New shutdown rules for Modern Awards

The rules for shutdowns in Modern Awards have changed again. During COVID lockdown periods in 2021 and 2022, many businesses had to temporarily close and stand down employees because of the mandatory requirements to stay home.

Temporary arrangements were in place across Modern Awards during that time that allowed flexibility for employees to use things like their accrued leave during that time to still be paid.

Most Modern Awards made allowance for an annual shutdown period or a temporary shutdown period, but the entitlement varied from Award to Award, and some were silent on this. Find out which Modern Award applies to your business

What changed?

In August 2022, the Fair Work Commission (FWC) made a decision to amend 78 modern awards in relation to shut-down periods.

A ‘shut-down’, ‘stand-down’ or ‘close-down’ refers to period where an employer requests an employee not work due to circumstances that are outside the employer’s control, such as:

• equipment breakdown
• industrial action
• when the business has closed because of an enforceable government direction

Employers no longer have the ability to direct employees to take their unpaid leave during a shut down period when the employee does not have enough paid leave.

These changes took effect from 1 May 2023.

What does this mean for your business?

The effect of these changes means that if your business has a temporary shut down period, and your employees do not have sufficient paid leave accrued, you cannot ask them to take unpaid leave (aka ‘Leave Without Pay’).

The most likely example of this is over Christmas/New Year where most businesses will close their doors for a few days between the Public Holidays and enjoy a break with family. This would be a temporary shut down. But the good news is, that gives you the chance to plan ahead and give enough notice to your employees so they can plan ahead too.

Your options

If your business regularly takes a temporary shutdown at the same time each year, it makes it easier to plan ahead, and your staff can plan accordingly. However, there may come a time when an employee might not have enough leave accrued, for example, if they are a new employee who started just before the temporary shutdown period.

Although you can request an employee take unpaid leave, you can:

• allow them to take paid leave in advance (although this will be a liability for your business)
• usefully engage them in that period in other work (e.g. a stocktake or clean up or work from home)
• negotiate another option that works for you both (e.g. time off in lieu of overtime)
• simply pay them not to be there

If none of these suit, there is another option. If you and your employee agree taking unpaid leave is best, you can. But beware:

• not to coerce the employee to agree to it
• it is best to get this in writing

Some other strategies to think of:

• To avoid the dilemma of a new employee without enough accrued leave, you could choose to stop recruitment coming up to a shutdown period
• You can choose not to approve leave earlier in the year (e.g. for a holiday) if it means they will not have enough remaining for the shutdown period

Keep in mind that this only applies to staff eligible for paid leave (not including your Casual staff).

The Bottom Line

It’s your responsibility to ensure that your business complies with workplace relations rules, but we’re here to help! One last tip: remember to give your employees 28 days’ notice of the shutdown.