Alert: Important Annual Leave Development

Earlier this month, the Fair Work Commission amended a total of 78 modern awards to include a model clause regarding the ability of employers to direct employees to take annual leave during a temporary shutdown period, for example, between Christmas and New Year. The affected awards include the Clerks – Private Sector Award, General Retail Industry Award, Hospitality Industry (General) Award, Manufacturing and Associated Industries and Occupations Award, and Real Estate Industry Award.

Key Changes

Previously, the relevant awards permitted employers to direct employees to take a period of annual leave during a temporary shutdown period or, if employees did not have a sufficient amount of accrued annual leave to cover the period, employers could require those employees to take a period of leave without pay. That is no longer the case.

Instead, the new model clause imposes the following requirements:

• Employers must provide employees with 28 days’ written notice of a temporary shutdown period (unless a majority of employees agree to a shorter notice period).
• Any new employees engaged within the 28-day notice period must be provided written notice of the temporary shutdown period as soon as reasonably practicable after they are engaged.
• Employers may only direct an employee to take a period of paid annual leave during a temporary shutdown period if the employee has enough accrued annual leave to cover the entire period.
• If an employee does not have enough accrued annual leave to cover the entire temporary shutdown period, employers may seek to reach a written agreement with the employee to take a period of leave without pay or annual leave in advance during part of all of the temporary shutdown period. If an agreement cannot be reached, the employee will have the right to attend work during the shutdown period.

Employers that do not comply with the new award requirements will be exposed to a range of sanctions, including penalties of up to $82,500 per breach.

Importantly, the above changes do not apply to any award-free employees. Employers may continue to direct award-free employees to take a period of annual leave during a temporary shutdown period provided the direction is reasonable in the circumstances.

Implications for Employers

Businesses and organisations that have employees who are covered by an award containing the new model clause should review their standard employment contracts and policies to ensure they reflect the requirements of that clause. Further, when considering whether to approve any applications for annual leave made by affected employees during the year, employers should take into account whether the employees will have sufficient accrued annual leave to cover any upcoming temporary shutdown periods.