AWARDS: HOW DO THE NEW TEMPORARY SHUTDOWN PROVISIONS IMPACT EMPLOYERS?
Q&A sheet – last updated October 2022
In September 2022, the Full Bench of the Fair Work Commission (FWCFB) released its four-yearly review of modern awards. While the primary purpose was to improve the use of plain language, a large part of the review also focused on annual leave shutdown clauses.
The timing of the review is significant because of the upcoming Christmas / New Year holiday period.
The review introduced a model term for annual leave during temporary closures. As a result, relevant employers can no longer force employees to take unpaid leave during a shutdown period. The FWCFB majority said the previous unpaid leave requirement was unfair because it effectively deprived employees of work and pay.
Learn more about this issue with our answers to common questions.
When do the annual leave shutdown provisions apply?
The annual leave shutdown provisions apply if:
- You employ workers who are covered by a relevant award; and
- You intend to shut down all or part of your operation for a particular period (temporary shutdown period), for example, during the Christmas – New Year break; and
- You require affected employees to take paid annual leave during the temporary shutdown period
Can I require my employees to take annual leave?
You can require your employees to take paid annual leave where they have an accrued entitlement. It must be a reasonable requirement. What is reasonable depends on the circumstances, but it may include:
- The employee’s needs
- Your organisation’s needs
- Any agreement already made with the employee
- How your organisation usually operates
- Your organisation’s usual practice at the time of year that shutdown is being considered
- How much notice you’ve given the employee
We recommend that you contact us to discuss whether your proposed annual leave direction is reasonable.
How much notice should I give of the planned temporary shutdown?
You must give affected employees at least 28 days’ notice in writing of:
- The temporary shutdown period; and
- Your requirement that they take annual leave during the shutdown
It must be a reasonable amount of time in the circumstances. You can make an agreement with the employee for a shorter notice period. However, we recommend that:
- The agreement is in writing; and
- Before agreeing, the employee has had at least 24 hours to consider it and seek independent advice
- You seek our advice about whether a shorter notice period is reasonable in the circumstances
If you employ a worker after the 28 days have commenced, you need to notify them of the shutdown as soon as possible.
What information should the written notice include?
The written notice should include:
- The date
- The mode of delivery to the employee (for example, by hand or by email)
- That there will be a temporary shutdown requiring them to take annual leave
- The reason for the shutdown
- When the shutdown will start and end
- When the employee is required to return to work
- The name and contact details of your organisation’s representative (for example, a human resources officer, manager or team leader) if the employee has any questions or concerns
What happens if an employee doesn't have enough accrued annual leave?
If your employee doesn’t have enough accrued annual leave to cover the shutdown period, you can make an agreement with them for an advance on their annual leave.
Before giving notice of a shutdown, we recommend that you:
- Communicate with your employees about their annual leave entitlements
- Where there’s a shortfall, ask the employee whether they wish to take annual leave in advance
- Confirm the agreement in writing with the employee
Contact us for advice if the employee doesn’t agree to an advance on their annual leave.
What happens if I need some staff to work during the temporary shutdown period?
As the employer, it’s your right to continue operations with scaled-back staff numbers during the temporary shutdown period.
However, having a scaled-back operation instead of ceasing work may mean that, for operational reasons, you must refuse an employee’s request for annual leave. But it’s also true that you can’t unreasonably withhold a leave request, so you would need to consider whether another employee could do the work.
If you intend to scale back your operations during the shutdown period, act as soon as possible to identify the employees who should continue working. Bear in mind that some employees will have already booked holidays, especially if they’re used to the organisation closing completely over the Christmas / New Year break.
Notify those employees in writing as soon as possible that you need them to continue working. We recommend giving them a minimum of 28 days’ notice.
The written notice should include:
- The date
- How the notice is delivered to the employee (for example, by hand or by email)
- That they will be required to continue working during the temporary shutdown because the organisation will be operating with reduced staff
- The reason why you need them to continue to work
- The dates of any time that they may take off work over this period
- Whether the time off will be annual leave
- The name and contact details of your organisation’s representative (for example, a human resources officer, manager or team leader) if the employee has any questions or concerns
And finally
The model clause is likely to come into effect by November 2022. You may experience uncertainty over how the clause will operate and whether you meet all the requirements. For these reasons, we recommend you seek our help in managing annual leave during a temporary shutdown.