Closure Countdown – Annual Leave and Shutdown Rule Changes
                     Closure Countdown – Annual 
Leave and Shutdown Rule 
Changes
With Christmas less than 90 days away, employers 
should be turning their mind to planning and 
confirming their Christmas/New Year shutdown 
arrangements.
What is a “shutdown”?
A shutdown, sometimes referred to as a close down, 
occurs when an employer’s business (or part of the 
business) temporarily shuts down for a period of time. 
Shutdowns usually occur during holiday periods such as 
Christmas/New Year, when there is a decrease in 
general business activity or at other times when the 
specific business is not in demand.
As part of the plain language review of modern awards, the 
Full Bench proposed a draft model clause in relation to 
annual leave shutdown provisions in modern awards.
Previously, the modern awards contained different rules in 
relation to providing notice of taking annual leave during a 
shutdown and whether or not an employer could direct an 
employee to take annual leave in advance or leave without 
pay if there is insufficient accrued annual leave.
In May 2023, many modern awards were amended to 
insert the model clause to replace existing shutdown 
clauses in 78 awards (with minor amendments to 
individual awards).
Shutdown model clause
The model clause, and the new shutdown rules provide 
that if an employer intends to temporarily shut down 
all or part of its operation and wants affected 
employees to take annual leave during that period 
then:
• The employer must give affected employees 28 days 
written notice of the temporary shutdown period (or 
shorter period agreed between the employer and 
majority of relevant employees).
• The employer may direct employees to take a period 
of accrued annual leave during the temporary 
shutdown period. The direction must be in writing 
and must be reasonable.
• If an employee does not have sufficient annual leave 
accrued, then the employer and employee may agree 
to take leave without pay, or to take annual leave in 
advance.
Employers should refer to the applicable modern award 
for the specific shutdown provisions.
Importantly the new shutdown rules will require 
employers to manage annual leave requests during the 
year to ensure that there is sufficient leave to cover the 
shutdown period. Otherwise, there must be agreement 
for an employee to take leave in advance or leave 
without pay.
Modern award and enterprise agreement-free 
employees
For employees who are not covered by a modern award 
or enterprise agreement, the Fair Work Act 2009 (Cth) 
(FW Act) will apply.
Section 94(5) of the FW Act provides that an employer 
can require an employee to take a period of paid 
annual leave but only if the requirement is reasonable.  
“Reasonableness” includes the employer’s enterprise 
being shut down for a period (for example, between 
Christmas and New Year).
Under section 94(6) of the FW Act, an employer an 
employee may agree on when and how paid annual 
leave may be taken – including taking paid annual leave 
in advance of accrual.
https://www.ikeep.com.au/