Client impact statement: JobKeeper legacy employers

Legislation relating to the extension of the JobKeeper Payment scheme has been introduced into parliament and is expected to pass early September 2020. The extension of the scheme will allow additional assistance to eligible employers from 28 September 2020 through to 28 March 2021.

Included in this legislation are extensions to the relevant Fair Work Act 2009 provisions which allow employers to temporarily vary the working arrangements of employees. These variations are typically called “JobKeeper enabling directions”. The JobKeeper enabling directions include standing down employees, effectively reducing their hours in line with the JobKeeper wage condition (or even down to zero hours). Also, employers and employees can agree on changes to work duties, work locations and working hours. However, employers need to ensure that base and penalty payment rates are retained, as well as allowing employees to get secondary employment or undertake training/education courses.

Extension of Fair Work Act provisions

Amendments to the Fair Work Act 2009 are required in order to align the rules with the changes to the JobKeeper Payment scheme. Effectively, the JobKeeper Payment scheme extension period requires employers to qualify for JobKeeper for each quarter from 28 September 2020, where previously an employer only had to qualify at a point in time.

The change in the JobKeeper qualification rules means that, for the purposes of the Fair Work Act 2009, two broad categories of employer will exist during the extension period:

• Qualifying employers — employers who are eligible for JobKeeper on behalf of their employees both before and after 28 September 2020.
• Legacy employers — employers who were eligible for JobKeeper payments prior to 28 September 2020, but do not qualify on or after this date.

Changes for all employers

Changes were temporarily made to the Fair Work Act 2009 in relation to annual leave in April 2020. These changes meant that employers who qualified for JobKeeper could request that eligible employees take annual leave, so long as at least two weeks remained.

This temporary measure is due to be automatically repealed on 28 September 2020, the end of the original JobKeeper payment period. The changes to the Fair Work Act 2009 do not change the repeal of the annual leave JobKeeper enabling direction. That is, employers will not be able to set a direction for JobKeeper eligible employees to take annual leave during the JobKeeper period.

Qualifying employers

A qualifying employer will need to demonstrate to the ATO that they will continue to qualify for JobKeeper payments. This is in line with their quarterly lodgments and requires them to meet a decline in turnover test (generally 30%). Full details can be found here.

For the JobKeeper extension period, qualifying employers will retain the full range of JobKeeper enabling directions, except for the annual leave direction above.

JobKeeper enabling directions currently in place with employees on 27 September 2020 will automatically carry over from 28 September 2020 if the employer remains eligible to give that direction or make that agreement in those terms. However, the employer is able to revoke any direction given.

Legacy employers

There will be employers who qualified and received original JobKeeper payments between 30 March 2020 and 27 September 2020, who will be ineligible after this date. These employers are known as “legacy employers” for the purposes of the Fair Work Act 2009.

Legacy employers who have a certificate stating that they have experienced a 10% decline in turnover will temporarily have access to modified JobKeeper enabling directions.

10% decline in turnover test

To be eligible for modified JobKeeper enabling directions, the employer must hold an applicable written certificate stating that they satisfy the 10% decline in turnover test. The 10% decline in turnover test has the exact same rules as the JobKeeper Payment Rules. This means that, for the purposes of the Fair Work Act 2009, the test will capture employers with a decline in turnover between 10% and their applicable JobKeeper rate (either 15%, 30% or 50% depending on the entity).

The 10% decline in turnover certificate is required to be completed by an eligible financial service provider. An eligible financial service provider is defined in the Fair Work Act 2009 as a:

• registered tax agent or BAS agent, or
• qualified accountant.

However, a financial service provider cannot be a director, employee or an associated person of the employer.

Certificates

An eligible written certificate is only valid for a set amount of time and needs to be issued before the employer can utilise the modified JobKeeper enabling directions. The eligible 10% decline in turnover certificates relate to the following periods:

• Between 28 September 2020 and 27 October 2020, a legacy employer must have had a 10% decline in turnover in the June 2020 quarter, compared to the June 2019 quarter.
• Between 28 October 2020 and 27 February 2021, a legacy employer must have had a 10% decline in turnover in the September 2020 quarter, compared to the September 2019 quarter.
• Between 28 February 2021 and 28 March 2021, a legacy employer must have had a 10% decline in turnover for the December 2020 quarter, compared to the December 2019 quarter.

The written certificate must relate to a specific employer. Also, the certificate must state that, in the opinion of the financial services provider, the employer satisfied the 10% decline in turnover test for the designated quarter.

For a legacy employer who wishes to use JobKeeper enabling directions for the entire JobKeeper extension period, they will need 3 certificates to be issued.

An original JobKeeper employer who does not satisfy the 10% decline in turnover test for a specific period may still qualify for modified enabling directions in a later period. However, the employer is required to hold a relevant certificate prior to commencing a JobKeeper enabling direction.

If a legacy employer fails to satisfy the necessary tests during the extension period, they must notify their employees that any stand down notice no longer applies. That way, an employee of a legacy employer is notified either way whether any previous change to their employment contract is in effect or has changed. Any change during the extension period will be accompanied by a relevant certificate.

Small business employers and statutory declarations

The Fair Work Act 2009 defines a small business employer broadly as an entity with fewer than 15 employees.

Instead of getting a 10% decline in turnover certificate from their accountant or tax agent, a small business employer can choose to complete a statutory declaration. The statutory declaration must made by an individual who has appropriate knowledge of the financial affairs of the small business employer.

The statutory declaration must state that the declarant is satisfied that the small business employer satisfies the 10% decline in turnover test for the relevant quarter. Like the certificates, the statutory declaration is only valid for a specific period (listed above).

Modified JobKeeper enabling directions

Under the Fair Work Act 2009, JobKeeper enabling directions can only be in effect if the employer is receiving a JobKeeper payment for a particular employee. For legacy employers in the extension period, a modified JobKeeper enabling direction can only be in effect for an employee for whom a JobKeeper entitlement was previously claimed.

The following are the major modifications to the rules for legacy employers.

• A stand down direction can be for no less than 60% of the employee’s ordinary hours as at 1 March 2020.
• A stand down direction cannot require the employee to work for less than 2 consecutive hours in a day.
• A legacy employer must give a longer period of notice before giving a modified JobKeeper enabling direction, being 7 days rather than 3.

An employer still has the ability to direct the employee to specific duties of work, or the location work, as long as other requirements are met. A modified JobKeeper enabling direction can still request employees to perform duties on different days or at different times (as long as the agreement doesn’t require the employee to work less than 2 consecutive hours in a day).

The 60% stand down direction means that an employee who was working 38 hours per week as at 1 March 2020 as a full time employee can only be reduced to 22.8 hours per week.

Also, a legacy employer is required to pay the employee at their base hourly rate for these hours.

Ordinary hours is defined to mean hours contracted to work, as set out in the employee’s industrial instrument or contract of employment.

Risk mitigation steps

Civil penalties are in place for entities who knowingly making a false statement in relation to satisfying the 10% decline in turnover test. This includes where an employer was reckless as to whether the test was satisfied and provided misleading information in order to obtain a 10% decline in turnover certificate. The civil penalties are 60 units ($13,320) for an individual or 300 units ($66,600) for a body corporate.

Source: CCH iQ