If an employee is covered by an award or enterprise agreement, the terms of the relevant industrial instrument should be checked to see whether the employee is required to take paid annual leave during a period of shut down.
Where there are no specific provisions in relation to shut down entitlements, an employee may agree to take paid or unpaid annual leave.
Where an employee is not covered by an award or agreement, the employer may require the employee to take a period of paid annual leave.
In both cases the requirement has to be reasonable.
The following factors are relevant when determining if a requirement from an employer to take annual leave is ‘reasonable’:
- the needs of both the employee and the employer's business
- any agreed arrangement with the employee
- the custom and practice in the business
- the timing of the requirement or direction to take leave
- the reasonableness of the period of notice given to the employee to take leave.
While each employer needs to look carefully at their own circumstances, it is likely that a requirement to take annual leave during a shut down over Christmas and New Year will be reasonable.
This can sometimes happen where an employee has just started employment and hasn’t had time to accrue enough paid annual leave. For instance, a person who started on December 10 will not have accrued a week’s annual leave by 24 December.
There are a few possible outcomes:
- The employer can credit the employee with annual leave in advance. The employee could then be required to take that advanced leave during the shut down. This is subject to the reasonableness factors set out above.
- The employee could agree to take unpaid leave.
- If the employer decides not to advance annual leave, and the employee doesn’t agree to take unpaid leave, we consider that the employee is entitled to be paid during this period. This pay must be in accordance with the terms of the employee’s award, enterprise agreement and their contract of employment.
An employee cannot be directed to take unpaid leave.
Where an employee agrees, an employee can take a period of unpaid leave during a shut down period.
An employee can be stood down without pay during a shut down if this is provided for in their award, enterprise agreement, or contract of employment.
In the absence of any specific provisions, the Fair Work Act 2009 provides that an employee can be stood down without pay if they cannot be usefully employed where the stoppage of work is caused by something that the employer cannot be held responsible.
In relation to the Christmas/New Year shut down, the Fair Work Act 2009 stand down provisions are unlikely to apply as this is usually something decided upon by the employer. However, this may be relevant if there was State/Territory legislation that prohibited trading on certain days.
Public holidays are separate entitlements and are not affected if a public holiday falls during a period of paid annual leave.
Where a public holiday falls on a day that the employee would have ordinary performed work during a period of paid annual leave, then they should not be paid annual leave for that day. Rather, the employee would be entitled to be paid at their base rate of pay for ordinary hours that they would have worked.
An employee is not entitled to payment for a public holiday if it falls during a period of unpaid leave.
An employee can only be on a period of unpaid leave if they agree to do so.