The Fair Work Commission (FWC) has varied 78 modern awards as part of the Commission’s 4-yearly review of modern awards process by replacing existing shutdown clauses with a new model term.
These clauses relate to an employer’s ability to direct employees to take a period of annual leave where the employer shuts down all or part of its enterprise. The changes are:
- Any mechanism that directs an employee to take leave without pay during a temporary shutdown period has been removed;
- The circumstances in which a temporary shutdown can occur have been narrowed to where the employer intends to shut down all or part of its operation for a particular period and the employer wishes to require affected employees to take paid annual leave during that period. Certain model terms still preserve the entitlement to shut down operations in some industry-specific circumstances, including for example when a drilling rig is being repaired in the Hydrocarbons Industry (Upstream) Award 2020;
- Employers must now provide at least 28 days’ written notice of the temporary shutdown period (or a longer period if the term preserves an existing longer period of notice);
- If an employee is engaged within the 28-day notice period, notice of the temporary shutdown must be provided as soon as reasonably practicable after engagement.
- Any direction by the employer to take annual leave must now be in writing and be reasonable.
- Employees can now only take paid annual leave in accordance with a direction under the shutdown term.
- The model term allows the employer and employee to agree, in writing, to take unpaid leave during a shutdown period once an employee’s paid annual leave has been exhausted.
- Where an employee has not accrued enough paid annual leave to cover the period of the shutdown, the employee may take paid annual leave in advance of accruing the entitlement in accordance with the existing “annual leave in advance” term contained in each modern award.
- The new terms confirm that when calculating the amount of paid annual leave accrued by an employee, any leave taken in advance pursuant to the “annual leave in advance” clause must be taken into account.
- New shutdown clauses now confirm that periods of annual leave taken for the purposes of a temporary shutdown do not apply for the purposes of the existing excessive leave provisions contained in modern awards.
Employers with employees covered by the 78 modern awards impacted by the decision should take the following steps to prepare for and accommodate the incoming changes on 1 May 2023:
- Review any current procedures and guidelines in regards to annual shutdowns and update materials relating to award-covered employees impacted by the changes.
- Have a discussion with your HR team or business partners regarding the future change. This includes factoring in the updated notice periods and requirements to take paid leave.
- Update Payroll and employee management systems to ensure employees can access leave in advance and ensure that employees’ annual leave entitlements are being properly accrued and accounted for.