By Kelly Godfrey

Many businesses close over the Christmas holiday period due to a decrease in demand for services or simply to take a holiday. A temporary closure of an employer’s business (or part of the employer’s business), such as the one that occurs during the Christmas period, is called a shut down.

In May 2023, the Full Bench of the Fair Work Commission (FWC) inserted a model shut down clause into 78 modern awards.

The model shut down clause sets out the procedure to be followed if an employer intends to temporarily shut down all or part of its business and wants employees to take annual leave during that shut down period.

The model shut down clause requires:

• the employer to provide 28 days’ written notice of the temporary shut down period to the affected employees. This time period can be shortened with the agreement of the majority of affected employees; and
• the employer to provide a written direction to employees to take a period of accrued annual leave during the temporary shut down. The direction must be reasonable.

If an affected employee does not have sufficient accrued annual leave to use during the shut down period, the model clause requires the employee and employer to agree for the employee to either take leave without pay, or be able to take annual leave in advance.

It is important for employers to review the model shut down clause in the modern awards that apply in their workplaces.

Award-free employees can be required under the Fair Work Act 2009 (Cth) to take a period of accrued annual leave but only if the requirement is reasonable. A temporary shut down over the Christmas period is likely to be reasonable if sufficient advance notice is given. If sufficient accrued annual leave is not available, then agreement can be reached to take unpaid leave or leave in advance.

Given the above, it is preferrable that employers manage the taking of annual leave by employees throughout the year, to ensure there is sufficient accrued annual leave to cover the Christmas shut down. Giving notice of likely Christmas shut downs in employee’s employment contracts or by way of a company notification to staff, can also be helpful.