Numerous contemporary awards currently enable employers to enforce a temporary “shutdown” or “closedown” within their business. This right is typically exercised for a temporary closure during the Christmas/New Year season. The exact regulations regarding such shutdowns differ from award to award. Some awards necessitate that employees are given a minimum notice period for the shutdown. Employers are typically permitted to require full-time or part-time employees to utilise their annual leave during this time. If they don’t have sufficient annual leave accrued to cover the shutdown, some awards allow employers to oblige employees to take unpaid leave. If an award doesn’t have provisions enabling employers to require annual or unpaid leave during a shutdown, employees are still entitled to their usual pay throughout the period unless they voluntarily agree to take annual or unpaid leave.
The Fair Work Commission has made a significant decision as part of its 4-yearly review of modern awards. The ruling means that the ability to require employees to take unpaid leave during a period of shutdown will be eliminated from all awards. Instead, a new “model clause” will be added to 78 modern awards, allowing employers to instruct employees to take annual leave during a shutdown. In most cases, employers will need to give 28 days’ notice of the closure. However, in awards that currently require longer notice periods, the model clause will be modified to preserve those longer notice periods. It will be crucial to review the exact changes that will apply to your business when they are published. The full list of awards that will contain the model clause (either as drafted or in a modified form) is provided below.
The Details of Unpaid Leave Changes
Under the new model clause, employers will no longer be able to instruct employees to take unpaid leave during a temporary shutdown. If an employee doesn’t have enough annual leave to cover the period, the employer must pay them during the shutdown.
Here’s what this means:
- Employers can direct employees with sufficient annual leave to take it during a temporary shutdown.
- Employers can request written agreement from employees to take annual leave in advance during a temporary shutdown, where permitted by the award. Some awards allow employers to make deductions from an employee’s final pay if they are still in negative leave balance at the end of their employment.
- Employers can request written agreement from employees to take unpaid leave during a temporary shutdown. Employees are not obliged to agree.
- Employers cannot instruct employees with insufficient leave to take it in advance or take unpaid leave during a temporary shutdown.
These changes will take effect from May 1, 2023, so businesses need to be prepared for the new arrangements for shutdowns during the Christmas 2023 period.
Practical Implications of the Changes
Let’s say Employer 123 has given its employees 28 days’ written notice of a 2-week annual temporary shutdown over the Christmas and New Year period.
- Employee Sam Smith has 3 weeks’ annual leave accrued. Employer 123 can instruct him to take 2 weeks of annual leave during the shutdown period.
- Employee Jane Doe has 4 days’ annual leave accrued. Employer 123 can instruct her to take all 4 days during the shutdown period.
- Employee John Doe has no annual leave accrued. Employer 123 cannot direct him to take unpaid leave or leave in advance to cover the shutdown period.
For employees like John Doe and Jane Doe, Employer 123 has two options:
- Seek written agreement from the employees to take annual leave in advance (if permitted by their award) or to take unpaid leave for the shutdown period.
- Direct the employees to not attend work during the shutdown period and pay their wages as normal.
What does the model clause look like?
These changes will require employers to review their employment agreements and ensure they comply with the new model clause for shutdown periods.
The model clause, titled “Direction to take annual leave during shutdown,” outlines the requirements and options for employers in directing their employees to take annual leave during a temporary shutdown period. The key points of the clause are as follows:
- The clause applies if the employer intends to shut down all or part of its operation for a particular period and wishes to require affected employees to take paid annual leave during that period.
- The employer must give affected employees 28 days’ written notice of a temporary shutdown period, or any shorter period agreed upon between the employer and the majority of relevant employees.
- The employer may direct the employee to take a period of paid annual leave that the employee has accrued an entitlement to during a temporary shutdown period.
- The direction must be in writing and reasonable.
- The employee must take paid annual leave in accordance with the direction given by the employer.
- In respect of any part of a temporary shutdown period that is not the subject of a direction, the employer and employee may agree in writing for the employee to take leave without pay during that period.
- An employee may take annual leave in advance during a temporary shutdown period in accordance with an agreement under clause XX.XX.
