Changes to Modern Awards and Compulsory Shutdown

Overview

In many of the Modern Awards there are provisions that allow Employers the ability to direct employees to take leave without pay or leave in advance (negative balances ) if they do not have sufficient annual leave to be able to cover a shutdown period (This usually occurs over Christmas and New Year period).

Following a review in August 2022, The Fair Work Commission updated the shutdown provisions in 78 awards. It was determined and decided upon to update the Awards with a model shutdown provision to replace the previous clauses.

The reasons for the change included because the FWC considered that such provisions are inconsistent with the Fair Work Act, and that it is not fair for an employer to direct an employee take leave without pay during a shutdown, unconstrained by any requirements as to reasonableness, in circumstances where the employee has no entitlement to take or request leave without pay.

As part of the review process, the Fair Work Commission invited feedback from relevant parties surrounding its decision. While many were not in favor of the change, the Fair Work Commission made the final decision, and the new provisions will come into effect from 1st May 2023.

The changes are as follows:

• Employers must give affected employees 28 days’ written notice of any temporary shutdown period, or any shorter period as agreed between the parties.
• Employers may direct employees in writing to take a period of paid annual leave if the employee has an accrued annual leave entitlement, providing the direction is reasonable.
• Should an employee not have sufficient annual leave to cover the whole shutdown period, by written agreement the employee may take leave without pay or annual leave in advance during the temporary shutdown.

Employees can no longer be required to take leave without pay if they do not have sufficient annual leave or leave in advance to cover the whole period of the shutdown.

The last point is obviously the biggest change to the process. The consequence of this decision is that employees who do not have sufficient accrued annual leave to cover the shutdown period may in some circumstances be entitled to wages during the shutdown period if they do not agree to take pay without leave or leave in advance. Employers will not be able to be imply due force to get Employees to agree to take leave without pay.

So what can Employers do to avoid this?

Employers should consider their rights and obligations with respect to shutdown periods following the vesting date 1 May 2023, and whether directing employees to take leave without pay where they do not have sufficient annual leave accrued to cover the shutdown will now be lawful. This may also impact whether employers approve annual leave requests throughout the year prior to any shutdown. Before requests are granted, it would be useful to forward calculate leave balances for that time.  Employers should seek advice before directing an employee to take unpaid leave or leave in advance and consider whether an award applies that has temporary shutdown provisions. Lucky Now Actually can provide this advice. If you need help email contact@nowactually.com.au