Six COVID-19 legal changes Australian sporting organisations need to know about

By Martin Ross and Mark Lebbon

The COVID-19 pandemic has had, and will continue to have, a major impact on sport in Australia. Competitions and events have been cancelled or postponed; revenue streams and commercial arrangements have been disrupted; and participation in and attendance at sporting events has ceased.

In response to the pandemic, the Commonwealth and State governments and other relevant authorities have announced important amendments to various laws. The changes affect a wide variety of areas and many of the changes have important consequences for the operations and legal obligations of Australian sporting organisations.

We set out below a summary of some of the key recent legal changes which are relevant to Australian sporting organisations. Hall & Wilcox has established a dedicated COVID-19 resource centre which contains further material and information on these issues.

Government directions

To prevent the spread of COVID-19, action has been taken at a Commonwealth and State level through the issuing of various directions.[1]

The Commonwealth Government has prohibited international travel,[2] while State governments have limited travel across state borders and implemented quarantine measures on travel between most States.

State governments have also imposed social distancing measures and restrictions on non-essential businesses. For example, in Victoria directions relevant to sporting organisations include:[3]

• requirements that individuals remain at home unless they are obtaining necessary goods or services, attending work or education, exercising, or engaged in limited other specified activities;
• limitations on gatherings;
• closure of arenas, stadiums and other sporting venues;
• closure of both indoor and outdoor recreation and leisure facilities, including swimming pools, gymnasiums and fitness centres; and
• closure of licensed premises.

Failure to comply with these government directions can result in penalties being imposed.

The directions have resulted in many sporting organisations suspending, cancelling or postponing competitions, matches and events.

The directions also mean that sporting organisations need to consider their approach to athlete training and other aspects of their operations. The social distancing restrictions allow for exercise as a valid or essential reason for leaving the home during the period of the government restrictions,[4] however group training sessions involving even a modest number of participants are likely to breach the directions.

The directions made by State governments have an express expiration date.[5] The expiration date needs to be monitored by sporting organisations. In Victoria, the period of the restrictions was recently extended to 11 May 2020, and it seems likely that at least some of the directions will remain in place for an additional period of time beyond this extension.

Importantly, the government restrictions may impact the ability of sporting organisations, their commercial partners and other stakeholders to perform their contractual obligations. Whether or not a government direction will, in and of itself, be a reason for relief under a contractual clause (such as force majeure), statutory provision or common law from a failure to perform a contractual obligation will depend on the particular contract and surrounding circumstances. Sporting organisations need to carefully consider their agreements and seek advice where issues relating to non-performance of obligations or termination may be relevant.

JobKeeper program

One of the key stimulus programs introduced by the Commonwealth government is the $130 billion JobKeeper program.[6]

Under this program, employers can register online with the Australian Taxation Office (ATO) and may be eligible to receive payments of $1,500 per fortnight for each eligible employee. The $1,500 payment received by employers must be paid to eligible employees. The first scheduled fortnightly payments begin in the first week of May 2020, with the first payment to include a ‘catch-up’ component for April. The payments are set to cease at the end of September 2020.[7]

Businesses must pass the ‘decline in turnover test’ in order to be eligible to receive the JobKeeper payment. Entities with an aggregated turnover of under $1 billion will be eligible for payments if the projected GST turnover for:

• a calendar month that ends after 30 March 2020 and before 1 October 2020; or
• a quarter that starts on 1 April 2020 or 1 July 2020,

is at least 30% less than the current GST turnover for a corresponding period in 2019. Organisations that are registered with the Australian Charities and Not-for-profits Commission (ACNC) can qualify if their turnover falls by 15% or more in the relevant periods.

An individual must also meet certain criteria in order to be considered an eligible employee for a fortnightly payment, including that they:

• are employed at any time during the relevant fortnight;
• were 16 years of age or over on 1 March 2020;
• were a full-time or part-time employee, or a long-term casual employee that was employed for more than 12 months by the entity on a systematic and regular basis as at 1 March 2020; and
• were an Australian resident at 1 March 2020.