- In determining the amount of paid annual leave to which an employee has accrued an entitlement, any period of paid annual leave taken in advance by the employee, to which an entitlement has not been accrued, is to be taken into account.
- Clauses XX.XX to XX.XX do not apply to a period of annual leave that an employee is required to take during a temporary shutdown period in accordance with clause XX.XX.
What additional modifications should I be mindful of following the clause’s alteration?
Under the new changes to the model clause, employers are required to give employees at least 28 days’ written notice of any upcoming temporary shutdown period. This notice period may be longer if specified in the relevant modern award. Additionally, if an employee is hired during the notice period, the employer must provide notice of the temporary shutdown as soon as reasonably possible after the employee’s start date.
When calculating an employee’s accrued annual leave entitlements for the purposes of determining how much annual leave an employer can require them to take, any leave the employee has taken in advance must be taken into account. This applies only to leave taken in advance pursuant to an “annual leave in advance” clause in the relevant award.
It’s important to note that these changes do not impact the ability of employers to require employees to take annual leave if they have an “excessive” amount of accrued leave. This is generally defined as eight or more weeks of accrued leave.
Is it reasonable for me to reject requests for annual leave throughout the year to guarantee that employees have accumulated sufficient annual leave to accommodate a shutdown?
Section 88 of the Fair Work Act 2009 (Cth) allows for the rejection of annual leave requests only if they are deemed unreasonable. The Fair Work Commission has provided a ruling on this issue, stating the following regarding the denial of annual leave requests:
On the working assumption that a shutdown period would in most cases be two weeks or less (except for some industry sectors with special characteristics) and would typically occur during the Christmas/New Year period, any employee with 6 months or more of service is likely to have accrued sufficient annual leave to cover the shutdown period. Some employer submissions have expressed a concern about employees using up their annual leave entitlements during the course of the year prior to the shutdown occurring, but we consider that s 88 of the FW Act provides sufficient scope for employers to manage employee annual leave requests so that employees have sufficient accrued leave to cover a shutdown period. In particular, where it is an established feature of an employer’s business, or a relevant part of it, to shut down in the Christmas/New Year period, it would be unlikely that a refusal to agree to a leave request which would leave the employee with insufficient accrued leave to cover the shutdown period would be unreasonable within the meaning of s 88(2) unless there were some strong countervailing factors pertaining to the individual concerned.
Based on this, it appears probable that employers can reject annual leave requests in order to guarantee that employees have enough leave to accommodate an annual shutdown. As a precaution, it is advisable to communicate the expectation of taking leave during the shutdown to employees in advance, such as in their employment contract, offer letter, or relevant workplace policy, and continue to reinforce this throughout their employment.their employment contract, letter of offer or relevant workplace policy and to continue to emphasise this throughout employment.
What steps should I take when preparing for a temporary shutdown?
If you intend to implement a temporary shutdown, the following steps should be taken:
- Keep track of your employees’ annual leave accruals, particularly leading up to the shutdown.
- Notify your employees in writing about the temporary shutdown as required.
- Establish written agreements with employees who are taking leave in advance or leave without pay.
- Familiarise yourself with the Fair Work Act’s provisions regarding the rejection of annual leave.
