Shutdown provisions have been amended for 78 modern awards. Is your business affected?

The Fair Work Commission (FWC) has made amendments to most modern award shutdown provisions, impacting the way employers implement shutdown periods. The change took effect from 1 May 2023, and involves the introduction of a standard clause, or model term, with consistent wording across all 78 affected awards.

Here our experts break down these changes into easy-to-understand language and share what business owners must be aware of when it comes to managing shutdown periods and leave entitlements.

So, what’s been amended in these modern awards?

Simply put, existing shutdown provisions within modern awards were deemed problematic because of how unpaid leave was granted. Where some awards allowed employees to take unpaid leave even if they had accrued annual leave balances, others contained clauses that gave employers the right to direct employees to take unpaid leave.

The ability to direct employees to take leave without pay is akin to standing down an employee without pay, which can only be done in accordance with the general stand-down provisions in the Fair Work Act 2009 (Cth) (FW Act) or in accordance with an enterprise agreement or contract of employment. Accordingly, the FWC deemed it important to adjust the wording of the shutdown provisions of modern awards and implement a model clause that instead provides for an agreement to be made between an employee and employer to take unpaid leave, rather than allowing an employer the ability to direct such leave.

The model clause updates the shutdown provisions in the following ways:

1. any reference that employers are allowed to direct an employee to take leave without pay during a temporary shutdown period has been removed;
2. an employer can only implement a temporary shutdown where it intends to shut down all or part of its operation for a particular period (i.e., the Christmas period) and wants to require affected employees to take paid annual leave for that period (note that certain awards still allow an employer to implement a shutdown period in specific circumstances related to their industry);
3. employers must provide employees with at least 28 days’ written notice of the temporary shutdown period;
4. if a new employee commences employment within the 28-day notice period, notice of the temporary shutdown must be provided as soon as reasonably practicable after engagement;
5. an employer may direct an employee to take annual leave during the shutdown period as long as the direction is in writing and is reasonable;
6. if employers have provided a direction to an employee to take annual leave during the shutdown period, and the direction is in writing and is reasonable, the employee must take paid annual leave during the shutdown period;
7. an employee who doesn’t have enough paid annual leave to cover the shutdown period may come to an agreement with their employer for other options including using accrued time off, annual leave in advance or leave without pay.

What happens if an employee’s paid annual leave entitlements have been exhausted?

As prefaced above, if an employee does not have enough annual leave to cover the shutdown period, employers and employees may agree to take unpaid leave during the temporary shutdown period. This agreement must also be in writing.

In circumstances where an employee does not agree to take unpaid leave during a shutdown period, an employer can no longer direct an employee to take unpaid leave and the employee must be paid ordinary wages for the duration of the shutdown period.

About our author

Amanda Curatore is a qualified Senior Associate at Citation Legal and Citation HR. Amanda is highly experienced in providing workplace relations advice and assistance to clients in a wide range of matters including employment contracts, modern award interpretation, managing performance, bullying and harassment, terminations and managing risk.