Changes To Shut­down Leave Rules For 78 Mod­ern Awards

The Fair Work Com­mis­sion (‘FWC’) is required to con­duct a review of the mod­ern award process every 4 years under sec­tion 156A of the Fair Work Act 2009 (Cth) (‘FWA’). This time around, it will be amend­ing 78 dif­fer­ent mod­ern awards to include a new mod­el term’. This mod­el term’ is intend­ed to replace the exist­ing shut­down claus­es in these awards which relate to an employ­er’s abil­i­ty to direct its employ­ees to take annu­al leave when it shuts down all or part of its oper­a­tions. The most com­mon exam­ple would be employ­ers shut­ting down for the Christmas/​New Year hol­i­days every year. Ordi­nar­i­ly, there would be no issues if every employ­ee has accrued suf­fi­cient annu­al leave lead­ing up to this peri­od. How­ev­er, things get a lit­tle more com­pli­cat­ed when employ­ers find them­selves in sit­u­a­tions where an employ­ee does not have enough annu­al leave accrued to cov­er the employ­er’s shut­down peri­od. Note, these changes will take effect on 1 May 2023.

Some of the 78 mod­ern awards which will be amend­ed include but are not lim­it­ed to:

  1. Clerks — Pri­vate Sec­tor Award 2020
  2. Hos­pi­tal­i­ty Indus­try (Gen­er­al) Award 2020
  3. Mis­cel­la­neous Award 2020
  4. Pro­fes­sion­al Employ­ees Award 2020

The impe­tus for this Change 

The wheels were set in motion on 25 August 2022 when the FWC decid­ed that amend­ments to cer­tain mod­ern awards were required specif­i­cal­ly in rela­tion to the shut­down claus­es in those awards (‘August Deci­sion’). On 22 Decem­ber 2022, the Full Bench of the FWC (‘Full Bench’) decid­ed that these changes to the 78 awards were need­ed in order to meet the mod­ern awards objec­tive in FWA134(1) (as var­ied by the Fair Work Leg­is­la­tion Amend­ment (Secure Jobs Bet­ter Pay) Act 2022). The issue the FWC had to grap­ple with was pre-exist­ing shut­down claus­es con­tained in these 78 awards con­fer­ring pow­ers on employ­ers to make their employ­ees take leave with­out pay in the event that (i) the employ­er shuts down all or part of its oper­a­tions and (ii) the employ­ee does not have suf­fi­cient annu­al leave accrued.

The FWC was of the view that these shut­down claus­es were incon­sis­tent with the FWA as “…there is no gen­er­al enti­tle­ment to take leave with­out pay under either the Nation­al Employ­ment Stan­dards or any award and (ii) the estab­lish­ment of an unde­fined enti­tle­ment to take such leave in a clause con­cerned with tak­ing of annu­al leave would not be appro­pri­ate”.[1] It was fur­ther held that it would be unfair if employ­ers were per­mit­ted to direct employ­ees to take leave with­out pay dur­ing a shut­down, uncon­strained by any require­ments as to the rea­son­able­ness, pri­or con­sul­ta­tion or (in most cas­es) the dura­tion of the shut­down, in cir­cum­stances where the employ­ees them­selves have no enti­tle­ment to take, or even request, leave with­out pay if they wish to do so”.[2]

Require­ments under the New Mod­el Term’

In the event an employ­ee does not have enough annu­al leave or leave in advance to cov­er a shut­down peri­od, employ­ers will no longer be able to direct their employ­ees to take unpaid leave dur­ing this peri­od. Some of the key terms under the new Mod­el Term are:

  • employ­ers are required to give employ­ees 28 days’ writ­ten notice of a tem­po­rary shut­down period;
  • an employ­er may direct an employ­ee to take paid annu­al leave (assum­ing the Employ­ee has suf­fi­cient annu­al leave accrued) dur­ing this shut­down peri­od but, the direc­tion must be rea­son­able and in writing;
  • employ­ers and employ­ees may agree, in writ­ing, for the employ­ee to take unpaid leave dur­ing the shut­down peri­od; and
  • an employ­ee may take annu­al leave in advance if the employ­ee does not have suf­fi­cient annu­al leave accrued to cov­er the shut­down period.

Impact on Employers

Employ­ers should con­sid­er review­ing their inter­nal poli­cies, pro­ce­dures, and guide­lines that cov­er shut­down peri­ods and annu­al leave and mak­ing the nec­es­sary changes to ensure com­pli­ance with the new Mod­el Term. This includes upgrades to applic­a­ble HR and pay­roll processes.

[1] [2022] FWCFB 161 at [149].

[2] [2022] FWCFB 246 at [64].