New rules for unpaid leave during temporary shutdown periods

Employers can no longer direct employees to take unpaid leave during shutdowns

BY Chamberlains Law Firm 21 Sep 2023

Shutdown periods are a common business practice during calendar holiday periods such as over the Christmas and New Year period. A shutdown period refers to a particular period when a business is temporarily closed.

Employees with an entitlement to annual leave are often directed to take annual leave during these periods. As such, employees will often accrue and keep their annual leave balance, in forethought of ensuring their balance will cover them during the shutdown period. However, where an employee has an insufficient balance of annual leave hours to cover this period, they often find themselves in a predicament. In this instance, the leave policy of many employers will require the employees to take unpaid leave.

What has changed?

As of 1 May 2023, employers are prohibited from directing employees covered by any of the 78 impacted modern awards to take unpaid leave during any business shutdown periods.

This change follows the 22 December 2022 decision of the full bench of the Fair Work Commission to amend 78 of the modern awards by implementing a clause which protects employees from being forced to take unpaid leave during shutdown periods. These amendments are now in operation. Some of the impacted awards impacted include:

Clerks—Private Sector Award 2020 (clause 32.5).
General Retail Industry Award 2020 (clause 28.4).
Hospitality Industry (General) Award 2020 (clause 30.4).
Professional Employees Award 2020 (clause 18.4).

The changes also impose an obligation of employers (in all 78 impacted modern awards) to provide their employees with a minimum of 28 days’ notice in writing, notifying employees of the dates and details of the temporary shutdown period.

How does this affect you?

Employers of employees covered by any of the 78 impacted modern awards need to be aware that they are now prohibited from directing employees to take unpaid leave during a shutdown period. Employees equally should be aware of their entitlements regarding leave during their workplace shutdown period.

As the Christmas and New Year period approaches, employers must be aware of their obligations in the following circumstances.

If the employee has a sufficient annual leave balance:
- an employer cannot direct the employee to take annual leave
- can mutually agree with the employee to take paid annual leave during the shutdown period. This agreement must be in writing.

If the employee does not have a sufficient leave balance:
- the employee can come to a mutual agreement with the employer to take unpaid leave for the shutdown period. This must have the genuine consent of the employee and must be in writing; or
- if the employee’s applicable Award permits, the employee can agree to take annual leave in advance during the shutdown period.

If the employee does not have a sufficient leave balance and does not agree to take unpaid leave or leave in advance:
- the employer can allow the employee to work if this is in line with the needs of the business; or
- the employer must pay the employee for the time for which annual leave cannot be taken.

The changes significantly impact the management of employee leave during shutdown periods. Navigating these changes can be complex for many employers and ensuring that your business is protected can be difficult. Now is a crucial time to review any existing employment contracts, leave policies, or procedures to ensure compliance with the new provisions and protection of your business from potential liability.