The Commission has issued a Decision publishing a new model term that will replace the shutdown provisions in 78 modern awards. The variations to the 78 impacted awards will take effect on 1 May 2023.
Directed Leave Without Pay
The Commission found that the Fair Work Act (FW Act) doesn’t provide a power for them to include terms within an Award concerning the stand-down of employees.
They noted that the FW Act outlines the circumstances in which employers can stand down employees. As a result existing clauses within Awards that provide for an employer to direct an employee to take leave without pay or be stood down during a shutdown are not within the power provided by the FW Act. The Commission noted that there are likely to be situations in which the stand down provisions of the FW Act apply.
How do shutdown clauses in modern awards currently operate?
The purpose of “shutdown” or “closedown” clauses in modern awards are to enable employers to direct their employees to take annual leave during a particular period or periods in the year where a business ceases to operate. Typically, this would be the Christmas or New Year’s period.
Not all modern awards include this, and where they do, the wording can vary considerably. For example, some awards require employees be given a number of weeks’ notice of a closedown, in others it is a period of months; some allow employers to direct employees who do not have sufficient annual leave to cover the shutdown period to be required to take leave without pay; others are silent on this. It was this, in particular that caused concern to the FWC.
Clauses within awards that presently provide for employers to direct employees to take leave without pay during a shutdown/stand down will be removed.
Agreement to take leave without pay
The Commission found that the model term should include the ability for an employer and employee to agree in writing to the employee taking leave without pay during a period of shutdown. They stated that this represents a beneficial entitlement for employees to be absent from work and provides an alternative to the employee having to use another form of leave they may wish to retain.
Limitations on the length and frequency of shutdowns
Some awards contain clauses regarding the permitted length and frequency of shutdowns. The Commission has not been persuaded to retain these clauses within awards going forward or include provision within the model term for permitted length or duration of shutdowns. Their concern has been that this could inhibit the flexibility open to employers in this regard.
Other points of note:
- the model clause will retain a minimum requirement for 28 days’ notice (subject to agreement as to a lesser period) of a shutdown, but in individual awards the clause will be adapted to retain existing prescriptions for a greater period of notice to be given.
- the model clause will be adapted in individual awards to incorporate existing prescriptions which limit the application of shutdown provisions by reference to the circumstances in which the shutdowns occur
- E.g. in the Poultry Award: ‘shut down all or part of its operation for a particular period of pre-planned maintenance or the installation of machinery’.
If you have a spare half hour and need some help getting to sleep, you can read the full decision here.
What does this mean for employers?
Employers need to check whether the Awards that apply to their people are impacted by the decision. If they are, consider:
- Review Contracts of Employment for appropriate wording relating to agreement of leave without pay during shutdowns
- Consider your leave application form/process during shutdown periods – is there a way to build in agreement of leave without pay
- Be conscious of shutdown periods when approving leave during the year to either a) ensure the employee has sufficient leave for the shutdown period; or b) agree in writing with an employee that future leave during shutdown will be leave without pay.
Where agreement is not reached on leave without pay, in essence it means that the employee needs to be paid as normal even during the shutdown, so getting the right practices in place is crucial.
Keep in mind that this applies only to Award covered employees. Those covered by an Agreement or Award-free are not affected by this change.
For help with setting up your Contracts of Employment and other people practices, please contact our team.