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Direction to take annual leave during shutdown clause

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Author: James Sanders, Principal

On 22 December 2022, the Fair Work Commission, as part of its 4-yearly review, handed down its decision which will introduce a model “Direction to take annual leave during shutdown clause” into 78 modern awards from 1 May 2023.

A list of which can be located here.

What does this mean for employers?

Currently, a large number of modern awards allow employers to implement a shutdown period (generally over the Christmas/New Year holiday) and require employees to take annual leave. This is irrespective of whether the employee has sufficient annual leave to cover some or all of the period.

This resulted in employers requiring employees to take unpaid leave or annual leave in advance during a shutdown period.

From 1 May 2023, the model clause will prevent, subject to a written agreement between the employer and employee, the employer enforcing unpaid leave during the shutdown period.

What if the employee does not agree to take unpaid leave?

Where an employee does not have sufficient annual leave to cover the shutdown period (or part of the shutdown period), and they do not agree to take unpaid leave, then the employer is required to either (a) provide the employee with work to complete on their ordinary working days and pay the employee at their usual pay rate or (b) pay employees to be absent for those days which is not to be counted as leave.

In effect, this means that employees who exhaust their annual leave throughout the year, may receive an additional period of paid leave over the shutdown period.

What should employers do?

It is recommended that employers:

  1. exercise diligence when approving annual leave requests from employees to ensure that all employees will have sufficient annual leave to cover the full duration of any shutdown period; and
  2. review and amend their employment agreements to ensure that they contain a written agreement to take unpaid leave during any shutdown period.

If you have any questions regarding the contents of this article or any other employment related issues, please contact the MST LawyersEmployment Law team on 03 8450 0200 or email workplace@mst.com.au.