From 1 May 2023, changes to 78 modern awards will come into effect which will impact employers’ ability to direct employees to take annual leave during a site or office closure.
These changes arise from a 2022 decision of the Fair Work Commission (FWC) to the effect that the Fair Work Act does not allow the FWC to include a clause in any modern award permitting employers to direct employees to take leave without pay during a site or office closure.
Current Modern Award provisions
Most Modern Awards contain a clause which gives an employer the right to direct employees to take annual leave when there is a site or office closure. Naturally, they are not all uniform in their requirements for giving directions to take annual leave.
For example:
- Some awards require no less than 2 or 3 months’ notice of the closure (see for example the Textile, Clothing, Footwear and Associated Industries Award 2020 which requires 3 months’ notice).
- Some allow the employer to direct the employee to take unpaid leave (see for example the Black Coal Industry Award 2020) which others are silent on unpaid leave (take for example the Clerks-Private Award 2020).
From 1 May 2023, 78 awards containing a clause regarding directions to take leave during office/site closures will have a single uniform clause dealing with when and how directions may be given.
What will the new requirements be?
From 1 May 2023, the new requirements will be as follows:
- Employers must give notice of an intended office/site closure no less than 28 days’ of the closure or as soon as practicable after the employee commences work (if the employee commences after the employer has given the notice of closure).
- For employees who have sufficient accrued annual leave to cover the period of site closure/office closure: the employee can elect to take paid annual leave for all or part of the shutdown. If this election is not made, the employee can be directed to take annual leave if the direction is given in writing and it is “reasonable”. What is reasonable will depend on the needs of the business and the employee, any agreed arrangements between the employee and employer, custom/practice of the employer and the industry more generally, notice provided in relation to the direction and the period of time the leave is required to be taken (ie the period of the closure). Practically, this will require the employer to engage in communications with impacted employees before any direction is given to allow any employer to decide the reasonableness of the direction.
- For employees who do not have sufficient leave accrued for all or any of the office/site closure: the employee may elect to take annual leave for part of the closure (and may be directed to do so) and, for the balance, may elect to take leave without pay or agree with the employer to take annual leave in advance (ie, negative leave). If neither of these can be agreed (or neither are elected by the employee), the employer cannot give a direction to take leave on either basis (ie as unpaid or to take leave in advance). The awards remain silent on what happens if this scenario arises but it would seem that the employee would still need to be paid wages during the closure if unpaid leave or negative leave cannot be agreed.
- For an employee in their first 12 months of service and who has not accrued sufficient leave to cover all of the closure period: the employer may direct this employee to take annual leave in advance up to a maximum of one week. That direction must be in writing and it must be reasonable (having regard to the same matters referred to above).
Some homework for Employers and HR managers impacted by the changes:
- Review your policies on leave and consider updating it to reflect the new changes and expectations for negotiations with employees;
- Identify potential/likely periods of office or site closures and strategise the giving of notice of the closure (maximise notice period to ensure reasonableness and to permit negotiations to occur with employees);
- Review current annual leave balances against annual leave requests for the remainder of 2023 to January 2024 to identify those employees unlikely to have sufficient annual leave balances – engage in communications with them well in advance of the proposed closures.
- Document any arrangement for an employee to take negative leave.
