With the Christmas and New Year period fast approaching,
employers need to consider whether they intend to shut down their
business over the Christmas and New Year period or beyond, and
whether they intend to require employees to take annual leave
during a shut down.
Under the Fair Work Act 2009 (Cth) (FW Act), an
employer's ability to require an employee to take annual
leave varies depending on what industrial instruments, if any,
apply to an employee.
If a modern award or enterprise agreement (including certain
transitional instruments) applies to an employee, an employer can
require the employee to take annual leave according to the terms of
the modern award or enterprise agreement. Despite this, the FW Act
provides that the requirement to take annual leave must be
reasonable. The requirements under modern awards and enterprise
agreements vary, however many, such as the Clerks
– Private Sector Award 2010, the Banking,
Finance and Insurance Industry Award 2010, the
Pharmaceutical Industry Award 2010 and the
Professional Employees Award 2010 will require an employer
to provide its employees with a minimum period of notice in order
to shut down their business.
If no modern award or enterprise agreement applies to an
employee, the FW Act allows an employer to require an employee to
take a period of annual leave, but only if the requirement is
reasonable. The FW Act does not specify what is reasonable, however
it does give an example that the employer shutting down its
business between Christmas and New Year may be reasonable. If an
employer decides to shut down its business, the FW Act does not
specify a period of notice that must be given to require an
employee who is not covered by a modern award or an enterprise
agreement to take a period of annual leave. However, it is likely
that the more notice an employer gives to its modern award or
enterprise agreement free employees, the more likely it is that the
requirement to take annual leave during a shut down will be
Key lessons for employers
Employers intending to shut down their business over the
Christmas and New Year period by requiring employees to take annual
leave should carefully review the industrial instruments that apply
to their employees to ascertain what notice is required. When
directing employees to take a period of annual leave during a shut
down, employers should give the direction in writing, and should
give as much notice as possible.
Long experience representing many of Australia's leading employers has taught us that in employment litigation the identity of an employee's representative is a major factor in how employee litigation runs.
Australian employees receive certain entitlements (such as annual leave and superannuation) where contractors do not.
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