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Work’s out for the summer: shutdown periods, requirement to take leave, unpaid leave and excess leave

16 December 2013

Work’s out for the summer: shutdown periods, requirement to take leave, unpaid leave and excess leave

Misa Han, Associate and Dimi Baramili, Associate

The beginning of summer and the festive season means most employers and employees consider their leave arrangements.

With the summer and the festive season just around the corner, it is timely for organisations to review current leave arrangements and be prepared to deal with any associated issues that may arise. These issues include shutdown periods, requiring employees to take leave, employees who are seeking to take unpaid leave and dealing with those who have excessive leave balances. We have addressed some of the common questions employers operating in the federal system may have relating to leave to help manage leave arrangements to suit your organisation’s unique needs and circumstances.

Q. My business is generally quiet over Christmas. Can I shut down my business over this period and force all employees to take leave?

A. Yes, provided you satisfy the requirements of the FW Act. Under the FW Act, you can direct your employees to take annual leave during your business shut down period if the modern award or enterprise agreement that your employees are covered by allows you to do so.

For example, many modern awards allow businesses to require employees to take annual leave as part of its shut down by providing one month’s notice. If your employees are not covered by any modern award or enterprise agreement, the FW Act provides that you can require the employees to take leave if such requirement is reasonable. Generally, it will be reasonable to require employees to take annual leave during the Christmas and New Year shutdown period.

Q. I do not want to shut down my entire business, however, I would like to force certain individuals or parts of the business to take leave. Can I do this?

A. Your first point of reference should be any relevant modern award, enterprise agreement, contract of employment or policy for guidance on whether there are any provisions concerning forced leave. If there is no instrument which provides for a part business shut down you will need to comply with the FW Act, which requires a request to be reasonable.

In any situation where an organisation is making a decision that involves treating groups or individuals differently to others, there is a risk that individuals may make a claim on the grounds of discrimination and/ or adverse action under the general protections provisions of the FW Act. You should always bear these considerations in mind when implementing changes that target specific individuals or groups within the business.

Q. An employee has approached me asking whether they can take unpaid leave during this period. Do I have to say yes?

A. Generally, you can say no to a request for unpaid leave as there is no statutory right to unpaid leave in Australia. However, employers should check any relevant employment contract, policies, modern award and enterprise agreement to see if the employee is entitled to unpaid leave.

In addition, under the FW Act, certain employees can request exible working arrangements. If such an employee requests unpaid leave as a form of a flexible working arrangement, you must give a written response to the employee within 21 days. You must not refuse such request for unpaid leave except on reasonable business grounds. If you refuse, you must provide the reasons for the refusal in the written response to the employee.

Q. one of my employees has accrued a substantial amount of leave and is not planning to take any leave over this period. How can I encourage them to reduce their leave balance?

A. Excess leave is a widespread problem in certain workplaces. It can lead to fatigue, loss of productivity and low employee morale and can contribute to work health and safety issues. Furthermore, in the event of termination of employment, excess leave can add to the cost of any payments due on termination.

If you have an employee with a substantial amount of leave, you can alert them to the fact that they have an excessive amount of leave accrued and that you would be happy for them to take leave during the Christmas period or another mutually convenient times.

If the employee still does not reduce their leave balance, you should check any relevant contract, enterprise agreement, award or internal policy. Some modern awards allow employers to require employees to take annual leave if they have accrued substantial leave. If an employee is not covered by any modern award or enterprise agreement, you can direct the employee to take the annual leave if such a requirement is reasonable. While such a requirement will most likely be deemed reasonable in situations where employees have accrued excessive leave, employers should try to give as much notice as possible and schedule the leave around mutually convenient times.

Failing that, there may also be scope for the employee to ‘cash-out’ their annual leave in certain circumstances. The FW Act allows an employee to cash out their annual leave if it is permitted under a modern award or enterprise agreement or, if the employee is award or agreement free, an agreement is made between both parties in accordance with the FW Act. In both scenarios, cashing out can not lead to an employee’s annual leave balance falling below four weeks. However, when cashing out annual leave, employers should be mindful of the impact that the lack of a break can have on the employee’s physical and emotional well-being.

The employer may also have grounds to direct the employee to take excessive accrued leave to ensure an appropriate break from work so as to discharge its duty of care under work health and safety legislation.


Annual leave provides an invaluable opportunity for employees to take a break and re-charge. Employers are advised to plan ahead and manage leave proactively to ensure that their business needs are met and the personal needs of employees are addressed.

CASE STUDY: – United Voice v Valspar (WPC) Pty Ltd [2013] FCCA 1437

Wattyl sought to reduce work levels in its manufacturing business by requiring employees to take a combination of annual leave and rostered days off to reduce their nine day fortnight to an eight day fortnight. Wattyl was also proposing further shutdown periods over Christmas. This decision was in response to an excess of paint stock levels which were set to reach maximum capacity. It was noted that if this option was not pursued, they may need to look at other options such as redundancy.

The employees did not wish to take their leave in this manner as they preferred to take larger blocks of leave.

There was a dispute as to whether the provisions governing annual leave under the FW Act (which require agreement) or the applicable enterprise agreement (which gave Wattyl the power to direct annual leave where all or part of the business is closed) prevailed in this situation. It was ultimately held that Wattyl was acting in accordance with the power provided to it under the enterprise agreement and was permitted to direct part of the business to take annual leave.

Tips for your organisation in managing leave

  • Be open and transparent with employees throughout the process and allow them an opportunity to provide input.
  • Encourage employees to pursue a work life balance by taking annual leave.
  • Be open and exible to other leave arrangements that may suit an employee.
  • Consider your current arrangements and obligations within the applicable policies, contracts, awards and/or enterprise agreements.
  • Seek advice if you are not certain about your employees’ rights and obligations to avoid the risk of a legal claim.
Posted in Strateg-Eyes.
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