As Christmas approaches, it’s crucial for employers to finalise their arrangements for the Christmas shutdown.

What is meant by a “shutdown”?

A shutdown, also known as a close down, occurs when a business (or a part of it) temporarily ceases its operations. Such shutdowns usually happen during holiday seasons like Christmas/New Year.

As part of the effort to simplify and make modern awards more understandable, the Fair Work Commission has proposed a draft model clause regarding annual leave during shutdowns in modern awards.

Previously, different rules existed in modern awards when it came to notifying employees about taking annual leave during a shutdown and whether employers could instruct employees to take annual leave in advance or unpaid leave if they didn’t have enough accrued annual leave.

In May 2023, many Modern Awards were revised to include the model clause, which replaced existing shutdown provisions in 78 awards with minor adjustments to some individual awards.

Shutdown model clause

The model clause and the new shutdown rules stipulate that if an employer plans to temporarily close all or part of its operations and wishes for affected employees to take their annual leave during this period:

The employer must provide affected employees with 28 days of written notice about the temporary shutdown period (or a shorter period if agreed upon between the employer and the majority of relevant employees).
The employer can instruct employees to take accrued annual leave during the temporary shutdown period. This instruction must be in writing and reasonable.
If an employee doesn’t have sufficient accrued annual leave, the employer and the employee can agree to either take leave without pay or take annual leave in advance.

Employers should consult the applicable modern award to understand the specific shutdown provisions.

Crucially, the new shutdown rules will require employers to manage annual leave requests throughout the year to ensure that there’s enough leave to cover the shutdown period. If not, there must be an agreement for an employee to take leave in advance or unpaid leave.

Employees not covered by Modern Awards or Enterprise Agreements

For employees who aren’t covered by a Modern Award or Enterprise Agreement, the Fair Work Act 2009 (Cth) (FW Act) applies.

Section 94(5) of the FW Act allows an employer to require an employee to take paid annual leave, but only if such a requirement is reasonable. “Reasonableness” encompasses scenarios where the employer’s enterprise is temporarily closed, such as during the period between Christmas and New Year.

Under section 94(6) of the FW Act, employers and employees can agree on when and how paid annual leave is taken, including taking it in advance of accrual.

Also, it is important to note during this shutdown period, the company must continue to pay employees any public holidays that they are usually rostered for, even if an employee is on unpaid leave.

More information can be found: https://www.fairwork.gov.au/pay-and-wages/stand-downs

How can we help?

If you need assistance with your employer obligations for a compulsory Christmas shutdown, please feel free to get in touch. If we can’t answer your question we can put you in touch with an HR specialist in our trusted network of professionals.

You can find out more about working with Marsh & Partners here. As your Absolute.Account.Ability partner we’re on a mission to make your business life better.

Please note that the information provided in this blog should not be considered legal advice and should not be relied upon as such.