It’s Christmas! Can I direct my employee to take unpaid leave during the end of year shutdown?

With Christmas fast approaching, employers and employees will be turning their minds to organising leave arrangements over closedown (or ‘shutdown’) periods.

During shutdown periods, employees are usually required to utilise their annual leave. However, employees that are new to the organisation, or those who have used up a large portion of their leave during the year, may not have accrued enough leave to cover the period of business closure.

In those circumstances, what are an employer’s rights to direct an employee to take unpaid leave, and where do you stand in law?

In a recent review of modern awards, the Fair Work Commission Full Bench (Commission) made it clear that awards should not give employers the right to make employees take leave without pay during a shutdown. Instead, the leave taken should be agreed to.

In keeping with the Commission’s take on directing unpaid leave, the Federal Circuit and Family Court made a similar decision in 2018, stating that directing an employee to take leave without pay amounted (in that instance) to grounds for an adverse action claim. That is, the employee was able to take action against the employer.

Therefore, the safest bet for employers these holidays (and for any business shutdown) is to seek an employee’s consent to take leave without pay.

Subject to the terms of any award or agreement, it is recommended that businesses consider seeking an employee’s consent to taking unpaid leave in the following ways:

  1. Write to the employee:
  • Explaining the organisation’s shutdown period dates;
  • Setting out the employee’s accrued annual leave entitlement as at the first day of the shutdown period;
  • Explaining that you intend to direct the employee (if you have the legal right to do so, i.e. 28 days notice is given), to take their accrued and entitled annual leave during the shutdown period; and
  • Detailing how many hours of leave without pay the employee will need to take over the shutdown period (if any) and seek their consent for those days to be taken as leave without pay.
  1. Ideally, the employee would communicate their agreement to taking the leave without pay in writing (either by way of returning an email or signing a letter confirming their acceptance).

Given that the required 28 days (as stated in the model award clauses) has passed, if you did not give notice prior to that time, you may have to seek consent for staff taking annual leave (subject to the award).

If an employee refuses to give their consent to take leave without pay, in the worst-case scenario you may end up in a stalemate about how that employee will be paid over a shutdown.

You may need to enter negotiations and explore alternative options, such as the employee taking a combination of annual leave in advance and leave without pay, or the employee returning to work during the shutdown period.

To get ahead of this issue, employers may also consider engaging with employees earlier in the year. This might happen when employees take annual leave outside a shutdown period, particularly where taking annual leave may affect their ability to be off work on full pay for the shutdown period. Managers should seek their agreement about the necessary leave without pay and/or leave in advance for the shutdown at that point.

If you have any questions about your rights, entitlements, or obligations in relation to shutdown periods please do not hesitate to contact Warwick Ryan, Partner in Workplace Relations, Employment & Safety.

Post by Hicksons’ Partner, Warwick Ryan.

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