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ANNUAL SHUTDOWN: HOW TO GET IT RIGHT

Planning to close over the Christmas/New Year period? It’s time to start planning.

Many employers opt to close their doors over the Christmas holiday period. Here’s what you need to know if you’re contemplating a shutdown.

THE RULES

An employer’s right to send employees on an annual shutdown will depend on the applicable modern award or enterprise agreement or, in the case of award/agreement free employees, the National Employment Standards.

An employer is usually required to give at least a specified period of notice to close a business for a period of annual leave. Business shutdowns are common over the Christmas-New Year period because business suppliers or clients are also closed for business, or most staff want to take annual leave during this period.

MODERN AWARDS

Most awards contain terms that allow employers to send employees on an annual shutdown. This is usually subject to an employer giving affected employees at least four weeks’ notice, although an award may require a greater period of notice. For example, the Textile, Clothing, Footwear and Associated Industries Award 2010 requires an employer to give at least three months’ notice of a shutdown. 

Some awards provide that the same shutdown conditions that apply to most employees in the business will apply to employees under that award.

If a modern award does not contain a provision regarding an annual shutdown, an employer cannot direct employees to take annual leave as an annual shutdown. The Fair Work Act (s88) states that paid annual leave may be taken for a period agreed between an employee and an employer. This means an employer must obtain the agreement of each affected employee for a shutdown down to occur.

A prospective employee should be advised at the time of recruitment that they may be required to take annual leave during the company’s annual shutdown. This may influence a prospective employee’s decision whether to accept employment with the company.

AWARD/AGREEMENT FREE EMPLOYEES

The Fair Work Act (s94(5)) provides that an employer may require an award/agreement employee to take a period of paid annual leave, but only if the request is reasonable. Section 94(5)(b) provides examples of a reasonable request by an employer, including the employer’s enterprise being shut down for a period, e.g. Christmas and New Year.

Matters that can be agreed upon between an employer and an award/agreement free employee include:

  • that paid annual leave may be taken in advance of accrual (when the period of the shutdown exceeds an employee’s annual leave accrual)
  • that a specified period of notice must be given before taking annual leave, e.g. four weeks’ notice, and
  • the form of application for paid annual leave.

PUBLIC HOLIDAYS

The Fair Work Act (s115) lists a schedule of days prescribed as a public holiday for the purpose of the National Employment Standards.

These provisions apply in conjunction with the public holidays declared under the relevant state or territory public holiday legislation. As mentioned previously, the Fair Work Act provides that if a public holiday falls during a period of annual leave (such as an annual shutdown), an employee is taken not to be on annual leave where the public holiday falls on a day the employee usually is required to work.

OTHER PERIODS OF PAID LEAVE

Under the Fair Work Act (s89(2)), if the period of a shutdown for annual leave includes a period of any other paid leave, such as a public holiday, personal/carer’s leave, compassionate leave or community service leave, an employee is not taken to be on paid annual leave for the period of the other leave. This provision applies to paid leave entitlements under the National Employment Standards.

LONG SERVICE LEAVE

A state or territory long service leave statute will usually provide that a period of long service leave and paid annual leave cannot be taken concurrently. Therefore, if an annual shutdown coincides with an employee’s absence on long service leave, the employee is deemed to be absent on long service leave and not paid annual leave.

The bottom line: Most modern awards contain terms that permit an employer to close down a business for the purposes of taking annual leave. There is also some protection for an employer where an employee takes annual leave in advance and terminates before the employee has accrued enough annual leave to cover the leave taken in advance.

Generally, an employee is taken to be on a form of paid leave other than annual leave where two forms of paid leave coincide.