Annual Leave Shutdown provisions in modern awards

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Posted February 19, 2023

Background

The Fair Work Commission (FWC) has decided to significantly vary the annual leave shutdown provisions in 78 modern awards including the Hair and Beauty Industry Award 2020 (the Award) by replacing them with a new model annual leave shutdown clause which is set out below.

The FWC will publish proposed determinations setting out the specific changes to the Award.

The most significant change will be the ability for the employer and employee to agree on taking a period of unpaid leave during a shutdown.

Model clause

XX.XX Direction to take annual leave during shutdown

(a) Clause XX.XX applies if an employer:

(i) intends to shut down all or part of its operation for a particular period (temporary shutdown period); and

(ii) 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):

(i) must be in writing; and

(ii) 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

 

What is the operative date of the changes?

The new shutdown provisions will be operative on 1 May 2023.

What potential options are available to employers?

Where employees do not have sufficient annual leave to cover the full shutdown period, employers should aim to reach agreement from employees to take a period of unpaid leave. In these circumstances, an employee might also agree to use other forms of paid leave to cover the shutdown period such as taking time off in lieu of overtime or taking annual leave in advance.

Employers should also manage annual leave throughout the year to ensure that employees maintain enough leave to cover a future shutdown period. The Fair Work Act 2009 (Cth) allows an employer to refuse an employee’s request for annual leave if the refusal is reasonable.

During this decision, the FWC expressed a view that refusing an annual leave request may be reasonable if its approval would result in the employee having insufficient annual leave to cover a future shutdown.

More information

HABA members can call the HABA Advice Line