Preparing for the annual close down

With the Christmas period soon upon us, many businesses will be considering whether to close down and for how long. Strict rules apply for close downs, so everyone needs to be prepared.

The rules governing periods of close down for employers and employees under the national workplace relations system are derived from the National Employment Standards (NES) in the Fair Work Act and modern awards or enterprise agreements.

Award/agreement covered employees

The NES permits modern awards and agreements to allow employers to direct employees to take annual leave in reasonable circumstances. Many modern awards include such provisions in relation to annual close downs.

Award provisions for close downs vary considerably:

• Some limit a close down to the period around Christmas and New Year.
• A number of awards allow for the employer to have 1 or 2 separate close down periods in a year; additionally, some of these provide for up to 3 close downs in a year by majority employee agreement. Generally, one close down must be for at least 14 days, including non-working days.
• In some awards, if a workplace closes down more than once in a year, one period must be for at least 21 days, including non-working days, unless the employer and a majority of employees agree to a lesser period.
• Some awards do not limit the number or length of close downs.
• Some awards provide for one close down, but do not specify the length.
• Some awards do not expressly provide for close downs.

Award/agreement free employees

The NES allows an employer to direct an award/agreement free employee to take annual leave, provided that the requirement is reasonable. This could include a close down over the Christmas and New Year period.

Employers should communicate with employees in advance that the business has an annual close down, and during the Christmas/New Year period they are required to take annual leave or unpaid leave if they don’t have enough accruals. This could be set out in an employment contract or agreement or a company policy.

Implementing a Close Down

Notice

Modern awards with close down provisions require the employer to provide employees with notice when directing annual leave to be taken. The period of notice is generally either 4 weeks or 1 month, with some awards requiring notice of 2 months. A number of awards require the notice to be in writing; however, Ai Group recommends that employers give notice in writing in all cases.

The following is an example of a notice to employees of a close down:

Christmas / New Year Close down
Employees are advised that the company’s operations will close down for the purposes of granting annual leave to employees (other than those employees specifically notified to the contrary), from the ordinary finishing time on Friday 17 December 2021. Work will resume at the normal commencement time on Monday 3 January 2022.

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

Many modern awards have a provision that enables an employer to place an employee on unpaid leave for any period of the close down if the employee does not have enough leave accrued.

The purpose of a close down is to allow employees to take their annual leave, so whilst there may be a provision allowing the employer to place an employee on unpaid leave, this would only apply in limited cases. For example, this may include a new employee who has not had enough service to have accrued sufficient annual leave to cover the period.

Managing requests for annual leave

Employers intending to exercise their right to implement an annual close down period are advised to manage annual leave requests from employees during the year to ensure that employees will have sufficient annual leave accrued at the time of the close down.

An employer may have regard to the operational requirements of the business in considering requests for annual leave (which may include the need to keep sufficient annual leave accrued for a planned close down) but must not unreasonably refuse to grant leave.

Where to find more information

Go to the Fair Work Ombudsman website