Many modern awards currently provide an ability for an employer to implement a temporary “shutdown” or “closedown” in the business. Typically, this right is exercised is for a temporary closure over the Christmas / New Year period.
The exact provisions regarding shutdowns vary from award to award. Some awards provide that employees must be given a minimum period of notice of the shutdown. Usually the award will provide an ability for employers to require full-time or part-time employees to take annual leave during this period. Some awards also allow an employer to force these to take a period of unpaid leave if they do not have sufficient annual leave accrued to cover the shutdown.
For business covered by awards which do not contain provision enabling employers to require employees to take annual leave (or unpaid leave) during a shutdown, an employee would still be entitled to be paid as per normal through such a period (unless they agreed to take annual or unpaid leave).
What is changing?
As part of its 4 yearly review of modern awards, the Fair Work Commission has handed down a decision that will mean the ability to require an employee to take unpaid leave during a period of shutdown will be removed from all awards.
A new “model clause” will be inserted into 78 modern awards which will contain an ability to direct employees to take annual leave during a shutdown. In most awards employers will be required to give 28 days notice of the closedown, but in awards which currently contain longer notice periods, the model clause will be adapted so that those existing longer notice periods will remain. It will therefore be important to check the exact amendments that will be made to any awards that affect 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 set out at the end of this article.
The changes in detail
The new model clause no longer allows an employer to direct an employee to take a period of unpaid leave during a temporary shutdown. If an employee does not have enough annual leave to cover the temporary shutdown period, the employer will be required to pay the employee during the temporary shutdown period.
What this means is:
- An employer can direct an employee with sufficient annual leave accrual to take a period of annual leave during a temporary shutdown period.
- An employer can get written agreement from an employee to take annual leave in advance during a temporary shutdown period, where the award permits this. Many awards provide that where an employee is provided annual leave in advance a deduction can be made from their final pay if they are still in a negative leave balance when their employment ends. An employee is under no obligation to agree to take annual leave in advance.
- An employer can get written agreement from an employee to take unpaid leave during a temporary shutdown period. An employee is under no obligation to agree to this.
- An employee cannot direct an employee with insufficient leave to cover a temporary shutdown period to take leave in advance or unpaid leave.
The new change comes into effect 1 May 2023, so businesses will need to be ready for these new arrangements for shutdowns in Christmas 2023.
What does this look like in practice?
Employer 123 has provided the required 28 days written notice of an annual temporary shutdown period to its employees. The temporary shutdown will be 2 weeks over the Christmas and New Year period.
- Employee Sam Smith has 3 weeks annual leave accrued. Employer 123 can direct him to take 2 weeks of annual leave during the temporary shutdown period.
- Employee Natalie Wu has 4 days annual leave accrued. Employer 123 can direct her to take 4 days of annual leave during the temporary shutdown period.
- Employee John Doe has no accrued annual leave. Employer 123 cannot direct him to take unpaid leave or leave in advance to cover the temporary shutdown period.
- For John Doe and Natalie Wu, Employer 123 has two options:
- Seek written agreement from John Doe and Natalie Wu to take annual leave in advance (so long as this is authorised by their award) or to take unpaid leave for the relevant shut down period in which they do not have sufficient annual leave to cover.
- Direct John Doe and Natalie Wu to not attend work during the temporary shutdown period and pay their wages as normal.
- For John Doe and Natalie Wu, Employer 123 has two options:
What does the model clause look like?
XX.XX Direction to take annual leave during shutdown
(a) Clause XX.XX applies if an employer:
(i) intends to shut down all or part of its operation for a particular period (temporary shutdown period); and
(ii) wishes to require affected employees to take paid annual leave during that period.
(b) The employer must give the affected employees 28 days’ written notice of a temporary shutdown period, or any shorter period agreed between the employer and the majority of relevant employees.
(c) The employer must give written notice of a temporary shutdown period to any employee who is engaged after the notice is given under clause XX.XX(b) and who will be affected by that period as soon as reasonably practicable after the employee is engaged.
(d) The employer may direct the employee to take a period of paid annual leave to which the employee has accrued an entitlement during a temporary shutdown period.
(e) A direction by the employer under clause XX.XX(d):
(i) must be in writing; and
(ii) must be reasonable.
(f) The employee must take paid annual leave in accordance with a direction under clause XX.XX(d).
(g) In respect of any part of a temporary shutdown period which is not the subject of a direction under clause XX.XX(d), an employer and an employee may agree, in writing, for the employee to take leave without pay during that part of the temporary shutdown period.
(h) An employee may take annual leave in advance during a temporary shutdown period in accordance with an agreement under clause XX.XX.
(i) 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, in accordance with an agreement under clause XX.XX, to which an entitlement has not been accrued, is to be taken into account.
(j) 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 other changes do I need to be aware of with the clause changing?
- Employers must now provide at least 28 days’ written notice of the temporary shutdown period (or a longer period if the modern award stipulates this).
- If an employee is engaged within the notice period, notice of the temporary shutdown must be provided as soon as reasonably practicable after they have been engaged with the employer.
- When calculating the amount of paid annual leave accrued by an employee for the purposes of determining how much annual leave an employee can be required to take, any leave the employee has taken in advance (pursuant to an “annual leave in advance” clause in the award) must be taken into account.
- The new rules do not affect the separate ability contained in many awards for employers to require employees to take annual leave where they have “excessive” leave accruals (generally defined as 8 or more weeks of accruals)
Can I refuse annual leave requests during the year to ensure employees have enough accrued annual leave to cover a shutdown?
Annual leave requests can only be refused where they are reasonable, as per section 88 of the Fair Work Act 2009 (Cth). The Fair Work Commission specifically dealt with the question of denying annual leave requests in its decision on this matter. It said this:
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.
It therefore seems likely that in most situations employers will be able to refuse annual leave requests in order to ensure employees have sufficient leave to cover an annual shutdown. We consider it would be prudent to refer to the expectation that leave will be taken during the shutdown in information given to employees prior to commencement of employment e.g. in their employment contract, letter of offer or relevant workplace policy and to continue to emphasise this throughout employment.
What impacts will I need to work through?
If you are planning on having a temporary shutdown you will need to ensure that you:
- Monitor the annual leave accruals of your employees, particularly in the lead up to a temporary shutdown.
- Provide employees with the required notice in writing of the temporary shutdown.
- Ensure you have written agreements in place for any employees who are taking leave in advance or leave without pay.
- Be aware of the Fair Work provisions in the Fair Work Act around the Refusing of Annual Leave.
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)
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Disclaimer
The information provided in these blog articles is general in nature and is not intended to substitute for professional advice. If you are unsure about how this information applies to your specific situation we recommend you contact Employment Innovations for advice.