What do new award rules mean for mandating leave over Christmas?

On paper, Christmas shutdowns can seem like a win-win for employers and employees: businesses reduce their costs and leave liability while it’s quiet, while employees can recharge and enjoy festivities and the summer. The reality is rarely so simple: forcing people to use limited leave needs to be managed fairly, and with changes introduced to many awards earlier this year, there are new obligations to meet.

Fair Work Commission (FWC) rulings in August and December 2022 changed the requirements for organisations that want to shut down completely or partially for a given period, asking its employees to take annual leave when it does. It impacts employers covered by 78 modern awards and came into effect on 1 May this year.

Giving fair warning

While it is generally accepted that you can direct employees to take leave in these circumstances, there is now more structure on how and when this needs to happen. Under award changes, you must provide 28 days written notice of the shutdown period, although you can use a shorter notice period if both you and most affected employees agree to it.

You also need to provide written notice directing employees to take leave, and that request needs to be reasonable. Exactly what is considered reasonable is not defined, but complying with proper notice will help put you on the right side of reasonableness. (Whether your employees view having to take all their leave over a shutdown as reasonable in a non-legal sense and what that means for churn is a separate matter.)

The unpaid leave question

Where things get more complicated is directing your employees who do not have enough annual leave to cover your shutdown period, either because they recently joined the company and have not accrued enough or because they have already taken it. This is because the FWC’s view is that it did not have the power to include an award provision that allowed employers to direct employees to take unpaid leave during these periods.

So, what should you do? The first thing is that you need to ensure that you are providing new starters with written notice that your organisation has a shutdown.

Then, if you want to avoid a situation where you can’t direct employees to take unpaid leave, you can negotiate appropriate provisions in your employment contracts or enterprise agreements. You can also give employees the option to take unpaid leave, as long as it is recorded in writing, such as an email or text message paper trail.

You can also make it clear to employees that annual leave requests will be refused if they result in insufficient leave being available during the regular shutdown period, or you can grant employees with insufficient leave accruals paid annual leave in advance. Once again, these arrangements need to be in writing and comply with relevant award provisions.

Finally, you can consider using rostered day offs (RDOs) or time off in lieu of overtime to ensure employees are paid during the shutdown.

Whichever approach you take, it’s best to do it by working with your employees and clearly communicating what’s happening and why.

Time is of essence

Given the number of sleeps between now and Christmas, you need to ensure you are compliant with the new obligations sooner rather than later. You and your legal counsel need to review your shutdown process, employment contracts, leave policies and other procedures to ensure they are in line with requirements.

Taking these at least steps 28 days in advance of your shutdown period will ensure that everyone has a happy New Year.

Charles Power is the workplace relations and safety partner at Holding Redlich.