Shutting down over the Christmas and New Year Period? New modern award requirements may apply to your organisation

In December 2022, the Fair Work Commission (FWC) updated the annual leave shutdown provisions contained in 78 modern awards as part of its four-yearly review. These changes took effect in the relevant awards from 1 May 2023.

In the lead up to the festive season, organisations should take a moment to consider the updated shut down provisions in modern awards to ensure that any directive to employees to take annual leave during a temporary shutdown is compliant with the updated requirements of any applicable modern award.

We have prepared a helpful set of FAQs below explaining the new provisions.

Which modern awards are impacted?

Industry and occupational awards which typically shutdown operations over the Christmas and New Year period are impacted include the:

• Banking, Finance and Insurance Award 2020.
• Building and Construction General On-site Award 2020.
• Clerks—Private Sector Award 2020, General Retail Industry Award 2020.
• Hair and Beauty Industry Award 2020, Hospitality Industry (General) Award 2020.
• Manufacturing and Associated Industries and Occupations Award 2020.
• Professional Employees Award 2020.
• Real Estate Industry Award 2020.
• Restaurant Industry Award 2020.

This FAQ relates only to the shutdown provisions contained in these listed awards.

If your award is not on the above list, a full list of the 78 impacted modern awards can be found at Attachment A of the FWC’s decision.

Our organisation is shutting down over the Christmas and New Year period, can we direct employees to take annual leave over this temporary shutdown period?

Prior to 1 May 2023, the drafting of many of the shutdown provisions of modern awards were broad and simply provided that an employer may require an employee to take annual leave as part of a close-down of its operations with the provision of the requisite notice.

Under the new model shutdown provisions, employers may only direct employees to take a period of paid annual leave to which the employee has accrued an entitlement during a temporary shutdown period. The direction for an employee to take paid annual leave must be reasonable and issued in writing.

What if an employee has not accrued sufficient annual leave to cover the shutdown period?

If an employee has insufficient paid annual leave accrued to cover the temporary shutdown period, an employer and employee may agree, in writing, for the employee to take:

• leave without pay; or
• paid annual leave in advance.

The FWC noted that a written agreement for the purposes of taking leave without pay may be recorded through means including an exchange of emails, text messages or by other electronic means.

An employee’s employment contract may also provide that an employee agrees to take leave without pay if they do not have accrued annual leave to cover the temporary shutdown period. The updated modern award provisions have not yet been tested and we recommend you seek advice should this be an arrangement you currently adopt or wish to implement.

Most modern awards include terms dealing with taking annual leave in advance, including requiring a written agreement that states the amount of leave to be taken in advance and the date on which leave is to commence. The written agreement must be signed by the employer and the employee (or if the employee is under 18 years of age, by their parent or guardian). Some awards may have an example of a written agreement included in the Schedule to the award which may be used to reflect the agreement.

What if we are unable to reach agreement with an employee to take leave without pay or paid annual leave in advance?

If an employee has insufficient paid annual leave to cover the temporary shutdown period and you are unable to reach an agreement for the employee to take leave without pay or paid annual leave in advance, you will need to consider alternative options including whether:

• the employee can work through the shutdown period;
• the employee can use any time off in lieu of overtime that has accrued or any other accrual arrangement; or
• the requirements of a stand down pursuant to section 524 of the Fair Work Act 2009 (Cth) (FW Act) are met.

We recommend that legal advice is sought if the organisation considers that stand down under the FW Act may be an option as shut down provisions are only intended to apply in very limited circumstances.

How much notice do we need to provide employees if we intend on shutting down all or part of our operations over the Christmas and New Year period and require affected employees to take paid annual leave during that period?

An employer must provide employees with 28 days’ written notice of a temporary shutdown period, or any shorter period agreed between the employer and the majority of relevant employees.

What happens if an employee commences employment after the written notice to take annual leave has been given?

If the new employee will be affected by the shutdown, an employer must provide the written notice of the temporary shutdown period as soon as reasonably practicable after the employee is engaged.

It is likely that an employee may not have enough paid annual leave accrued to cover the temporary shutdown period if they are a new starter, therefore employers will need to consider entering into a written agreement for the employee to take either leave without pay or paid annual leave in advance.

What happens if an employee’s employment contract contains different provisions relating to the taking of annual leave that do not comply with the recently updated modern award terms?

To the extent that an employee’s employment contract offers more beneficial entitlements than the new modern award provisions, the employment contract will take precedence. However, if the employee’s employment contract offers less favourable terms (for example, the notice requirement is one week), the new award terms will override the contractual entitlement.

We recommend that you seek independent legal advice in the above circumstances.

Please contact us should you require any advice or assistance with directing employees to take leave over the Christmas and/or New Year period.

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Authored by:

Erin Lynch, Partner
Diana Diaz, Special Counsel
Sarah Saliba, Senior Associate