New shutdown provisions have taken effect in many awards this month, including the Vehicle Repair, Services and Retail Award, Manufacturing and Associated Industries and Occupations Award and Clerks – Private Sector Award.
On 22 December 2022, the full bench of the Fair Work Commission determined that the below model clause would replace the existing shutdown clauses in 78 awards (subject to adaptions for each individual award).
XX.XX Direction to take annual leave during shutdown
(a) Clause XX.XX applies if an employer:
- intends to shut down all or part of its operation for a particular period (temporary shutdown period); and
- wishes to require affected employees to take paid annual leave during that period.
(b) The employer must give the affected employees 28 days’ written notice of a temporary shutdown period, or any shorter period agreed between the employer and the majority of relevant employees.
(c) The employer must give written notice of a temporary shutdown period to any employee who is engaged after the notice is given under clause XX.XX(b) and who will be affected by that period as soon as reasonably practicable after the employee is engaged.
(d) The employer may direct the employee to take a period of paid annual leave to which the employee has accrued an entitlement during a temporary shutdown period.
(e) A direction by the employer under clause XX.XX(d):
- must be in writing; and
- must be reasonable.
(f) The employee must take paid annual leave in accordance with a direction under clause XX.XX(d).
(g) In respect of any part of a temporary shutdown period which is not the subject of a direction under clause XX.XX(d), an employer and an employee may agree, in writing, for the employee to take leave without pay during that part of the temporary shutdown period.
(h) An employee may take annual leave in advance during a temporary shutdown period in accordance with an agreement under clause XX.XX.
(i) In determining the amount of paid annual leave to which an employee has accrued an entitlement, any period of paid annual leave taken in advance by the employee, in accordance with an agreement under clause XX.XX, to which an entitlement has not been accrued, is to be taken into account.
(j) Clauses XX.XX to XX.XX do not apply to a period of annual leave that an employee is required to take during a temporary shutdown period in accordance with clause XX.XX
The majority expressed the view that the Fair Work Act 2009 (Cth) (FW Act) does not include a power for the FWC to include terms about the stand-down of employees in an award and existing clauses which permit employees to be directed to take leave with pay, or to be stood-down or stood-off, during a shutdown, are beyond power.
Impact of the new shutdown provisions
Employers will no longer be able to direct employees to take unpaid leave during a shutdown period if they do not have sufficient annual leave accrued to take for the full period of the shutdown.
These new requirements are summarised as follows:
- An employer must provide at least 28 days’ written notice of the temporary shutdown period to all impacted employees (and as soon as reasonably practicable for any employees engaged after the notice). The notice period can be reduced through an agreement between the employer and the majority of impacted employees.
- An employer may direct employees to take their accrued paid annual leave during a temporary shutdown. The direction to take annual leave must be in writing and reasonable.
- If an employee does not have enough accrued paid annual leave to cover the whole temporary shutdown, the employer and employee may agree in writing to:
- period of leave without pay; or
- annual leave in advance in accordance with the relevant award.
- The employee will be paid for any public holidays during the shutdown period that fall on days they would normally work.
It is arguable that a clause in an employment contract which provides for a stand down or leave without pay during a shutdown may mitigate the requirement to pay employees.
The majority stated at paragraph  of the Decision:
We do not accept that the removal of existing provisions permitting an employee to be directed to take leave with pay or stood down if they do not have sufficient accrued annual leave will necessarily have the legal effect or practical effect that an employee in this situation will have to be paid. As to the legal effect, this will depend upon the applicability of s 524, the terms of the employee’s contract of employment, as well as any applicable enterprise agreement. In relation to s 524, there are likely to be many circumstances in which s 524(1)(c) applies…
Until there is clarity on whether employers will be able to rely on the employment contract as a written agreement with the employee to take unpaid leave during a shutdown, we recommend that employers confirm such an agreement with employee in writing for each shutdown in accordance with the relevant award.
What should employers do now?
Employers must prepare for temporary shutdowns by understanding the new provisions and their implications. Here are some tips to help navigate the new provisions:
- Plan ahead: Determine the shutdown dates, review employee leave balances, and consider any operational impacts.
- Communicate with employees: Provide 28 days’ written notice of the shutdown period and the requirement to take annual leave. If a shorter notice period is required, negotiate with the majority of impacted employees to reduce the notice period.
- Be reasonable: Consider the needs of both the business and employees when requiring annual leave. Be prepared to work with employees to find a mutually beneficial solution.
- Explore alternative leave options: Find alternative leave options for employees who do not have enough annual leave to cover the shutdown period e.g. accrued time off, taking annual leave in advance, or taking leave without pay. These arrangements must be agreed upon in writing.
- Manage annual leave: Use s 88 of the FW Act to manage employee annual leave requests to ensure sufficient accrued leave to cover a shutdown period. The majority observed at paragraph  of the Decision that “…where it is an established feature of an employer’s business, or a relevant part of it, to shut down in the Christmas/New Year period, it would be unlikely that a refusal to agree to a leave request which would leave the employee with insufficient accrued leave to cover the shutdown period would be unreasonable within the meaning of s 88(2) unless there were some strong countervailing factors pertaining to the individual concerned”.
- Public holidays: Pay employees for any public holidays that fall during the shutdown period on days they would normally work.
Employer Assist provides all members with advice regarding all aspects of your workplace and employment law. We can assist you in understanding and complying with your obligations in relation to the new shutdown provisions.
Please contact Employer Assist on (07) 3376 6266 or firstname.lastname@example.org if you require any assistance.
This article is intended for information purposes only and should not be regarded as legal advice. Please contact Employer Assist for advice.
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