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Are you considering a forced shutdown over the Christmas and New Year period? It’s important to understand your obligations.

Understanding your Obligations

The Christmas and New Year period is a popular time for many businesses to close-down their operations. During this time, employers may require their employees to take a period of annual leave.

The right of an employer to require an employee to take annual leave during such a close-down will depend on the applicable modern award, enterprise agreement or in the case of award/agreement-free employees, the National Employment Standards.

Prior to directing employees to take a period of annual leave during your Christmas/New Year close down, it is essential that you confirm that:

  • there is an entitlement to direct an employee to take leave under any applicable industrial instrument, and if so,
  • any requirement to provide a minimum period of notice is adhered to.

Annual Close Down Entitlements

Award-free Employees

The Fair Work Act provides that an employer may require an award or agreement-free employee to take a period of paid annual leave, provided that the request is ‘reasonable’.

The following factors are to be taken into consideration when determining whether such a request would be reasonable:

  • the needs of the employee and the employer’s business;
  • any agreed arrangement with an employee;
  • timing of the direction to take leave; and
  • if the period of notice given is reasonable, ie. Providing a few days’ notice would be unreasonable while a few months’ notice would be reasonable.
  • custom and practice of the business, ie. such a request will be deemed reasonable if the employer’s enterprise annually shuts down over the Christmas-New Year period.

An employer and an award/agreement-free employee can agree:

  • on the specified period of notice that must be given to employees prior to the requirement to take annual leave.
  • whether paid annual leave may be taken in advance of being accrued when the close-down period exceeds an employee’s accrued annual leave.
  • whether unpaid leave may be taken when the close-down period exceeds an employee’s accrued annual leave.
Award Covered Employees

While many modern awards will provide an employer with the right to require their employees to take a period of annual leave during an annual shutdown, it is essential that the terms of the applicable modern award are reviewed to ensure that an annual close down is permitted.

Where such a closedown is permitted and an employee has insufficient leave accrual, the awards will determine how the period of leave is to be processed during the close down.

Where insufficient leave is accrued, some awards will permit the employee to agree to take:

  • a period of annual leave in advance
  • a period of unpaid leave

Providing Notice of Annual Close Down

Most modern awards will require that employer provide their employees with at least four weeks’ notice of the intention to close down the business for a defined period, and of the requirement for employees to take annual leave. However, it is important to note that some awards do provide that a greater period of notice be provided.

For example:

  • the Building and Construction General On-site Award 2020 requires that employees be given at least 2 months’ notice in writing before the leave needs to be taken.
  • the Textile, Clothing, Footwear and Associated Industries Award 2020 requires an employer to give three months’ notice of the intention of implementing an annual close down.

Prior to confirming any period of annual close down, reference should be made to any applicable modern awards to determine the relevant period of notice required to be given to employees.

The notice for the annual close down period and requirement to take leave should be clearly communicated to your employees both verbally and in writing.

How to Provide Notice to Employees regarding an Annual Close Down

The applicable modern award will provide specific steps employers need to take to provide appropriate notice regarding an annual close down however below are our recommended steps for both award and award free employees.

1. Consult with your employees

You should meet with your employees to advise them of the close down period. You should ensure that the employees understand:

  • the reason for the close down (eg. Christmas, New Year)
  • the length of the close down
  • that they will receive paid annual leave during the close down, and
  • that this annual leave will be deducted from their accrued entitlements.

2. Prepare a letter of notice to confirm the requirement to take annual leave for the purpose of the closedown

Unless a greater period of notice is required under a modern award, you must provide your employees with at least 4 weeks’ written notice of the requirement to take annual leave during a close down period.

This notice should include

  • the dates that the close down period will start and finish
  • the reason for the close down.

The BetterHR portal has the ‘Notice of requirement to take annual leave for purpose of close down’ letter template for this purpose.

3. Provide the letter to the employee and keep a copy for your records

Provide the letter to the employee, ensuring they receive it at least 4 weeks (or at least before the required minimum notice period under a Modern Award) before the start of the close down period.

You should also keep a copy of the letter on each employee’s file for your records.

Please contact the BetterHR Advice team for any questions relating to closing down your business during the holiday season.

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