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Shutdown Periods! The Employer has been stung again

Shutdown Periods! The Employer has been stung again

Provisional Conclusions

  1. The right to elect to take leave without pay in lieu of accessing annual leave entitlements during a shutdown should be deleted. There is no general entitlement to take leave without pay under either the NEW or any award.
  2. That the Fair Work Commission has no power to include a provision in an award by which an employer may require an employee to take leave without pay.
  3. Limiting the shutdown provisions and circumstances in which the shutdowns occur.
  4. Requiring 28 days’ notice of a shutdown.
  5. That any direction to take annual leave in a shutdown must be temporary and reasonable.

Many businesses have shut down periods, particularly at Christmas time. The Fair Work Commission handed down a decision on 22 December 2022 in relation to Shut down provisions and the obligations employers now have. Previously you could shut down over Christmas and force unpaid leave if your employee did not have the leave now, we see a shift bringing this to a halt in 78 awards including the Building Award, Poultry Award, Lega Services Award and this list goes on.

What we can take away from the decision is:

  • Employers must give 28 days’ notice to the employee in writing of a temporary shutdown period.
  • The Employer can direct the employee to take a period of paid annual leave to which they have accrued that entitlement.
  • It must be in writing and reasonable.
  • The Employer cannot direct employees to take leave without pay during a shutdown or to stand them down.
  • This will increase employment costs and close management of leave will be needed to ensure enough paid leave is available to cover shutdown periods.

A number of submissions were made by various industries and unions for and against the changes to the awards. The Commission stated that they were not persuaded by the submissions and concluded that the clause will be replaced.

The model clause to replace the current clause is as follows:

XX.XX Direction to take annual leave during shutdown

  1. Clause XX.XX applies if an employer:
    1. Intends to shut down all or part of its operation for a particular period (temporary shutdown period); and
    2. Wishes to require affected employees to take paid annual leave during that period.
  2. The employer must give the affected employees 28 days’ written notice of a temporary shutdown period, or any shorter period agreed upon between the employer and the majority of relevant employees.
  3. The employer must give written notice of a temporary shutdown period to any employee who is engaged after the notice is given under clause XX.XX (b) and who will be affected by that period as soon as reasonably practicable after the employee is engaged.
  4. The employer may direct the employee to take a period of paid annual leave to which the employee has accrued an entitlement during a temporary shutdown period.
  5. A direction by the employer under clause XX.XX (d):
    1. Must be in writing; and
    2. Must be reasonable.
  6. The employee must take paid annual leave in accordance with a direction under clause XX.XX (d).
  7. In respect of any part of a temporary shutdown period which is not the subject of a direction under clause XX.XX (d), an employer and an employee may agree, in writing, for the employee to take leave without pay during that part of the temporary shutdown period.
  8. An employee may take annual leave in advance during a temporary shutdown period in accordance with an agreement under clause XX.XX.
  9. In determining the amount of paid annual leave to which an employee has accrued an entitlement, any period of paid annual leave taken in advance by the employee, in accordance with an agreement under clause XX.XX, to which an entitlement has not been accrued, is to be taken into account.
  10. Clauses XX.XX to XX.XX do not apply to a period of annual leave that an employee is required to take during a temporary shutdown period in accordance with clause XX.XX

Key Take Aways

  • Effective 1 May 2023
  • How will this impact your shutdown periods? Do you have adequate leave policies?
  • Diarise the notice period.
  • Ensure employees have leave accrued to take in the shutdown or you will be paying leave in advance. Planning is key.
  • It is unclear if you can take unpaid leave if agreed between the employer and employee outside the shutdown, further clarification is needed, it does seem if it is not subject to a direction you can but the issue will arise that a shutdown period will be a direction.

Want to Know More?

Navigating the new shutdown period regulations and ensuring compliance with employee leave policies can be challenging. Don’t let these changes catch you by surprise. Reach out to our experienced employment law team at Coutts today. We can provide you with tailored legal advice, help you update your policies, and guide you through the entire process, ensuring a smooth transition for your business.

Contact our Employment Law Compensation team today to see how we can assist you. At Coutts, we have multiple experienced Lawyers that provide you with legal advice in relation to your employment obligations.


Karena Nicholls - Compensation Lawyers Parramatta

Karena is a Partner at Coutts and is the Head of our Injury Compensation (with extensive knowledge in personal injury) and Employment Law teams. She is passionate and dedicated to helping her clients understand their rights and obligations and advising them on the best course of action to achieve their desired outcomes. It is her practical and client-orientated approach that has attributed to her authentic reputation positioning her as a highly regarded compensation and employment lawyer.

For further information please don’t hesitate to contact:

Karena Nicholls
1300 268 887

Contact our Employment Lawyers Today.

This blog is merely general and non-specific information on the subject matter and is not and should not be considered or relied on as legal advice. Coutts is not responsible for any cost, expense, loss or liability whatsoever to this blog, including all or any reliance on this blog or use or application of this blog by you.

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