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Article by Michael Cooper

With the Christmas and New Year period fast approaching, employers need to consider whether they intend to shut down their business over the Christmas and New Year period or beyond, and whether they intend to require employees to take annual leave during a shut down.

Under the Fair Work Act 2009 (Cth) (FW Act), an employer’s ability to require an employee to take annual leave varies depending on what industrial instruments, if any, apply to an employee.

If a modern award or enterprise agreement (including certain transitional instruments) applies to an employee, an employer can require the employee to take annual leave according to the terms of the modern award or enterprise agreement. Despite this, the FW Act provides that the requirement to take annual leave must be reasonable. The requirements under modern awards and enterprise agreements vary, however many, such as the Clerks – Private Sector Award 2010, the Banking, Finance and Insurance Industry Award 2010, the Pharmaceutical Industry Award 2010 and the Professional Employees Award 2010 will require an employer to provide its employees with a minimum period of notice in order to shut down their business.

If no modern award or enterprise agreement applies to an employee, the FW Act allows an employer to require an employee to take a period of annual leave, but only if the requirement is reasonable. The FW Act does not specify what is reasonable, however it does give an example that the employer shutting down its business between Christmas and New Year may be reasonable. If an employer decides to shut down its business, the FW Act does not specify a period of notice that must be given to require an employee who is not covered by a modern award or an enterprise agreement to take a period of annual leave. However, it is likely that the more notice an employer gives to its modern award or enterprise agreement free employees, the more likely it is that the requirement to take annual leave during a shut down will be reasonable.

Key lessons for employers

Employers intending to shut down their business over the Christmas and New Year period by requiring employees to take annual leave should carefully review the industrial instruments that apply to their employees to ascertain what notice is required. When directing employees to take a period of annual leave during a shut down, employers should give the direction in writing, and should give as much notice as possible.