Yesterday, the Fair Work Commission (the “FWC”) handed down its award review decision on annual leave with a number of implications for employers.

Most importantly, the FWC has determined that a model term on cashing out of annual leave will be inserted into all modern awards. The Fair Work Act 2009 (Cth) has allowed for such terms since 2009 and they have been a common feature of enterprise agreements.

The model term will allow the cashing out of an award-covered employee’s annual leave, subject to four safeguards consistent with and expanding upon the minimum safeguards provided for by the FW Act:

• maximum of two weeks’ paid annual leave can be cashed out in any 12 month period (subject to the requirement of the FW Act that an employee cannot be left with less than four weeks’ accrued annual leave following the cashing out);

• employers must keep records of any agreement relating to cashing out annual leave and its content;

• agreements to cash out annual leave involving employees under 18 years of age must be signed by the employee’s parent or guardian; and

• the model term will be followed by notes drawing attention to the general protections provisions of the FW Act with respect to undue employer influence and misrepresentation of employee rights.

The decision also covered a number of other issues, including:

• excessive leave: a model term has been drafted which will allow employers, in certain circumstances, to direct an employee to take annual leave if the employee has accrued more than six weeks’ annual leave;

• close down: the FWC has rejected inserting a model term into 65 modern awards which would have allowed employers to shut down their organisations and require annual leave to be taken at certain times (for example, during business turndown); and

• purchased leave: the FWC has recognised an interest in “purchased leave” (whereby an employee chooses to forego wages in return for receiving a corresponding period of leave) and will begin work on a discussion paper with respect to this issue.