Many modern awards presently contain provisions that allow employers to direct employees to take leave without pay or leave in advance if they do not have sufficient annual leave available to cover a shutdown period (such as over the Christmas and New Year period).
In August 2022, the Fair Work Commission (FWC) reviewed these provisions and determined that 78 awards should be updated to include a model shutdown provision which will replace the pre-existing shutdown clauses included in those awards.
The reasons for the change included because the FWC considered that such provisions are inconsistent with the Fair Work Act, and that it is not fair for an employer to direct an employee take leave without pay during a shutdown, unconstrained by any requirements as to reasonableness, in circumstances where the employee has no entitlement to take or request leave without pay.
The FWC invited submissions from relevant parties regarding its decision, of which many opposed the change, however the FWC ultimately determined that the new provisions would come into effect from 1 May 2023.
In summary, from 1 May 2023:
- Employers must give affected employees 28 days’ written notice of any temporary shutdown period, or any shorter period as agreed between the parties.
- Employers may direct employees in writing to take a period of paid annual leave if the employee has an accrued annual leave entitlement, providing the direction is reasonable.
- Should an employee not have sufficient annual leave to cover the whole shutdown period, by written agreement the employee may take leave without pay or annual leave in advance during the temporary shutdown.
- Employees can no longer be required to take leave without pay if they do not have sufficient annual leave or leave in advance to cover the whole period of the shutdown.
The implication of this decision is that employees who do not have sufficient accrued annual leave to cover the shutdown period may in some circumstances be entitled to wages during the shutdown period if they do not agree to take pay without leave or leave in advance.
What does this mean for employers?
In light of this decision employers should consider their rights and obligations with respect to shutdown periods following 1 May 2023, and whether directing employees to take leave without pay where they do not have sufficient annual leave accrued to cover the shutdown will now be lawful. This may also impact whether employers approve annual leave requests throughout the year prior to any shutdown. Employers should seek advice before directing an employee to take unpaid leave or leave in advance and consider whether an award applies that has temporary shutdown provisions.