Tis nearly the season for Christmas close-downs, where many businesses in Australia shut their doors for the Christmas period and employees are required to take leave for a set period.
Many employers assume that it is lawful simply to require employees to take annual leave during this period and if the employees do not have sufficient accrued annual leave, that the employees can be required to take leave without pay. The reality is that the law is not quite so simple and whether or not an employer is entitled to follow such an approach depends on what modern award (if any) applies to the employees in question.
The majority of employees in Australia are covered by an industry or occupation specific “modern award”. However, some employees (typically those in “the professions” or senior levels of management) are not covered by a modern award and are classed as “award-free”.
In respect of these employees, an employer can only require them to take annual leave where the requirement is “reasonable”. A Christmas close-down in the vast majority of cases will be considered a reasonable reason to require an employee to take annual leave, so long as the employees are given sufficient notice.
However, the law does not permit an employer to require an award-free employee to take unpaid leave in the circumstances that they do not have sufficient annual leave to take. Unless, therefore, an agreement can be made with the employee that they take unpaid leave (or take annual leave in advance of accruing it) the employer cannot insist the employee takes leave without pay. The employer will, therefore, have to pay the employee for the relevant period of the close-down (or let them work).
Employees covered by a modern award
For employees covered by a modern award, whether or not the employer can require an employee to take leave during an annual close-down will depend on the exact terms of the award in question.
Most awards provide that employees must be given a specific period of notice of the close-down. For example, in the Clerks Private Sector Award 2010 the notice period is four weeks, whilst in the Textile, Clothing, Footwear and Associated Industries Award 2010 the notice period is three months.
Some awards allow for an employer to require an employee to take unpaid leave if they do not have sufficient accrued annual leave, others do not.
An award which does allow for this is the Manufacturing and Associated Industries and Occupations Award 2010. The relevant part of the Award states as follows (with our emphasis):
41.10 Annual close down
Notwithstanding s.88 of the Act and clause 41.6,an employer may close down an enterprise or part of it for the purpose of allowing annual leave to all or the majority of the employees in the enterprise or part concerned, provided that:
(a) the employer gives not less than four weeks notice of intention to do so;and
(b) an employee who has accrued sufficient leave to cover the period of the close down,is allowed leave and also paid for that leave at the appropriate wage in accordance with clauses 41.4 and 41.5;and
(c) an employee who has not accrued sufficient leave to cover part or all of the close down,is allowed paid leave for the period for which they have accrued sufficient leave and given unpaid leave for the remainder of the closedown;
If the award(s) covering your business does not contain a similar provision, you will not be able to require employees to take unpaid leave in these circumstances: you will either need to agree with the employee that they take unpaid leave (or are granted annual leave in advance of it accruing) or pay them for the relevant period.
Employees covered by an enterprise agreement
If you have an enterprise agreement then you should check the terms of the enterprise agreement for rules about annual close-downs. In essence, the rules are the same as for modern awards, as stated above, ie if there is no specific provision about close-downs or unpaid leave, you will not be able to require that employees take annual leave / unpaid leave at this time.
What about casual employees?
The nature of casual employment is that casual employees do not have guaranteed hours, it is, therefore, open to employers simply to not roster casual employees for the relevant period of the close-down. If your casual employees are being given regular, fixed shifts then it may be that they are not truly casual employees which could expose your business to significant risks (see our checklist for further help on this issue).
If you need help understanding which award(s) apply to your business and/or your rights and obligations regarding Christmas close-downs, please contact Employment Innovations today. We have a range of products to assist you in this area, including unlimited workplace advice through our subscription services.