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Changes to shutdown clauses in awards

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Compliance Alert: Changes to shutdown or “close-down” clauses in awards

As part of the Commission’s 4-yearly review of modern awards, the Fair Work Commission (FWC) has varied 78 modern awards by replacing existing shutdown clauses with a new model term.

Shutdown clauses relate to an employer’s ability to direct employees to take a period of annual leave where the employer shuts down all or part of its enterprise, for example over school holidays or the Christmas period.

Effective 1 May 2023, impacted employers will need to change the way they implement temporary workplace shutdowns. Some of the 78 modern awards impacted include:

  • Aboriginal and Torres Strait Islander Health Workers and Practitioners and Aboriginal Community Controlled Health Services Award 2020

  • Ambulance and Patient Transport Industry Award 2020

  • Animal Care and Veterinary Services Award 2020

  • Banking, Finance and Insurance Award 2020

  • Building and Construction General On-site Award 2020

  • Cleaning Services Award 2020

  • Clerks—Private Sector Award 2020

  • Educational Services (Post-Secondary Education) Award 2020

  • Fitness Industry Award 2020

  • Health Professionals and Support Services Award 2020

  • Higher Education Industry—General Staff—Award 2020

  • Legal Services Award 2020

  • Local Government Industry Award 2020

  • Nurses Award 2020

  • Pharmaceutical Industry Award 2020

  • Professional Employees Award 2020

  • Security Services Industry Award 2020

The new model term varies and updates existing shutdown clauses in a number of ways. In summary, from 1 May 2023:

  • Employers must now provide at least 28 days’ written notice of any temporary shutdown period. The written notice could be a shorter period as agreed between the parties, or a longer period if the term preserves an existing longer notice period.

  • Employers may direct employees in writing to take a period of paid annual leave if the employee has an accrued annual leave entitlement, providing the direction is reasonable.

  • Employees can no longer be directed to take leave without pay if they do not have sufficient annual leave or leave in advance to cover the whole period of the shutdown.

  • Once an employee’s paid annual leave has been exhausted, by written agreement the employee may take unpaid leave or annual leave in advance during the temporary shutdown.

Key considerations for employers:

  • Employers should review their applicable awards to see whether the new temporary shutdown provisions apply.

  • Employers should review their policies, processes, documentation, Payroll systems and employee management systems regarding accessing annual leave entitlements, temporary workplace shutdowns and directing an employee to take leave.

  • Employers may need to review their approval process for annual leave requests that fall before planned shutdown periods.

  • Employees who do not have sufficient accrued annual leave to cover the shutdown period may in some circumstances be entitled to wages during the shutdown period if they do not agree to take pay without leave or leave in advance.

  • When calculating the amount of paid annual leave accrued by an employee, employers must consider any leave taken in advance pursuant to the “annual leave in advance” clause.

  • Employers should note that periods of annual leave taken for the purposes of a temporary shutdown do not apply for the purposes of the existing excessive leave provisions contained in modern awards.

  • Employers should provide communications and training to HR and payroll managers and impacted employees regarding the changes to shutdown clauses in applicable awards. This includes accounting for the updated notice periods and requirements to take paid leave.

It is important for employers to keep up to date with changes to Australian workplace laws and regulations, including any changes to the awards that apply to their employees. Employers must ensure they are meeting their obligations under these instruments. In particular, employers are required to provide notice and consultation to affected employees before implementing temporary workplace shutdowns. The specific requirements, which depend on the size of the practice and the number of employees affected, must also be included in the employment contract.

For more information or assistance, please contact us today.


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