Employers with employees covered by any of the 78 modern awards impacted by the 1 May 2023 overhaul of business shutdown provisions by the Fair Work Commission should review their arrangements to ensure compliance.
On 22 December 2022, the Full Bench of the Fair Work Commission determined to significantly vary, and ultimately standardise, the shutdown clauses in 78 modern awards.
The new shutdown provisions, which relate to a period when a business temporarily closes (such as during the Christmas and New Year period) took effect from 1 May 2023. A model clause (as shown in paragraph 82 of the FWC decision) was issued to replace the existing provisions within the awards.
In this article, we will examine the implemented changes and discuss how employers can incorporate these amendments into their workplace procedures and prepare for shutdown periods.
What shutdown provisions have changed?
The most important change implemented by the amendments is that employers no longer hold the right to direct employees to take a period of unpaid leave over the shutdown period. Previously, if the employee did not have sufficient annual leave balances to cover the entirety of the shutdown period, they could still be directed by the employer .
What do the new rules mean?
From 1 May 2023, the following applies:
- At least 28 days of written notice must be given by the employer of the intended temporary shutdown period (or any shorter period as agreed by the employer and the majority of employees).
- Employers may direct employees to take paid annual leave during the temporary shutdown period, so long as the direction is ‘reasonable’.
- If they do not have sufficient annual leave accrued to cover the whole temporary shutdown period, employees may also access paid annual leave in advance or take unpaid leave during the temporary shutdown period (if agreed in writing).
- If the employee does not agree to take annual leave in advance or unpaid leave, the employer can either allow the employee to work (if permitted) or pay the employee their entitled wages during the temporary shutdown period.
It is important to note that the model clause is general in nature, with the FWC adjusting the model slightly to adapt to the nature of various industries and their accompanying awards. For example, the Building and Construction General On-Site Award 2020 requires two months of written notice to the employee, and only applies to a shutdown period over Christmas and the New Year holidays. Additionally, various awards allow for industry-specific temporary shutdown periods, such as the Poultry Processing Award 2020 and Hydrocarbons Industry (Upstream) Award 2020, which include temporary shutdowns for mechanical maintenance.
We encourage employers to check the specific shutdown clause in the relevant awards that cover their employees.
Which modern awards are affected?
On 3 March 2023, the FWC released the exact determinations of each award to be amended. The full list of all 78 awards is attached as Attachment A to a previous decision of the FWC. Some notable awards amended by this decision include:
- Clerks—Private Sector Award 2020 (clause 32.5)
- General Retail Industry Award 2020 (clause 28.4)
- Hospitality Industry (General) Award 2020 (clause 30.4)
- Legal Services Award 2020 (clause 22.7)
- Professional Employees Award 2020 (clause 18.4).
Do signed employment contracts equate to an employee’s ‘agreement’?
Its arguable that, if an employee’s contract of employment contains a clause allowing for unpaid leave to be taken in the event of a temporary shutdown period, then the employee has agreed to this upon signing the contract and commencing the role.
However, as this has not been directly addressed by the FWC or tested in court, employers should take a conservative approach and obtain an agreement from the affected employees prior to the shutdown period.
Key takeaways for employers
- review and update any internal procedures relating to temporary shutdown periods, particularly related to award‑covered employees, including the required notice periods and give consideration as to what a ‘reasonable request’ looks like
- plan for discussions with employees in relation to taking unpaid leave or annual leave in advance, including training with HR teams
- update internal systems to allow for leave in advance or unpaid leave to be accessed by employees.