The Fair Work Commission (FWC) has completed its first 4 yearly review of modern awards as required by the Fair Work Act 2009 (Cth).

The FWC has approved a model term to be included in all modern awards which allows employees to cash out 2 weeks' of accrued annual leave.  The model term includes the following terms:

  • Employees will be able to cash out a maximum of 2 weeks of paid annual leave in any 12 month period (providing that the cashing out of annual leave would not result in the employee having less than 4 weeks of accrued annual leave entitlements).
  • Any agreement to cash out a particular amount of accrued paid annual leave must be recorded in writing, signed by both the employer and employee and retained by the employer.
  • If an employee is under 18 years of age, the agreement to cash out any accrued leave entitlements must be signed by the employee's parent or guardian.
  • The employee must be paid the full amount that would have been payable to the employee, had the employee taken the leave instead of cashing out the leave.

The model term also makes reference to Section 344 of the Fair Work Act insofar as the employer must not exert undue influence or undue pressure on an employee to make an agreement to cash out paid annual leave.

Other matters considered by the FWC in its review of annual leave and the modern awards included the following:

  • Excessive annual leave – a model term has been drafted which would allow employers to direct employees to take annual leave when an employee has accrued 'excessive' (8 weeks) annual leave.  The model term also gives employees greater rights as to when they can take leave in circumstances when they have accrued excessive leave.  It is proposed that this term be included in all modern awards.  Directions have been made in relation to the filing of further submissions regarding this model term and there will also be a further oral hearing before the FWC finalises any model term regarding the taking of excessive annual leave.
  • Annual close-down – this term proposed to allow employers to direct employees to take leave during annual close down periods.  The FWC said that such a term would need to be considered on an award by award basis however did not consider that the term as proposed was reasonable as it was broad and only required limited notice to be provided to employees.

A date is yet to be set for the implementation of any changes to the modern awards.