Summary of Changes

Late last year, a Full Bench of the Fair Work Commission (Commission) decided to replace industry or occupation specific ‘annual leave close down’ clauses in 78 modern awards with a new model clause.

The model clause:

• requires an employer to provide at least 28 days’ written notice of the temporary shutdown. However, a shorter period of notice can be agreed to between the employer and the majority of relevant employees
• only allows an employer to direct employees to take a period of accrued, paid annual leave during the shutdown, in which case the direction must be:
  • in writing
  • reasonable
• does not allow an employer to direct an employee to take unpaid leave or annual leave in advance.

In making this decision, the Full Bench considered that the Commission had no power under the Fair Work Act 2009 (Cth) (FW Act) to include a term in any modern award that allows an employer to unilaterally direct an employee to take leave without pay during a shutdown, because this effectively amounts to an unpaid stand down.

A stand down is different to an organised and communicated shutdown. It occurs in a limited set of circumstances when an employee cannot be usefully employed by the employer due to circumstances beyond the employer’s control (e.g. a stoppage of work for which the employer cannot reasonably be held accountable).

Implications

Given employees who are covered by the 78 affected modern awards cannot now be directed to take a period of unpaid leave under the model clause during a temporary shutdown, significant challenges could arise for employers, particularly where there are employees with insufficient accrued, paid annual leave to cover some or all of the shutdown period.

If an employee does not have enough accrued, paid annual leave for any upcoming shutdown period, there are other options available to the employer and these could include reaching agreement with the employee for them to: take paid annual leave in advance, subject to any requirements under the relevant modern award;

• take leave without pay; or
• use other accrued time off (if applicable).
• take other types of paid leave that might be available to them (for example, accrued long service leave)

All of these options will generally require the agreement of the employer and the employee. Any such agreement should be recorded in writing and signed by both parties.

Where agreement cannot be reached though, this could leave the employer in a very difficult situation. For example, unless a relevant enterprise agreement allows the employer to direct the taking of unpaid leave or the employer is otherwise lawfully entitled to stand down the employee in the individual circumstances (for example, if a head contractor shuts down a construction site and employees of a subcontractor cannot then not be usefully employed during the shutdown for reasons beyond the subcontractor’s control), an employee with insufficient accrued annual leave would need to be paid during the shutdown even though they are not working, or found useful work to perform.

What should employers do?

To minimise any issues this holiday season, employers planning to have a shutdown should:

• check what the relevant modern award, enterprise agreement or employment contract says about having a shutdown or standing employees down; consider affected employees’ accrued annual leave balances, and whether or not these will be sufficient in all cases to cover the full length of the planned shutdown
• if there is no ability to direct employees to take leave without pay during any upcoming shutdown or to otherwise lawfully stand them down in the circumstances
• seek the agreement of employees who have insufficient paid annual leave to cover the shutdown period to take other accrued leave, leave without pay, paid annual leave in advance or other accrued time off instead; or
• otherwise seek to identify other useful work that those employees could perform during the shutdown period.

More generally, it is recommended that employers:

• manage leave requests throughout the year to ensure that employees have sufficient accrued annual leave for any shutdown period. This may require employers to refuse earlier leave requests if they would result in the employee having insufficient leave for a later shutdown
• update employment contracts and possibly even consider bargaining for an enterprise agreement, if necessary, to overcome (so far as can be lawfully done) any issues arising out of these changes to leave direction during a shutdown period.

Further information / assistance regarding the issues raised in this article is available from the authors, Louise Hogg, Partner and Lilian Zhou, Senior Associate, or your usual contact at Moray & Agnew.