Changes to shutdown provisions in modern awards

1 March 2023

The Full Bench of the Fair Work Commission has determined to vary shutdown clauses in 78 modern awards.

In summary, Awards applying to national system employers will be amended to mirror a model term. Under the new shutdown model clause:

  • Employers will be required to give employees affected by a temporary shutdown for a particular period (for example, a shutdown over Christmas/New Year), 28 days’ written notice of the shutdown if the employer will require affected employees to take paid annual leave during the shutdown period.
  • Employers can direct employees to take a period of paid accrued annual leave to which the employee has accrued an entitlement during the shutdown period, if the direction is provided in writing and is also ‘reasonable’. Under the model clause, employees ‘may’ also access paid annual leave in advance during a shutdown by ‘agreement’.
  • Importantly, although employers and employees can agree, in writing, for the employee to take a period of leave without pay during a part of the shutdown, employers will no longer be able to direct an employee to take a period of leave without pay during a shutdown.

These changes take effect from 1 May 2023.

What does this mean for employers?

The effect of these changes will mean (among other things) that permanent employees who do not have a sufficient paid annual leave balance, and who do not agree to take annual leave in advance (noting this cannot be directed) and who do not agree to take leave without pay, will be required to be paid their usual wages during any proposed shutdown.

Employers will need to review their policies (if in place) to ensure Award compliance.  Consideration needs to be given by each employer to the question of reasonableness of a direction and how this will be demonstrated if questioned.  Employers must review leave plans in advance of any temporary shutdown.  A system should be introduced to provide the required notice of any proposed shutdown and issue directives to take annual leave, in accordance with the new model clause requirements. Employers may also need to plan to engage in discussions with employees to reach agreement to take annual leave in advance or leave without pay for a shutdown (or part of a shutdown) if necessary.

The model clause taken from the Commission’s decision (at paragraph [82] (page 31) of the decision) appears here.

A list of the modern awards which will be amended to provide for the model clause (some with adaptations) can be provided to clients on request.

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