A reminder about Christmas Shutdowns

Annual shutdowns are generally periods where all or most employees in a business are directed to take annual leave.

The NES contain provisions allowing employers to direct an employee to take a period of annual leave in some circumstances. However, the ability to direct annual leave is not the same for all employees and depends on whether the employee is covered by a modern award, an enterprise agreement, or is award/agreement free. In addition, the ability to direct annual leave is subject to a general obligation that the direction be reasonable.

Modern award provisions about shutdowns

Most modern awards contain a model annual leave shutdown clause (Model Clause). The Model Clause allows employers to direct an employee to take annual leave during a temporary shutdown period where:

• The employer provides at least 28 days’ written notice of the shutdown period, or a shorter period if agreed with the majority of employees;
• The employee has sufficient annual leave to cover the shutdown period; and
• The direction to take annual leave is reasonable.

Note that some awards have slightly different requirements regarding the amount of written notice that must be provided. Therefore, it is important to check the relevant award that applies.

What if an employee does not have enough accrued annual leave to cover the shutdown period?

Ideally, employees will have accrued enough annual leave to cover an annual close down. However, there are times when an employee will not have enough annual leave such as employees who recently started employment with the company.

Not having enough annual leave can be challenging when trying to manage a shutdown. If an employee has a small amount of annual leave accrued but not enough to cover the whole period, or no leave accrued at all, employers may need to either:

• Reach agreement with employees to take a period of unpaid leave;
• Allow employees to work;
• Reach agreement with employees to take annual leave in advance;
• Allow employees to use their rostered days off (if the relevant award permits the accrual of rostered days off); or
• Reach agreement with employees to take time off in lieu of overtime worked.

Any agreement reached between the employer and employee should be documented in writing.

When is a direction to take annual leave ‘reasonable’?

The NES require that in order for an employer to direct an employee to take annual leave, the direction must be reasonable.

What is reasonable will depend on the individual circumstances of both employees and the employer.

When considering what is reasonable, the following factors should be considered:

• The needs of both the employee and the employer’s business
• Any agreed arrangement between the employee and the employer
• The custom and practice in the business
• The timing of the requirement or direction to take leave and
• The amount of notice given to the employee to take leave.