As part of the Fair Work Commission's first 4 yearly review of modern awards a Fair Work Commission full bench has handed down a decision which makes significant changes to the annual leave provisions in most modern awards. The new annual leave model clause will give employers the right to direct employees to take annual leave in order to reduce "excessive" leave accruals (if specific requirements are satisfied) and will bolster the cashing out of annual leave provisions in the Fair Work Act 2009.

The model clause defines "excessive leave accruals" as eight weeks for full time employees or 10 weeks for shift workers, and establishes mechanisms to allow both employers and employees to reduce excessive leave accruals. This includes the requirement for:

  1. either party to request a meeting; and
  2. the parties to try and reach agreement on steps to be taken to reduce or eliminate excessive leave. 

Tightening up the rules

In relation to the cashing out of annual leave, the full bench added four new "safeguards" to be included in all modern awards. These new rules:

  • allow a maximum of two weeks' paid annual leave to be cashed out in any 12 month period;
  • impose specific record keeping obligations on employers;
  • necessitate the signature of a parent or guardian if the employee is under 18 years of age; and
  • will draw an employer's attention to the general protection provisions in Part 3-1 of the Fair Work Act 2009 against undue employer influence and misrepresentation in relation to an employee.

The full bench also agreed to vary a number of modern awards to remove the obligation on employers to pay annual leave in advance (as opposed to during the usual pay cycle) and to facilitate agreement between an employer and an employee to take annual leave in advance.

Addressing leave rule changes in your business

Given the significant changes to the annual leave provisions in most modern awards, employers should:

  1. ensure that they have an up-to-date copy of the modern award or awards which apply to their business;
  2. take the time to familiarise themselves with the changes to the annual leave provisions in any applicable modern awards; and
  3. ensure that current leave policies and/or procedures are consistent with the new minimum legal obligations.

[2015] FWCFB 3406