The phrase “shutdown” has typically been defined as a period when a business temporarily closes operations. Shutdowns typically occur over Christmas, or some other holiday period, in businesses that operate seasonally, or in the event the business needs to close for maintenance. Generally, employees are made to take either paid or unpaid leave and don’t have much flexibility or choice in this area.
Changes to shutdown provisions
Recent changes to awards have aimed to create clarity around the laws regarding shutdowns and the rights and responsibilities of employers and employees. These changes commenced on 1 May 2023 and apply to 78 modern awards. If you want to take a look at the full list of awards impacted, click here.
Note – some important awards for clients of ER Strategies, such as the Fast Food Industry Award, do not have provisions allowing their employer to require them to take paid leave during a shutdown period. An employee in this situation can still agree to take annual leave, annual leave in advance, or unpaid leave during a shutdown.
However, if they don’t agree, they have to be paid their ordinary pay rate for the shutdown. They can’t be forced to take unpaid leave.
Unpaid vs Annual Leave
One of the most significant changes is that employers can no longer direct an employee to take leave without pay during a temporary shutdown period.
However, this doesn’t mean that unpaid leave is unavailable in all situations. If an employer and employee agree in writing, an employee can take unpaid leave for the period of a shutdown. Alternatively, if an employee has not accrued enough leave to cover the shutdown period, they can take annual leave in advance in accordance with the ‘annual leave in advance’ provisions contained in the modern award or enterprise agreement.
Lastly, any periods of annual leave taken because of a temporary shutdown do not apply for the purposes of the existing ‘excessive leave’ provisions in modern awards.
Employers also have more responsibilities when providing notice to employees who will be impacted by shutdown periods. Firstly, employers must provide at least 28 days written notice of the shutdown. In the case where an employee is employed within the 28 day notice period, the new employee must be given notice as soon as possible. Additionally, all directions to take paid annual leave must be reasonable and also be in writing.
Defining the Shutdown
Another important change is the further specification of when a temporary shutdown can take place. Now a temporary shutdown can only occur when the employer intends to shutdown all or part of its operations for a particular period.
Impacts to employers
It is important for all employers to get their head around these changes and identify how this may impact their businesses. A great place to start is reviewing current procedures and policies that are being used in the business and update these to reflect the new changes.
Training and education are also important, particularly for anyone involved in payroll and managing employees. It is crucial they understand the new changes and can provide employees notice in line with the changes and allow for employees to access annual leave or come to arrangements for leave to be taken in advance. Furthermore, if employees are to take leave in advance, payroll and employee management systems will need to be updated to reflect this.
Shutdown periods can create several issues when dealing with employees and with these changes there are new things to consider. ER Strategies are experts in employment compliance and has well over 20 years of experience in assisting employers manage their responsibilities. If you need help with managing employees in, or approaching a shutdown period, get in touch with us at 1300 55 66 37, or click the button below.