Most employers routinely rely on special provisions in awards and enterprise agreements to allow for annual shutdowns at Christmas and New Year. Some employers may have specific requirements for shutdowns at other times of the year. The provisions allow the employer to require employees to take annual leave during the shutdown period. As part of the award modernisation process, the Fair Work Commission made some changes to these provisions which will make it more difficult for employers to handle end of year shutdowns. These changes come into effect on 1 May 2023.
Employers relied on the provisions to enable them to require employees to take annual leave during the shutdown, as well as to require that employees without sufficient annual leave to take unpaid leave. But the Commission has amended the shutdown provisions for these very reasons.
The amendments are summarised below:
|Current provision||New provision|
|Employees may be directed to take annual leave.||Employees may be required to take annual leave, but the request must be made in writing and must be reasonable.|
|Employees may be directed to take leave without pay if they have not accrued sufficient annual leave for the duration of a shutdown period.||Employees may not be directed to take unpaid leave. Unpaid leave will be by agreement of the employer and employee.|
|In most awards, there is a requirement for notice, but no requirement for written notice. In some awards, there is no requirement for notice at all.||The Employer must notify employees in writing at least 28 days before the shutdown period (some awards will contain a longer notice period).|
|In many awards, there is no specific entitlement to take annual leave in advance to cover a shutdown period.||An employee may take annual leave in advance in accordance with the provisions in the award (which still requires the employer to agree).|
The amendments are to be made to the majority of the modern awards. Some awards will continue with shutdown provisions which are specific to the needs of the industry or employment.
If you rely on shutdown provisions in an enterprise agreement, then it is likely that these will continue to be effective while the agreement remains in place. However, it is also likely that the shutdown provisions would need to change in line with the relevant award changes if the agreement is renewed.
As employers will no longer be able to direct employees to take unpaid leave, you will have to make a choice from the following in relation to employees with insufficient paid leave:
- allow them to continue to work, or
- pay them during the shutdown period, or
- give them access to leave in advance.
Employers will need to more closely consider the management of annual leave during the year, as well as how newer employees will accrue sufficient leave for a shutdown. In order to accrue enough annual leave for a two week shutdown (excluding public holidays), employees would require at least 6 months’ of service.
For employees not covered by an award or enterprise agreement, there are provisions in the Fair Work Act which allow an employer to require the employee to take annual leave in circumstances including a shutdown period. Note that the Act does not say anything about requiring an employee to take unpaid leave. We think that such a requirement is likely to be unlawful.
Lessons for Employers:
- Check the award that applies to your business and employees to confirm what changes are to be made;
- Check and amend any policies you have about annual leave and shutdowns to ensure that they will comply with the award changes;
- Implement measures to control the taking of annual leave to ensure that sufficient paid leave remains to cover a shutdown period.
If you have a routine shutdown period around Christmas and New Year, then our recommendation is to include a specific provision in your employment contracts which satisfies the award requirements for notice and agreement in writing of the shutdown.
If you would like to discuss these or other workplace issues please contact Andrew Bland or call 02 9412 3077.