‘Review shutdown provisions now’, businesses told
Businesses should start reviewing their shutdown arrangements and payroll systems for temporary closures following recent changes by the Fair Work Commission, law firms warn.
Shutdown provisions which came into force in May could impact the arrangements businesses have in place for temporary closure including the Christmas and New Year period, Cooper Grace Ward Lawyers cautions.
The full bench of the Fair Work Commission determined to significantly vary and standardise the shutdown clauses in 78 modern awards in December last year.
The most significant part of the changes implemented by the amendments is that employers no longer hold the right to direct employees to take a period of unpaid leave over the shutdown period.
“Previously, if the employee did not have sufficient annual leave balances to cover the entirety of the shutdown period, they could still be directed by the employer,” CGW Lawyers explained in a recent article.
The new provisions require at least 28 days of written notice must be given by the employer of the intended temporary shutdown period or any shorter period as agreed by the employer and the majority of employees.
“Employers may direct employees to take paid annual leave during the temporary shutdown period, so long as the direction is reasonable,” the law firm said.
“If they do not have sufficient annual leave accrued to cover the whole temporary shutdown period, employees may also access paid annual leave in advance or take unpaid leave during the temporary shutdown period if agreed in writing.”
If the employee does not agree to take annual leave in advance or unpaid leave, the employer can either allow the employee to work, if permitted, or pay the employee their entitled wages during the temporary shutdown period.
Employment contracts as evidence of employee agreement
Cooper Grace Ward Lawyers said while it is arguable that, if an employee’s contract of employment contains a clause allowing for unpaid leave to be taken in the event of a temporary shutdown period, then the employee has agreed to this upon signing the contract and commencing the role.
“However, as this has not been directly addressed by the FWC or tested in court, employers should take a conservative approach and obtain an agreement from the affected employees prior to the shutdown period,” CGW Lawyers said.
Next steps for employers
Employers should review and update any internal procedures relating to temporary shutdown periods, particularly related to award‑covered employees, including the required notice periods and give consideration as to what a ‘reasonable request’ looks like.
“Plan for discussions with employees in relation to taking unpaid leave or annual leave in advance, including training with HR teams,” said the law firm.
Law firm Herbert Smith Freehills advised that businesses may need to provide additional training to HR managers and business partners regarding how a valid direction to take paid annual leave can be provided to impacted employees.
“This includes accounting for the updated notice periods and requirements to take paid leave,” the law firm said.
It also recommended that business update their payroll and employee management systems to ensure employees can access leave in advance and ensure that employees’ annual leave entitlements are being properly accrued and accounted for.
Checking shutdown clauses for specific clauses
The FWC has adjusted the model to adapt to the nature of various industries and their accompanying awards which means its general in nature, said CGW Lawyers.
“For example, the Building and Construction General On-Site Award 2020 requires two months of written notice to the employee, and only applies to a shutdown period over Christmas and the New Year holidays. Additionally, various awards allow for industry-specific temporary shutdown periods, such as the Poultry Processing Award 2020 and Hydrocarbons Industry (Upstream) Award 2020, which include temporary shutdowns for mechanical maintenance,” the law firm said.
“We encourage employers to check the specific shutdown clause in the relevant awards that cover their employees.”
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