Closure Countdown – Annual Leave and Shutdown Rule Changes

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Closure Countdown Annual Leave and Shutdown
Rule Changes
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• With Christmas less than 90 days away, employers
  should be turning their mind to planning and
  confirming their Christmas/New Year shutdown
  arrangements.
• What is a shutdown?
• A shutdown, sometimes referred to as a close
  down, occurs when an employers business (or part
  of the business) temporarily shuts down for a
  period of time. Shutdowns usually occur during
  holiday periods such as Christmas/New Year, when
  there is a decrease in general business activity
  or at other times when the specific business is
  not in demand.

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• As part of the plain language review of modern
  awards, the Full Bench proposed a draft model
  clause in relation to annual leave shutdown
  provisions in modern awards.
• Previously, the modern awards contained different
  rules in relation to providing notice of taking
  annual leave during a shutdown and whether or not
  an employer could direct an employee to take
  annual leave in advance or leave without pay if
  there is insufficient accrued annual leave.
• In May 2023, many modern awards were amended to
  insert the model clause to replace existing
  shutdown clauses in 78 awards (with minor
  amendments to individual awards).

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• Shutdown model clause
• The model clause, and the new shutdown rules
  provide that if an employer intends to
  temporarily shut down all or part of its
  operation and wants affected employees to take
  annual leave during that period then

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• The employer must give affected employees 28 days
  written notice of the temporary shutdown period
  (or shorter period agreed between the employer
  and majority of relevant employees).
• The employer may direct employees to take a
  period of accrued annual leave during the
  temporary shutdown period. The direction must be
  in writing and must be reasonable.
• If an employee does not have sufficient annual
  leave accrued, then the employer and employee may
  agree to take leave without pay, or to take
  annual leave in advance.

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• Employers should refer to the applicable modern
  award for the specific shutdown provisions.
• Importantly the new shutdown rules will require
  employers to manage annual leave requests during
  the year to ensure that there is sufficient leave
  to cover the shutdown period. Otherwise, there
  must be agreement for an employee to take leave
  in advance or leave without pay.

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• Modern award and enterprise agreement-free
  employees
• For employees who are not covered by a modern
  award or enterprise agreement, the Fair Work Act
  2009 (Cth) (FW Act) will apply.
• Section 94(5) of the FW Act provides that an
  employer can require an employee to take a period
  of paid annual leave but only if the requirement
  is reasonable.  Reasonableness includes the
  employers enterprise being shut down for a
  period (for example, between Christmas and New
  Year).

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• Under section 94(6) of the FW Act, an employer an
  employee may agree on when and how paid annual
  leave may be taken including taking paid annual
  leave in advance of accrual.
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