There are also a number of further considerations that are relevant for employers, including requirements regarding overpayments and the reporting processes that must be followed.

Many sporting organisations may be eligible to receive much-needed support under the JobKeeper program, and they should ensure that they register in order to be eligible to receive payments.

Employment

The Commonwealth and State governments and the Fair Work Commission (FWC) have made a number of changes to employment law and conditions that are important for both employers and employees.

The Fair Work Act 2009 (Cth) (FW Act) has been amended to provide eligible employers with temporary powers to implement flexibility measures in order to save jobs. Under the FW Act amendments, sporting organisations accessing JobKeeper payments may be able to:

• issue to employees ‘jobkeeper enabling directions’ to work reduced hours or days, undertake alternative duties or work at an alternate location;
• request employees to work reduced days or alternate hours of work and take accrued annual leave; and
• agree with employees to take annual leave at half pay.

The New South Wales government has reduced the notice requirements for directing an employee to take long service leave provided the employee agrees to that lesser period of notice. The purpose of this amendment is to allow leave to be taken with little notice, and to enable the use of long service leave to supplement other varied working arrangements.

The FWC has also varied many modern awards. Sporting organisations that employ support personnel and other administrative staff should be aware of temporary changes to the Clerks – Private Sector Award. These changes include flexibility to direct employees to work across classifications, changes to ‘ordinary working hours’, changes to minimum work hours, and shorter notice periods and relaxed rules for directions to take annual leave.

Conduct of General Meetings

Sporting organisations are required under their constitutions and by law to hold certain meetings.  For example, a sporting organisation that is a company limited by guarantee will be required to hold an annual general meeting each year.[8]

The constituent documents of sporting organisations commonly set out further requirements for meetings, such as notice provisions for the meeting and provisions enabling certain meetings to be held using technology rather than in person.

The government directions relating to social distancing may impact the ability of sporting organisations to conduct meetings in person.

The Australian Securities and Investments Commission (ASIC) has provided guidance[9] outlining two no action positions which ASIC will adopt for certain public companies that are required to hold an annual general meeting (AGM) by 31 May 2020:

• a ‘no action’ position will be taken against these public companies as long as the AGM is held by 31 July 2020 (this approach will be reviewed as the circumstances surrounding the COVID-19 outbreak develop); and
• a ‘no action’ position will be taken against public companies that conduct the AGM solely online, provided that the technology provides the members as a whole with a reasonable opportunity to participate, including the ability to ask questions and voting that occurs by a poll rather than a show of hands.

These ‘no-action’ positions are an expression of regulatory intention regarding how ASIC will exercise its powers, but it does not necessarily preclude third parties from taking legal action.

These no-action positions may be relevant to sporting organisations structured as public companies. The critical step for sporting organisations is to carefully review their constitution in order to establish the rules surrounding the conduct of the AGM, and whether it permits the use of technology to hold the meeting.

Creditors, debts and directors

The Commonwealth government has introduced a number of changes to provide a safety net so that previously profitable and viable businesses can better position themselves to resume operations once the COVID-19 pandemic has passed.

The key aspects of the relief package include:

• a temporary increase from $2,000 to $20,000 of the threshold at which creditors can issue a statutory demand on a company;
• a temporary increase in the time from 21 days to 6 months that companies have to respond to a statutory demand served on them;
• directors being temporarily relieved of their potential liability for insolvent trading with respect to any debts incurred in the ordinary course of the company’s business before 25 September 2020; and
• the ability for struggling businesses to work with the ATO to tailor solutions, such as a temporary deferral of payments and/or enforcement actions.  These must be negotiated with the ATO and do not apply automatically.[10]

Sporting organisations should consider how these changes may affect them, either as a creditor or if they may become unable to pay their debts as they become due and payable.

