Many Australian businesses close their doors over the Christmas and New Year period — a practice that brings both operational and legal considerations. Employers who plan to implement a temporary shutdown must ensure they comply with the Fair Work Act 2009 (Cth) and any applicable modern award or enterprise agreement.
Legal Basis for Requiring Employees to Take Leave
Under section 94(5) of the Fair Work Act, employers may direct employees to take annual leave in certain circumstances — including during a temporary shutdown — provided the direction is reasonable. Most modern awards and many enterprise agreements also contain shutdown provisions, which typically set out:
- How much notice must be given to employees,
- How annual leave will be deducted,
- What happens if an employee doesn’t have enough accrued leave.
Employers must check the applicable industrial instrument carefully before issuing any direction.
Notice Requirements and Employee Entitlements
When implementing a shutdown, employers should:
- Provide clear written notice specifying the shutdown dates.
- Explain how the annual leave will be applied (e.g., how many days will be deducted, how public holidays are treated).
- Confirm the return-to-work date.
Public holidays that fall during the shutdown period cannot be deducted from an employee’s annual leave balance. They must be paid at the employee’s ordinary rate or in accordance with the relevant award or agreement.
Insufficient Leave Balances
Some employees may not have enough accrued annual leave to cover the full shutdown period. In that case, employers may:
- Allow employees to take annual leave in advance, or
- Agree to unpaid leave for the balance, or
- Explore alternative arrangements by agreement (such as alternative duties).
The key is ensuring any arrangement is lawful and agreed upon in writing.
Practical Tips for Employers
- Plan early — provide sufficient notice to comply with the award or enterprise agreement and allow employees time to plan.
- Communicate clearly — set out the specific shutdown dates, leave deduction amounts, and pay arrangements for public holidays.
- Address leave shortfalls — be proactive in identifying employees with insufficient leave and discussing options.
- Keep records — retain signed acknowledgements or records of communications to avoid disputes.
- Check your instruments — not all awards have the same shutdown provisions, and some may impose minimum notice periods.
