Firstly, it’s essential to define the terminology of shutdown. A shutdown refers to a planned closure where employees use annual leave or agreed leave without pay based on their company’s decision to close specific sites or offices. It is important to understand the parameters of what you can and can’t impose as an organisation.

In relation to the modern awards, a shutdown should never be confused with a stand down, which occurs only in limited circumstances, such as a stoppage of work outside the employer’s control. Examples of a stand down include extreme weather or power outages, neither of which involve the forced use of annual leave, although it may include forced leave without pay. Stand downs fall under a different section of the Fair Work Act and have a very narrow trigger.

Our Workplace Relations team answer three frequently asked questions they receive about shutdowns.

How do Modern Awards differ in relation to planned shutdowns?

Many awards provide guidelines for planned shutdowns, and they are not all the same. The Construction Award for example, allows businesses to shut down a site and direct employees to take annual leave. However, written notice is required, and the process is rigid because of the project-based nature of the work. The Manufacturing Award also allows shutdowns with at least four weeks’ written notice, however it provides specific options for employees who don’t have enough leave, such as providing annual leave in advance or unpaid leave when by written agreement. Both awards are very specific and leave little room for interpretation.

The Clerk’s Award on the other hand is more flexible, still requiring written notice, but usually relying on agreement for annual leave in advance. Similarly, the Professionals Award also permits shutdowns, but generally expects reasonable notice and consultation, reflecting the more autonomous nature of professional roles. These are just a few examples of the nuances within each award, and it is essential that organisations review the award prior to planning a shutdown.

What happens when employees don’t want to take leave during a planned shutdown?

If an employee does not have enough annual leave or would prefer to take leave at another time of year, the relevant award will determine whether unpaid leave is required, or whether the employer and employee must reach an agreement. Public holidays during a shutdown must be paid and cannot be deducted from annual leave.

Organisations cannot direct award free employees to take annual or unpaid leave during a planned shutdown, unless it is written into their employment contract. Leave must therefore be taken by mutual agreement. Where an agreement cannot be reached, many organisations offer to pay a certain number of annual leave days in advance. The only alternative is to allow the employee to work or pay them during this period even if they don’t work, which may happen if a site is closed. As many employees who fall outside of the awards are part of the decision-making process, such as practicing accountants, some senior managers and most CEOs, this is often less of an issue.

There are also practical ways to minimise conflict associated with shutdowns, which leads us to our third FAQ.

What does effective planning for shutdowns look like?

Ideally, companies will have a strategy in place for planned shutdowns. Whether it happens every year, or has been planned for the first time, processes for communication need to be implemented as far in advance as possible.

1.    Communicate planned shutdowns

If your organisation has a planned shutdown, there are many ways to communicate it. This may include:

• Guidelines detailed in policies and employment contracts
• Setting a maximum number of days that the shutdown will occur
• Highlighting shutdown periods and leave required in company emails and calendars as early as possible
• Informing new hires during the recruitment and onboarding processes
• Send written notifications via email regarding the shutdown period, where relevant providing an opportunity for employees to discuss concerns with their manager

If a planned shutdown is occurring for the first time, all of the above will still apply. Policies and contracts can talk about the possibility of planned shutdown, along with relevant protocols if they are announced.

2.    Manage annual leave throughout the year

To avoid problems at the end of the year, employers should also manage annual leave throughout the year. This means monitoring leave balances and having discussions with employees early if their balance is falling short. Proactive leave planning prevents employees from being caught without enough leave at shutdown time and reduces the need for unpaid leave or complex individual agreements.

3.    Check that directions are reasonable and align with modern awards

Often construction sites and manufacturing plants shutdown universally. However, in other industries a shutdown may not be as straight forward. In these instances, it is advised that you assess leave applications on a case-by-case basis, with shut down requirements being a factor, or at least a discussion before approval.

Under many awards, this is in fact a legal requirement - organisations must take into consideration organisational requirements and the needs of the employee. If a request to work through the shutdown is rejected, the response needs to demonstrate reasonable business grounds in line with award requirements.

For advice on planned shutdowns, contact our Workplace Relations team today.