Although these measures may temporarily assist organisations during the course of the COVID-19 pandemic, liabilities continue to accrue.  Some examples include:

• liabilities to creditors, and the contractual enforcement rights of those creditors (eg. to seek repossession of leased equipment where the lease is not paid);
• directors’ duties to the organisation – importantly, if the organisation is approaching insolvency (ie. cannot meet its debts when they fall due), these include a duty to consider the interests of creditors as a whole;
• tax obligations – noting that the ATO can still issue directors’ penalty notices where tax obligations are not met, and that tax deferrals will still ultimately require payment;
• personal and bank guarantees – while many creditors (such as banks) are not currently calling on these, they remain a risk unless otherwise negotiated;
• rental liabilities, unless a formal arrangement has been entered with the landlord; and
• employee entitlements.

Sporting organisations will need to assess these matters separately.

Landlords and tenants

A major expense for many sporting organisations is rent.

On 7 April 2020 the National Cabinet released its mandatory Code of Conduct for commercial tenancies (Code), which imposes a set of good faith principles for negotiations between landlords and tenants in response to the financial difficulties that have been created by the COVID-19 pandemic. The code will be legislated in each State and Territory.

The Code will provide rent relief measures for commercial, industrial and retail tenants who meet the criteria for the JobKeeper program and have revenue under $50 million.

The Victorian government has separately developed a policy that will provide support to tenants of any government-owned properties. A sporting organisation that is a tenant on Crown land or land owned by government or a State-owned entity may be able to avail itself of significant rent relief measures.

If you are a tenant of privately owned land, the Code mandates a number of leasing principles that are to apply on a case-by-case basis and are designed to ensure that negotiations between landlords and tenants result in a mutually acceptable outcome, including that:

• landlords must not terminate on the basis of non-payment;
• tenants must continue to comply with the terms of their lease;
• landlords must offer proportionate rent reductions through waivers and deferrals;
• landlords must pass on any reduction in statutory charges, and should share any benefit received through the deferral of loan repayments by a financial institution;
• landlords must not charge fees or interest on deferred payments;
• landlords must not draw on a tenant’s security;
• landlords should allow tenants to extend the lease for an equivalent period of the rent waiver and/or deferral period; and
• landlords must freeze rent increases during the pandemic period and for a reasonable recovery period after it passes.

Sporting organisations should consider whether the new Code applies to their circumstances, and if so, how the ‘leasing principles’ will govern their negotiations with landlords or tenants.

On 15 April 2020, the Victorian government announced that the measures would be urgently introduced to assist commercial and residential landlords and tenants, and a $500 million relief package would be implemented. The new legislation will include:

• access to fast-tracked dispute resolution services for landlords and tenants that are unable to reach agreement over rent reductions or deferrals;
• $420 million in land tax relief for landlords that provide their tenants with rent relief; and
• a ban on evictions for six-months for the non-payment of rent for commercial tenancies involving small and medium-sized businesses.

Hall & Wilcox has advised various sporting organisations, event organisers and venues in relation to changes to the law to address COVID-19. Our cross-practice teams and subject matter experts are available to assist sporting organisations and others in the sports industry in relation to legal issues arising from the COVID-19 pandemic. For more information about Hall & Wilcox’s response, please visit our COVID-19 resource centre.

[1] For example, in Victoria directions regulating the activities of people and businesses during the pandemic have been made under the Public Health and Wellbeing Act 2008 (Vic) following the declaration of a state of emergency on 16 March 2020. In New South Wales directions have been made under the Public Health Act 2010 (NSW).
[2] There are some limited exceptions to the travel ban which do not apply for travel associated with sporting events.
[3] Stay at Home Directions (No 4) (Vic) and Restricted Activity Directions (No 3) (Vic).
[4] Stay at Home Directions (No 4) (Vic), item 9.
[5] For example, the restrictions under the Restricted Activity Directions (No 2) (Vic) were originally scheduled to end at midnight 13 April 2020, however this has been extended.
[6] Coronavirus Economic Response Package (Payments and Benefits) Act 2020 (Cth).
[7] Coronavirus Economic Response Package (Payments and Benefits) Rules 2020 (Cth), rule 5.
[8] Corporations Act 2001 (Cth), section 250N.
[9] 20-068MR Guidelines for meeting upcoming AGM and financial reporting requirements, Australian Securities and Investments Commissions
[10] Coronavirus Economic Response Package Omnibus Act 2020 (Cth), Schedule 12.