With the festive season around the corner many businesses will be considering a shutdown period over the holidays. This then raises the critical question of whether an employer can direct their employees to take paid annual leave over the shutdown and what happens if employees do not have sufficient leave to cover the entire period.

Whether an employer can direct employees to take annual leave during a temporary shutdown period will depend on if the employee is covered by a modern award or if the employee is award-free.

Award-Covered Employees

All modern awards include a provision that regulates an employer’s ability to direct employees to take annual leave during a temporary shutdown (for example, over Christmas and New Year).

The provision allows an employer to direct an employee to use their annual leave during the temporary shutdown period. However, an employer is required to give the affected employees written notice of a temporary shutdown period – commonly this is 28 days (unless a shorter period is agreed).

Award-Free Employees

Section 94(5) of the Fair Work Act 2009 (Cth) (FW Act) provides that an employer may require an award-free employee to take a period of paid leave, but only if the requirement is reasonable.

The section provides instances that may be considered reasonable will include (but are not limited to):

1. The employee has accrued an excessive amount of paid annual leave; or
2. The employer’s business is being shut down for a period (e.g. over Christmas and New Years).

Insufficient Annual Leave

Importantly, there is no right to direct an award-covered or award-free employee to take leave without pay unless this is stipulated in the employee’s contract of employment.

Accordingly, if an employee does not have sufficient annual leave to cover the shutdown period, the employer and employee must agree in writing for the employee to take leave without pay for that period. In the event the employee does not agree to take leave without pay, an employer may need to consider alternative options such as taking leave in advance or consider whether the employee can return to work during the shutdown period.

Key Takeaways

When planning for an end of year shutdown, businesses should:

• Check whether any applicable modern award contains term about directing employees to take annual leave over a temporary shutdown (including the required notice period).
• Provide notice to employees in writing – this should include the proposed dates of the shutdown.
• Start a dialogue with any employee who does not have sufficient accrued leave to cover the shutdown period. Alternate options may include taking leave without pay, taking leave in advance of accrual or performing work over the shutdown period.

For further assistance or specialised employment law advice, contact Workdynamic at https://workdynamic.com.au/contact/.

Disclaimer: The information in this article is of a general nature and is not intended to address the circumstances of any particular individual or entity. The information in this article does not constitute legal advice and should not be relied upon as such. You should obtain specific advice relevant to your circumstances.