Christmas Shutdown & Annual Leave Directions

In May, we provided a brief update on the Fair Work Commission’s (FWC) decision to amend employer rights relating to award-covered employees to take leave during a shutdown period, commonly the Christmas / New Year period.

As we approach Christmas again, we thought it would be prudent to remind businesses of their updated rights and obligations in relation to award-covered employees who may be affected by a shutdown.

The Updated Requirements

As a result of the amendments, employers are now required to notify employees of the proposed shutdown before they can lawfully direct their employees to take paid annual leave during that shutdown. The FWC has provided a model clause which will be implemented into the applicable modern awards. By way of summary, the model clause states that where employers wish to implement a shutdown period, the employer must:

  • Give their employees 28 days’ written notice of the shutdown (or as soon as reasonably practicable where an employee is engaged inside the 28-day period); and
  • Only direct an employee to take annual leave during the shutdown period if it has been accrued (direction must be reasonable and in writing).

While the amendment provides some welcome relief to employers who have historically struggled with directing their employees to take annual leave, a consequence of the decision has resulted in employers being unable to direct their employees to take unpaid leave during the shutdown where those employees have not accrued sufficient annual leave.

Consequently, an employer and employee will need to agree in writing for the employee to take leave without pay or alternatively, annual leave in advance (i.e. before it has been accrued). If the employee refuses to take unpaid leave, the employer will have to find work for the employee to perform or pay them for the shutdown period (but only to the extent that accrued annual leave will not cover the entirety of the shutdown period).

Conversely, this amendment has created an avenue for employers to reject annual leave requests: an employer can refuse an annual leave request, if such a request would leave the employee with insufficient accrued annual leave for an upcoming shutdown period.

Notwithstanding the above, it is also important to note that some employers may still have the right to direct their employees to take unpaid leave during a shutdown period under their enterprise agreement or employment contract. For enterprise agreements that are being negotiated post May 2023 and are yet to be lodged, they will be assessed against the new criteria.

If you have questions about any of the above, don’t hesitate to contact our Employment Law Team on (02) 4927 2900.