Annual Shutdown and Unpaid Leave changes

Impact on employers and employees

Generally, when businesses temporarily shut down over Christmas/New Year, employers have been able to direct their employees to take annual leave or, where they have no annual leave entitlements available, employers have been able to direct their employees to take unpaid leave.

As a result of changes to 78 Awards, from 1 May 2023, employers will no longer be permitted to direct their employees to take unpaid leave where they do not have a sufficient accrual of annual leave to cover the shutdown.

The recent findings of the Fair Work Commission were, that making a direction to an employee to take unpaid leave was effectively a stand down, and the Fair Work Act 2009 only permitted employees to be stood down in limited circumstances, which did not include a temporary stoppage of operations such as an annual shutdown.

Award Covered Employees 

Under the changes to the Awards listed in the Commission’s decision here, employers can still issue a direction to employees to take annual leave during a temporary shutdown if the direction is in writing, is reasonable and their employees have accrued sufficient annual leave entitlement.

In assessing reasonableness, the following factors are relevant:

  • the needs of the employee and the business
  • any agreed arrangement with the employee
  • custom and practice of the business
  • timing of the direction or requirement to take leave
  • whether the length of the period of notice given is reasonable.

Each Award stipulates the period of notice which must be given to all employees of the shutdown (generally between 28 days and two months) unless a shorter period is agreed with the majority of employees, or for employees who are engaged after notice is given, as soon as reasonably practicable after they have been engaged.

Employers are no longer permitted to direct employees to take unpaid leave where their annual leave entitlements have been exhausted.

However, under the changes, employers can still:

  • agree with an employee in writing that they take a period of unpaid leave; or
  • come to an arrangement with the employee to take annual leave in advance resulting in a negative annual leave balance.

But, if employees do not agree to the above, then they will be entitled to be paid wages during the shutdown period.

Award and Agreement Free Employees 

For award and agreement-free employees, employers can still require them to take a period of annual leave if the requirement is reasonable.

A requirement to take annual leave may be reasonable if, for example:

  • the employee has an excessive annual leave balance
  • the business is being temporarily shut down for a period (such as between Christmas and New Year).

Just like Award Covered Employees, Award/Agreement Free employees cannot be directed to take unpaid leave if they do not have sufficient accrued annual leave.

If you have questions in relation to the above, or any other matters, please do not hesitate to contact our office on 1300 620 345.

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