As the end of the year draws closer, businesses that plan to shut down operations over the holiday season will need to consider their legal obligations to employees, especially their obligations in directing annual leave over this time and the notice requirements to do so.
Many Modern Awards contain specific requirements for employers to follow when temporarily closing down their business, including over the Christmas and New Year periods. Where an award provides for such provisions, employers must act in accordance with these requirements and ensure they have met their minimum obligations to their employees. Often these provisions include lengthy notice periods an employer must provide to employees in order to implement a closedown period. These rules can vastly differ across awards, meaning the business should ensure they are aware of their obligations under each applicable award for their employees.
For example, The Hospitality Industry (General) Award allows for employers to direct employees to take annual leave during an annual shutdown. These employers will only need to provide at least 4 weeks’ written notice to enact this. However, other Modern Awards may have stricter rules, such as the Building and Construction Award, which requires a much longer 2 months’ notice to be provided in writing.
Whilst some businesses may include a blanket rule in their policies or employment contracts that the business will close over the holiday season, this is not enough to have met the obligations imposed under most Modern Awards with respect to having given notice of closure. Employers will still need to provide written notice of the exact dates of the closure, in line with the award requirements, in order to have met their requirements to employees.
Recently the Fair Work Ombudsman released changes to Christmas shutdowns for those covered under a Modern Award which you can review here, to be more clear for employers. Previously and mistakenly, some businesses considered that by there being no close down provisions that this meant they can set their own requirements around notice and directing leave. However, where an award does not contain an annual closedown provision; employers cannot direct employees to take annual leave. This means an employer must consult and obtain agreement from the affected employee to take annual leave over this time for a closedown to occur.
What if my employees are award-free?
The Fair Work Act 2009 (Cth) (‘The FWA’), Section 94(5) provides the ability for employers to require award-free employees to take annual leave where this is reasonable. It provides a non-exhaustive list of examples of what may be “reasonable” (depending on the particular circumstances) which includes:
- the employee has accrued an excessive amount of paid annual leave; or
- the employer’s enterprise is being shut down for a period (for example, between Christmas and New Year).
Therefore, it may well be possible to give a reasonable direction to award-free employees to take annual leave can include over a Christmas closedown, however, the business will need to consider aspects such as:
- The operational requirements of the business and the needs of the employee;
- Any predetermined arrangements with the employee;
- The working arrangements of the business;
- How much notice was given for leave.
What if the employee doesn’t have enough leave?
If the employee doesn’t have enough annual leave accrued to cover the shutdown period, the employee and their employee can reach an agreement to either take other paid time such as time off in lieu, annual leave in advance or unpaid leave for this time.
Some awards allow an employee to take annual leave in advance if their employer agrees in writing (subject to any provisions around what the agreement must include and any other limitations). This may be something a business might wish to consider if the employee has requested to be paid for the closure and not take unpaid leave.
Generally, the agreement must:
- be signed by both the employee and employer
- say how much annual leave is being taken in advance
- say the day that the leave will start.
Employers must keep a copy of the agreement with their employee’s records.
Some Modern Awards do contain provisions that allow an employer to direct unpaid leave where an employee does not have enough accrued leave for the closure. However, a recent decision from the Fair Work Commission has cast doubt on the lawfulness of such provisions, you can read more on this decision here.
In the absence of an award having a specific provision that requires an employee to take unpaid leave if they do not have sufficient annual leave to cover the closedown, an employee will have to be paid at their ordinary rate of pay for the period of shutdown. They cannot be forced or directed to take unpaid leave.
For award-free employees, there is no ability to require employees to take unpaid leave. They will therefore have to be paid at their ordinary rate of pay for the period of the shutdown if they cannot be directed to take annual leave (because, for example, they don’t have sufficient leave accrued).
How do I pay public holidays over Christmas and New Years?
Section 115 of the FW Act lists a schedule of days prescribed as a public holiday for the purposes of the National Employment Standards. However, the list is not exhaustive and will include any state or territory-specific public holidays as well, as such, it is important for employers to check any other applicable holidays for their business.
Importantly, the FW Act provides that if a public holiday falls during a period of paid leave, the employee will need to be paid for that public holiday and is taken not to be on leave for that day. That means that no deduction can be made from the employee’s leave balance for the public holidays. The employee will usually be paid at their ordinary rate of pay for the ordinary hours they would have worked (although some awards provide even more generous provisions).
The various public holidays over the Christmas-New Year period include:
- Christmas Eve (7 pm-midnight) (South Australia only) – Sunday 24 December 2023
- Christmas Day –Monday25 December 2023 (all states and territories)
- Boxing Day –Tuesday 26 December 2023
- New Year’s Eve (7 pm-midnight) (South Australia only) – Sunday 31 December 2023
- New Year’s Day – Monday 1 January 2024 (all states and territories)
Generally, employees that are on a period of unpaid leave are not entitled to the benefit of public holidays during this time. However, this will be subject to any agreement that was made with the employee over this time.
It is important for businesses to ensure that they have checked any applicable Modern Award or Agreement as these can provide more beneficial terms for paying public holidays.
What if my employee falls ill over the closedown period?
With the number of gatherings and social events over the holiday season, it is not unheard of that an employee may fall sick during the business closure. The FWA provides that where an employee is sick or injured during a period of annual leave, the employee is entitled to utilise their personal/carer’s leave balance instead. The business can, of course, request evidence to support the employee’s request, such as a medical certificate.
What about casual employees?
Annual closedown provisions will only apply to permanent employees, as they deal with how an employer directs leave over this time. As casual employees do not receive paid annual leave, and do not have set hours of work, employers can opt to simply not roster casual staff over the business closure period, and are not required to have provided any certain amount of prior written notice. Casuals are also not paid for absence on public holidays.
What if I am not closing my business and need employees to work over Public Holidays?
While many businesses will closedown over the holidays, various industries and employers will continue to operate over this time. While a business does not need to provide notification to employees notifying them that there will not be a business closure, these employers will need to be aware of rules around directing employees to work on public holidays specifically. Employers can direct an employee to work on a public holiday, where the requirement is reasonable.
While there is still plenty of time before the holiday season comes around, it is likely for many employers that it is now time to be aware of any obligations around enacting a business closure to adequately prepare for this. Should you need any assistance understanding your obligations in respect to directing annual leave, or consulting staff on a business closure, please reach out to the HR Connect team.
About HR Connect
HR Connect is one of Australia’s leading providers of HR and workplace safety advice service, designed to help small business owners make confident and compliant business decisions.
The information provided in these blog articles is general in nature and is not intended to substitute for professional advice. If you are unsure about how this information applies to your specific situation we recommend you contact HR Connect for advice.