With Christmas quickly approaching, employers must understand the rules about employees taking paid annual leave during a shutdown.
A shutdown is when your business (or part of your business) ceases operating and all (or some) of your employees are directed to take annual leave.
This article considers:
- the rules for employers to direct employees to take annual leave during a shutdown; and
- options for employers if employees do not have annual leave and refuse to take unpaid leave.
How do I direct employees to take paid leave during a shutdown?
Award or enterprise agreement-free employees
Section 94(5) of the Fair Work Act 2009 (FW Act) states:
An employer may require an award/agreement free employee to take a period of paid annual leave, but only if the requirement is reasonable.
For modern award and enterprise agreement free employees, there is no express requirement to provide a particular period of notice before directing them to take annual leave. The only requirement is that the requirement is “reasonable”.
The note to section 94(5) states, “A requirement to take paid annual leave may be reasonable if, for example […] the employer's enterprise is being shut down for a period (for example, between Christmas and New Year).”
In any event, we recommend giving as much notice as possible to ensure the requirement to take annual leave for the shutdown is reasonable.
Employees covered by an award or enterprise agreement
Section 93(3) of the FW Act states:
A modern award or enterprise agreement may include terms requiring an employee, or allowing for an employee to be required, to take paid annual leave in particular circumstances, but only if the requirement is reasonable.
If your employees are covered by an award or enterprise agreement, you must comply with any rules regulating when they can be directed to take annual leave, particularly in relation to the notice period to be given before the annual leave starts.
While most modern awards only require 28 days’ or one month’s notice, some require two or three months’ notice. The notice periods in each relevant modern award are detailed at the end of this article.
For example, if employees are covered by the Wine Industry Award and you intend to direct employees to take annual leave from 27 December 2024, the 28 days’ written notice must be given by 29 November 2024.
If a new employee starts after notice is given to other employees, that employee must be given written notice as soon as reasonably practicable.
However, all relevant modern awards state that notice can be given within “any shorter period agreed between the employer and the majority of relevant employees”.
What if I do not give the required notice, or an employee does not have enough leave for the shutdown?
An employee cannot be forced to take leave without pay, or leave in advance, or use their accrued RDO or time off in lieu.
If you fail to provide the required notice, or if an employee has insufficient annual leave to cover the shutdown, you will need to reach agreement with each employee for them to:
- take leave without pay during the shutdown; or
- take leave in advance (i.e. before its accrued); or
- use accrued rostered days off (RDO) or time off in lieu of overtime.
Any agreement must be in writing.
If you are unable to reach agreement, you may need to:
- pay the employee for the shutdown even if the employee performs no work; or
- allow the employee to work.
We recommend seeking advice if you are unable to reach an agreement with employee.
If the employer must allow an employee to work, but the employee’s usual duties are not available, the employer should review the employee’s contract and the applicable modern award to ensure that the employee can be required to perform alternative duties.
We recommend employers monitor and manage employees’ annual leave requests during the year to ensure they have enough leave to cover the shutdown. The Fair Work Commission has stated that it may be reasonable for an employer to refuse a request for annual leave if it would leave the employee with insufficient leave for an upcoming shutdown.
If you would like more information about shutdowns and the legal implications for your business, please contact our Employment and Workplace Relations team at [email protected] or on 8414 3400.
28 days’ notice required to direct employees to take annual leave:
- Aboriginal and Torres Strait Islander Health Workers and Practitioners and Aboriginal Community Controlled Health Services Award
- Aircraft Cabin Crew Award
- Alpine Resorts Award
- Aluminium Industry Award
- Animal Care and Veterinary Services Award
- Banking, Finance and Insurance Award
- Broadcasting, Recorded Entertainment and Cinemas Award
- Business Equipment Award
- Cemetery Industry Award
- Clerks—Private Sector Award
- Coal Export Terminals Award
- Commercial Sales Award
- Educational Services (Post-Secondary Education) Award
- Electrical Power Industry Award
- Food, Beverage and Tobacco Manufacturing Award
- General Retail Industry Award
- Graphic Arts, Printing and Publishing Award
- Hair and Beauty Industry Award
- Health Professionals and Support Services Award
- Higher Education Industry—General Staff—Award
- Hospitality Industry (General) Award
- Hydrocarbons Industry (Upstream) Award
- Journalists Published Media Award
- Legal Services Award
- Local Government Industry Award
- Manufacturing and Associated Industries and Occupations Award
- Mining Industry Award
- Mobile Crane Hiring Award
- Nursery Award
- Nurses Award
- Oil Refining and Manufacturing Award
- Pharmaceutical Industry Award
- Professional Employees Award
- Real Estate Industry Award
- Registered and Licensed Clubs Award
- Restaurant Industry Award
- Salt Industry Award
- Seafood Processing Award
- Security Services Industry Award
- Sugar Industry Award
- Supported Employment Services Award
- Timber Industry Award
- Vehicle Repair, Services and Retail Award
- Water Industry Award
- Wine Industry Award
- Wool Storage, Sampling and Testing Award.
Two month’s notice required to direct employees to take annual leave:
- Ambulance and Patient Transport Industry Award
- Aquaculture Industry Award
- Asphalt Industry Award
- Car Parking Award
- Cement, Lime and Quarrying Award
- Cleaning Services Award
- Concrete Products Award
- Contract Call Centres Award Fitness Industry Award
- Fitness Industry Award
- Gardening and Landscaping Services Award
- Gas Industry Award
- Horse and Greyhound Training Award
- Miscellaneous Award
- Pest Control Industry Award
- Poultry Processing Award
- Premixed Concrete Award
- Racing Clubs Events Award
- Racing Industry Ground Maintenance Award
- Road Transport and Distribution Award
- Road Transport (Long Distance Operations) Award
- Silviculture Award
- Storage Services and Wholesale Award
- Surveying Award
- Telecommunications Services Award
Two months’ notice required to direct employees to take annual leave:
- Building and Construction General On-site Award
- Joinery and Building Trades Award
- Plumbing and Fire Sprinklers Award
- Electrical, Electronic and Communications Contracting Award
Three months’ notice required to direct employees to take annual leave:
- Airline Operations–Ground Staff Award
- Meat Industry Award
- Textile, Clothing, Footwear and Associated Industries Award