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List of awards that will be amended
- Aboriginal and Torres Strait Islander Health Workers and Practitioners and Aboriginal Community Controlled Health Services Award 2020 (clause 22.3)
- Aircraft Cabin Crew Award 2020 (clause 19.4)
- Airline Operations–Ground Staff Award 2020 (clause 22.6)
- Alpine Resorts Award 2020 (clause 25.3)
- Aluminium Industry Award 2020 (clause 22.4)
- Ambulance and Patient Transport Industry Award 2020 (clause 22.7)
- Animal Care and Veterinary Services Award 2020 (clause 22.5)
- Aquaculture Industry Award 2020 (clause 22.9)
- Asphalt Industry Award 2020 (clause 21.8)
- Banking, Finance and Insurance Award 2020 (clause 22.5)
- Black Coal Mining Industry Award 2020 (clause 24.9)
- Broadcasting and Recorded Entertainment Award 2020 (clause 18.6)
- Building and Construction General On-site Award 2020 (clause 31.3)
- Business Equipment Award 2020 (clause 23.5)
- Car Parking Award 2020 (clause 24.6)
- Cemetery Industry Award 2020 (clause 19.3)
- Cement, Lime and Quarrying Award 2020 (clause 22.8)
- Cleaning Services Award 2020 (clause 21.4)
- Clerks—Private Sector Award 2020 (clause 32.5)
- Coal Export Terminals Award 2020 (clause 20.7)
- Commercial Sales Award 2020 (clause 20.6)
- Concrete Products Award 2020 (clause 22.6)
- Contract Call Centres Award 2020 (clause 22.10)
- Educational Services (Post-Secondary Education) Award 2020 (clause 22.5)
- Electrical Power Industry Award 2020 (clause 21.8)
- Electrical, Electronic and Communications Contracting Award 2020 (clause 21.5)
- Fitness Industry Award 2020 (clause 21.3)
- Food, Beverage and Tobacco Manufacturing Award 2020 (clause 25.11)
- Gardening and Landscaping Services Award 2020 (clause 20.9)
- Gas Industry Award 2020 (clause 20.7)
- General Retail Industry Award 2020 (clause 28.4)
- Graphic Arts, Printing and Publishing Award 2020 (clause 31.12)
- Hair and Beauty Industry Award 2020 (clause 24.3)
- Health Professionals and Support Services Award 2020 (clause 26.5)
- Higher Education Industry—General Staff—Award 2020 (clause 24.4)
- Horse and Greyhound Training Award 2020 (clause 18.6)
- Hospitality Industry (General) Award 2020 (clause 30.4)
- Hydrocarbons Industry (Upstream) Award 2020 (clause 25.7)
- Joinery and Building Trades Award 2020 (clause 27.9)
- Journalists Published Media Award 2020 (clause 20.8)
- Legal Services Award 2020 (clause 22.7)
- Local Government Industry Award 2020 (clause 23.5)
- Manufacturing and Associated Industries and Occupations Award 2020 (clause 34.7)
- Meat Industry Award 2020 (clause 25.8)
- Mining Industry Award 2020 (clause 22.7)
- Mobile Crane Hiring Award 2020 (clause 24.6)
- Miscellaneous Award 2020 (clause 21.4)
- Nursery Award 2020 (clause 22.12)
- Nurses Award 2020 (clause 22.7)
- Oil Refining and Manufacturing Award 2020 (clause 24.6)
- Pest Control Industry Award 2020 (clause 23.9)
- Pharmaceutical Industry Award 2020 (clause 21.5)
- Plumbing and Fire Sprinklers Award 2020 (clause 24.4)
- Poultry Processing Award 2020 (clause 21.5)
- Premixed Concrete Award 2020 (clause 22.8)
- Professional Employees Award 2020 (clause 18.4)
- Racing Clubs Events Award 2020 (clause 23.5)
- Racing Industry Ground Maintenance Award 2020 (clause 21.5)
- Real Estate Industry Award 2020 (clause 20.5(a))
- Registered and Licensed Clubs Award 2020 (clause 25.4)
- Restaurant Industry Award 2020 (clause 25.4)
- Road Transport (Long Distance Operations) Award 2020 (clause 20.4)
- Road Transport and Distribution Award 2020 (clause 24.9)
- Salt Industry Award 2020 (clause 23.10)
- Seafood Processing Award 2020 (clause 21.11)
- Security Services Industry Award 2020 (clause 21.4)
- Silviculture Award 2020 (clause 22.5)
- Storage Services and Wholesale Award 2020 (clause 24.5)
- Sugar Industry Award 2020 (clause 31.5)
- Supported Employment Services Award 2020 (clause 32.3)
- Surveying Award 2020 (clause 22.7)
- Telecommunications Services Award 2020 (clause 22.9)
- Textile, Clothing, Footwear and Associated Industries Award 2020 (clause 32.6)
- Timber Industry Award 2020 (clause 28.10)
- Vehicle Repair, Services and Retail Award 2020 (clause 29.6)
- Water Industry Award 2020 (clause 22.4)
- Wine Industry Award 2020 (clause 24.9)
- Wool Storage, Sampling and Testing Award 2020 (clause 23.5)