Award changes on annual closedowns

The Fair Work Commission has recently handed down a decision to vary 78 modern awards in relation to annual closedown arrangements.

Historically, annual closedowns have generally required a period of notice from a few weeks to a couple of months and employees then have to take annual leave during the closedown. Employees who don’t have adequate annual leave balances go on leave without pay for that part of the closedown period not covered by annual leave.

The major change that this decision makes is to remove the employer’s right to put an employee on leave without pay if the employee does not have adequate annual leave to cover the closedown period.

Instead, the employer will need to formally obtain the employee’s written agreement to go on leave without pay. If the employee does not agree, the employer must provide the employee with work or, if that isn’t possible, pay the employee normal wages for that part of the closedown period not covered by annual leave.

The employer and the employee may also agree to the employee having annual leave in advance.

What this means for employers?

Essentially, full-time and part-time employees who do not have adequate annual leave to cover an annual closedown period can withhold agreement to take leave without pay or annual leave in advance and still be entitled to payment by the employer for the part of the closedown not covered by annual leave without having to work and without having any deduction from paid leave entitlements.

This is clearly a disincentive to employing people as full-time or part-time and arguably runs counter to the new Object of “Job security” in the Fair Work Act. Employers can avoid the issue by employing people as casual employees.

In circumstances where an employer might need to recruit someone in the months leading up to their annual closedown, they might want to make employment conditional on a prospective employee agreeing to take leave without pay when the forthcoming annual closedown occurs as part of the job offer/contracting process.

Employers also need to revisit their annual leave policies and procedures and how they manage employees’ leave applications and accruals to ensure that employees have adequate annual leave to cover the closedown period. Assuring that employees receive the required notice in writing of closedowns also needs to be provided for.

There is probably also a need to consider the question of closedowns of themselves – what the need for them is and how long they need to go for.

These changes to modern awards are due to take effect from 5 May 2023.

If you need assistance in dealing with this issue, call us on 1300 108 488 or email enquiries@ridgelinehr.com.au.