Changes took effect from 1st May 2023 in how you will now deal with the closedown periods – most commonly over the Christmas/ New Year period.
As part of the four yearly modern reviews – the Fair Work Commission handed down the decision that will mean the ability to require an employee to take unpaid leave during a period of a shutdown will be removed from all awards.
Some employers use these provisions for shutdowns at other times of the year, but it is more common for a Christmas/New Year shutdown period.
Under the new rules, an employer can no longer direct an employee to take a period of unpaid leave during a temporary shutdown.
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 a 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 a 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 employer cannot direct an employee with insufficient leave to cover a temporary shutdown period to take leave in advance or unpaid leave.
What will this mean to you in reality?
Let’s give some examples using company XXX and Employee 007
Employee 007 has 3.5 weeks of annual leave accrued at the time that company XXX has provided the 28-day written notice of the annual temporary shutdown. Employer XXX CAN DIRECT 007 to take 2 weeks of annual leave during the temporary shutdown period.
If, on the other hand, employee 007 has 4 days accrued annual leave, employer XXX can direct her to take the 4 days of annual leave during the shutdown period.
But what if employee 007 has NO accrued annual leave?
XXX cannot direct 007 to take unpaid leave or leave in advance to cover the temporary shutdown period.
Two options remain:
- Seek a written agreement from 007 to take annual leave in advance (check the award allows first) or to take unpaid leave for the relevant shutdown period which they do not have sufficient leave to cover.
- Direct 007 to not attend work during the shutdown period and pay their wages as normal.
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, a 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)
To help manage your annual leave request during the year can you refuse annual leave request so that the employee have enough leave to cover the shutdown period?
As per section 88 of the Fair Work Act 2009 (Cth), annual leave requests can only be refused where they are reasonable.
The Fair Work Commission specifically dealt with denying annual leave requests in its decision. 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 is 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 suggest that before an employee’s commencement, an employer should refer to the expectation that leave will be taken during the shutdown, e.g. in their employment contract, letter of offer or relevant workplace policy, and to continue to emphasise this throughout employment.
What should you be doing NOW?
- Check the award that applies to your employees to confirm what changes you need to make (see list in our previous article);
- Check and amend any policies you have, if needed, to reflect the award changes (drop us an email at paulette@freshhrinsights.com.au);
- Implement a process to control and manage the taking of annual leave to ensure that sufficient paid leave remains to cover a shutdown period.
- Monitor the annual leave accruals of your employees now and in the lead-up to a temporary closedown.
- Ensure you manage annual leave balances to cover a Christmas/New Year shutdown period (have a log of hours tracked).
- Make sure that you have written agreements in place if an employee elects to take unpaid leave in the log of hours as per the above
- Consider if you can provide employees with work during a shutdown period if they don’t want to take their annual leave.
As per our earlier article on this subject, an example for clarification of what this pending Christmas/ New Year will look like is below :
From 1 May 2023 to 24 December 2023, a full-time employee will accrue 73.29 hours of annual leave.
There are three public holidays for a typical two-week shutdown, so an employee needs to have seven days (53.2 hours) of annual leave available to take, covering a two-week shutdown.
In 2023, a two-week shutdown over Christmas/New Year might look like this:
If we go back to our example, company XXX and employee 007 – there are seven days of annual leave required to be taken over this period (three of the ten days are public holidays)
Employee 007 has 3.5 weeks of annual leave accrued at the time that company XXX has provided the 28-day written notice of the annual temporary shutdown. Employer XXX CAN DIRECT 007 to take seven days of annual leave during the temporary shutdown period.
If, on the other hand, employee 007 has four days accrued annual leave, employer XXX can direct her to take the four days of annual leave during the shutdown period. And/or
- then request that the remaining three days are taken as unpaid or leave in advance. You will seek to obtain a written agreement to confirm.
- If employee 007 refuses, you would direct 007 not to attend the workplace and pay 007 as normal for the 3 days.
If 007 has no accrued leave – you can not direct 007 to take an unpaid leave in advance to cover this period. Your two options are;
- Seek written agreement from 007 to take annual leave in advance or to take this period as unpaid leave during the shutdown period; or
- Direct 077 to not attend the workplace during shutdown and pay the wages for 007 as normal.
If you need help or support, then please get in contact on 0452471960 or email paulette@freshhrinsights.com.au
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
