The Christmas/New Year period is traditionally a slow one in certain industries. Many employers shut down the whole or a part of their enterprises to avoid the costs of doing business during this low activity period.

This is particularly common in the current economic climate.  Can employers require their employees to take paid annual leave or unpaid leave, to avoid the cost of paying employees for attending at work when productivity will be low?

Employees covered by a modern award or enterprise agreement

For employees covered by modern awards or enterprise agreements made under the Fair Work Act 2009 (FW Act), employers should first check whether and, if so, how the applicable instrument permits them to direct employees to take leave for the period of the Christmas/New Year shut down.  

For instance, under both the Mining Industry Award 2010 and theBuilding and Construction General On-site Award 2010:

  • an employer may direct an employee to take paid annual leave during all or part of a period where the employer shuts down the business, part of the business or site where the employee works; and
  • if an employee does not have sufficient accrued annual leave for the period of the shut down, the employee may be required to take leave without pay.

Under the Building and Construction General On-site Award, an employer is required to provide at least two months notice of its intention to utilise the provisions of the awardto ask all, or the majority, of its employees to take the whole of the annual leave due to them over the Christmas/New Year period. In contrast, no such notification is required under the Mining Industry Award.

Employees who are award/agreement-free

In relation to employees who are not covered by a modern award or enterprise agreement, the FW Act provides that:

  • an employer may require an employee to take a period of paid annual leave if the requirement to do so is reasonable (s 94(5)).  The “Note” to this provision states that the requirement may be reasonable if the employer’s enterprise is being shut down for a period of time, for example, between Christmas and New Year. Other factors considered relevant to assessing reasonableness in this context include the needs of both the employee and the employer’s business, the custom and practice of the business, and whether the period of notice requiring an employee to take annual leave is reasonable.
  • an employer and an employee may agree on when and how paid annual leave may be taken by the employee (s 94(6)).  The “Note” to this provision states that one matter which can be agreed is that paid annual leave may be taken in advance of accrual. Employers considering making such an agreement should ensure that the agreement also authorises them to:
    • reduce the employee’s leave balance proportionately as the employee’s entitlement to paid leave accrues; and
    • if the employee’s employment is subsequently terminated, to deduct from the employee’s termination payments the money paid for leave taken in advance, if the entitlement to that leave has not accrued as at the date of termination.

There is no express provision in the FW Actentitling an employer to direct an award/agreement-free employee to take unpaid leave.  An employer may be contractually entitled to do so, depending on the specific terms of the employment contract entered into between the employer and employee. Past practice in the business concerning the taking of leave for the purpose of the Christmas/New Year shut down may also be relevant to determining whether an employer is contractually entitled to require an employee to take unpaid leave over this period.

Employees not covered by the Federal workplace relations system

Different considerations to those described above may arise for employees of employers who are not subject to the FW ActSpecific advice should be sought in relation to such employees.