New Rules for Annual Leave During Shutdowns: What You Need to Know
As of May 1, 2023, there will be changes in the rules governing annual leave during temporary shutdowns for many awards. Shutdowns are temporary closures of businesses, typically during holidays such as Christmas and New Year. If you’re unfamiliar with shutdowns, you can learn more about them on the Direction to take annual leave during a Shutdown website.
What is Changing?
One of the most significant changes for many employers regarding the new rules for annual leave during shutdowns is the removal of the ability for an employer to direct an employee to take a period of ‘leave without pay’ if that employee does not have enough annual leave accrued to cover the shutdown period. Although some modern awards currently have this provision, most do not.
In August 2022, the Fair Work Commission (FWC) declared their view that current annual shutdown clauses in several modern awards were unlawful because “the Commission has no power to include a provision in an award by which an employer may require an employee to take leave without pay.”
The new model clause in awards means that:
- Employers will only be able to direct their employees to take leave with pay during a shutdown period if the employee has enough annual leave to cover it.
- Employers are required to give employees at least 28 days written notice of a temporary shutdown period.
- Employers may direct employees to take paid annual leave during the shutdown period, but only if it is reasonable and in writing.
- Employers and employees may agree in writing for the employee to take ‘leave without pay’ during the shutdown period.
- If an employee does not have sufficient annual leave accrued to cover the shutdown period, they may take annual leave in advance.
It’s worth noting that employees will be paid for any public holidays that fall within the shutdown period and that they would have otherwise worked.
What should employers do?
To comply with the new regulations regarding annual leave during temporary shutdowns, employers must plan far enough in advance to allow for the provision of the required written notification of a temporary shutdown period. Employers should assess their internal policies and processes that address shutdown times to ensure they comply with the updated rules.
The final determinations for each modern award are now available and can be found in the New Shutdown Provisions on the FWC website. The changes serve as a timely reminder for employers to review and understand the specific award that applies to their company and employees. By doing so, they can ensure they are following the new rules and avoid any potential legal issues in the future.
