Annual Shutdown Provisions – significant changes to Modern Awards starting 1 May 2023
Following previous reviews in February 2019 and August 2022 of “annual shutdown” provisions in modern awards, the Fair Work Commission (FWC) will further amend the annual shutdown provisions found in 78 modern awards by replacing them with a “new” annual shutdown clause.
What is Changing?
The new shutdown clauses in modern awards will come into effect from 1st May 2023.
The most significant change for many employers will be removing the ability for an employer to direct an employee to take a period of “leave without pay” if that employee does not have enough annual leave accrued to cover the shutdown period.
Some modern awards currently have this provision, although most do not.
In the August 2022 decision, the FWC discussed their view that current annual shutdown clauses in several modern awards were unlawful because “the Commission has no power to include a provision in an award by which an employer may require an employee to take leave without pay”.
The new model clause in awards will mean that:
- In the event an employee does not have enough annual leave to cover a shutdown period, employers will no longer be able to direct their employees to take leave without pay during this period.
- Employers are required to give employees 28 days written notice of a temporary shutdown period.
- An employer may direct an employee to take paid annual leave during this shutdown period, but the direction must be reasonable and in writing.
- Employers and employees may agree, in writing, for the employee to take “leave without pay” during the shutdown period.
- An employee may take annual leave in advance if the employee does not have sufficient annual leave accrued to cover the shutdown period.
What Should Employers Do?
Plan far enough in advance to allow for the provision of the written notification of a temporary shutdown period.
To ensure compliance with the new regulations, employers should assess their internal policies and processes that address shutdown times.
Final determinations for each modern award are now published and can be found separately in the link FWC – New shutdown provisions.
This is a timely reminder for employers to make sure they understand and abide by the award that applies to their company and employees.
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