Now that the festive season is upon us, some businesses may decide to ‘close down’ some or all of their operations over this traditionally quieter period of the year. There are some important factors that a business needs to be aware of when looking to close down over this period.
Can I direct my employees to take leave?
An employer can direct an award or enterprise agreement covered employee to take annual leave during a close down period if the award or enterprise agreement expressly allows an employer to do so. Provisions in these instruments will often have certain requirements that an employer will need to adhere to in order to make this direction reasonable. A common requirement in awards is for an employer to provide a certain amount of notice if they intend to direct an employee to take annual leave. For example, under the General Retail Industry Award 2020, employers must provide at least 4 weeks’ notice of a direction to take annual leave during a close down.
Not being aware of this notice period and subsequently not having enough time to give employees notice, could be detrimental to whether this direction is reasonable or not. Therefore, it’s important to double check the provisions in your binding instruments as soon as possible to allow enough time to comply with these provisions.
Awards and agreements should also be read in conjunction with employment contracts where an employment contract contains provision relating to end of year close downs.
What if my award or agreement is silent?
If an industrial instrument is silent on an employer’s ability to direct an employee to take annual leave during a close down, an employer will not have an ability to direct an employee to take annual leave during this time. Employers will need to consider alternative arrangements such as reaching mutual agreement with the employee to take leave over this period. If an agreement cannot be reached, the employer may be obligated to pay the employees ordinary hours over this time, even if the business is closed.
What if my employees don’t have enough accrued annual leave?
If an employee does not have the required amount of annual leave to cover them for all or a portion of the close down period, an employer can mutually agree with the employee to take authorised unpaid leave. However, if the award or agreement does not allow for unpaid leave to be taken during an annual close down, and there is no agreement between the employer and the employee to utilise authorised unpaid leave, the employer may be obligated to pay the employee for the ordinary hours over this time, even if the business is closed.
For this reason, employers should consider allowing employees to continue to work over the close down period, or maintaining a skeleton staff, even with the business being closed down. Employees should be paid their normal wages over the close down period, keeping in mind that some of these days may be public holidays, where penalties may apply. Employers should also be mindful of health and safety risks such as employees working alone.
Some modern awards and agreements have provisions to be able to provide employees access to annual leave in advance. However, accessing this entitlement must be by agreement. An employer does not have an obligation to agree to such a request and should look at every request on an individual basis. The ramifications of allowing an employee to access annual leave in advance may leave the employer open to a financial loss, as it may be difficult for the employer to recoup this amount, if the employee leaves the business before they have accrued it back. Annual leave in advance agreements should always be in writing.
What if my employees are not covered by an award of agreement?
Award and agreement free employees are entitled to the minimum safety net, the National Employment Standards (NES), under the Fair Work Act 2009 (Cth) (FW Act). The Act allows employers to direct employees to take annual leave under section 94(5), but only if the request is reasonable. In considering the factors of whether a request is reasonable, consideration should be given to:
- The notice given to employees. Generally, the more notice you can give to an employee about the direction to take annual leave, the more reasonable the direction.
- Is it common practice to close down the business at the same time every year? An employer may want to make the employee aware of this upon their initial engagement with the business which could include a provision in the employment contract.
- The length of the close down and the subsequent period of leave needed to cover this period. Longer periods of leave can be considered unreasonable as an employee will utilise a larger portion of their annual leave accrual. One to two weeks should be used as a guide, anything over and above this may be unreasonable.
Please note that the above information applies to employers and employees in the national system only. If you are a state system employer, or if you would like more information on this subject or any other matters, please contact the CCIWA Employee Relations Advice Centre on (08) 9365 7660 or email email@example.com