible employer is unable to direct their eligible administration employees to undertake forklift duties if they are not licenced to do so.
Location of Work
An eligible employer is able direct an employee to perform duties at a place different to their normal place of work, including the eligible employee’s home, if:
- the place is suitable to complete the duties; and
- the distance the eligible employee is required to travel is not unreasonable in all circumstances, including COVID-19.
For example, an eligible employer will be able to direct an eligible employee to work at another office or place of work that does not require the employee to travel any further than they would normally travel. However, as an extreme example, an eligible employer will not be able to direct an eligible employee to travel eight hours to work at another worksite.
Days of Work
An eligible employee is able to enter into a written agreement with an eligible employee to change the days and times that an employee normally works if:
- it is safe for the employee to work on those days;
- it is reasonably within the scope of the operations of the business; and
- there is no reduction in the number of hours normally worked by the eligible employees.
An eligible employee must consider any request to change hours made by an eligible employer. The eligible employee must not unreasonably refuse any request.
For example, an eligible employer can request that an eligible employee who currently works Mondays and Tuesdays to change their days of work to Mondays and Wednesdays. The eligible employee cannot unreasonably refuse this request. If agreed to, the eligible employer and employee must enter into a written agreement regarding the change.
Paid Annual Leave
An eligible employer can request an employee take paid annual leave as long as the eligible employee retains a balance of at least two weeks annual leave.
An eligible employee must consider any request and not unreasonably refuse any request.
Eligible employers and eligible employees are able to agree in writing to take twice as much leave paid at half the eligible employee’s rate of pay.
For example, an eligible employer is able to request that an eligible employee who has accrued six weeks leave to take four weeks annual leave. The eligible employer is not able to ask the eligible employee to take all of their accrued leave. The eligible employer and employee can agree that the eligible employee will take the four weeks annual leave as eight weeks at half pay.
When determining whether a request under the new provisions of Part 6-4C is reasonable, all the circumstances will need to be considered. This includes any caring responsibilities that the eligible employee may have.
Continuing Employment of Employees
Before making any direction, an eligible employer must have evidence to show that the direction was necessary in order to continue to employ one or more employees.
Before implementing any JobKeeper direction an eligible employer is required to:
- provide written notice of the intention to give the JobKeeper direction to eligible employees. A prescribed form of this notice may be set by the Regulations;
- the written notice is to be provided at least three days before the giving of the direction, unless genuinely agreed to by the employee; and
- consult with the employee or their representative about the direction.
This section does not apply if an eligible employer has previously complied with the consultation requirements, the eligible employees or their representatives expressed their views about the direction, and these were considered by the eligible employer. The eligible employer is required to keep a written record of all consultations.
Form of Direction
Any JobKeeper direction to eligible employees is to be made in writing. The Regulations may create a prescribed form for such directions.
Duration of JobKeeper Direction
Unless revoked before or subject to an order by the Fair Work Commission, all JobKeeper directions will cease to have effect from 28 September 2020.
An employee’s service to a business continues during any Jobkeeper direction period. Meaning that any period of a JobKeeper direction will be counted for example when calculating notice for termination, redundancy payments and eligibility for parental leave.
During any JobKeeper direction period, an eligible employee will continue to accrue leave entitlements as they would normally.
Any redundancy pay or payment in lieu of notice of termination is to be paid as if the direction had not been given.
Requests for Secondary Employment or Training
An eligible employee is able to request to undertake:
- secondary employment
- training; or
- professional development
An eligible employer must consider any such request and must not unreasonably refuse a request.
This is a civil penalty provision. The maximum penalty for a breach of this obligation is 60 penalty units for an individual and 300 penalty units for a body corporate.
Dealing with Disputes
The Fair Work Commission has the power to deal with disputes arising under Part 6-4C.
Misuse of JobKeeper Enabling Direction
An eligible employer must not make a JobKeeper direction that is not authorised by Part 6-4C and the eligible employer knows that it is not an authorised JobKeeper direction.
This is also a civil penalty provision. The maximum penalties are 600 penalty units for an individual or 3,000 penalty units for a body corporate.
Review of Part 6-4C
An independent review of the operation of Part 6-4C must start on or before 28 July 2020, of a later date if provided for in the Regulations. The written report of the review must be provided to the Minister by 8 September 2020, unless otherwise provided for in the Regulations.
There a still many unknown details, but the executive now have been empowered to commence work supplying the details.
We will provide further updates as and when we know more.
Any enquiries in relation to this legislation should be directed to email@example.com or on 02 8436 2500.