Excessive annual leave accruals

We have an award covered employee who has 12 weeks of annual leave that he hasn’t used. We have been unable to reach agreement on when he is to take the leave. He has now given us a letter stating that he intends to take 4 weeks of annual leave in two months’ time which will be a busy time for our business. Do we have to grant this leave?

Where an employee has an excessive leave balance and is covered by a modern award, they may have a right to give notice to take leave. In this scenario the employer may also have the right to direct them to take annual leave.

Many modern awards were varied as a result of the Annual Leave Common Issues case during the current 4 Year Modern Award Review process to include somewhat complex provisions dealing with managing excessive annual leave balances.

What is considered excessive leave?

For modern awards that have been varied to include new provisions on dealing with excessive leave, an employee is defined as having an "excessive leave accrual" if the employee has accrued more than 8 weeks’ paid annual leave (or 10 weeks’ paid annual leave for certain shift workers).

Employee requesting leave

For modern awards that have been varied to include new provisions on dealing with excessive leave, employees will have the right to request a period of annual leave in circumstances where the employee and the employer have been unable to reach agreement on when leave is to be taken.

Employees who have an excessive leave accrual may give written notice to their employer to take a period of annual leave if:

• the employee has had an excessive leave accrual for more than 6 months at the time of giving notice to their employer; and
• their employer has not given a direction to take a period of annual leave which would eliminate their excessive leave accrual.

The employee must give a minimum of 8 weeks' notice of when they would like to take their annual leave. The employer must grant the request for annual leave only if the employee’s written notices does not:

• reduce their leave balance below 6 weeks; or
• make a request for a period less than one week; or
• Is not inconsistent with any leave arrangement already agreed by the employer and employee; or
• give less than 8 weeks’ notice, or more than 12 months’ notice of when the leave is to be taken; or
• requests more than 4 weeks of annual leave in any period of 12 months (5 weeks for shift workers as defined by the relevant award).

Where an employer receives a request from an employee, the employer should check whether the relevant modern award now includes the model provision from the Annual Leave case. Where this clause is in the award, and if the request by the employee is in line with the award provisions, the employer must grant the annual leave.

Employer directing the employee to take leave

For modern awards that have been varied to include new provisions on dealing with excessive leave, an employer can direct an employee to take annual leave only when they have genuinely tried to reach agreement with an employee but failed to do so and under certain circumstances.

Basically, the employer may direct the employee in writing to take one or more periods of paid annual leave, provided that:

• a direction by the employer is of no effect if it would result at any time in the employee’s remaining accrued entitlement to paid annual leave being less than 6 weeks when any other paid annual leave arrangements are taken into account;
• the employer must not require the employee to take any period of paid annual leave of less than one week;
• the employer must not require the employee to take a period of paid annual leave beginning less than 8 weeks, or more than 12 months, after the direction is given;
• a direction by the employer must not be inconsistent with any leave arrangement agreed by the employer and employee; and
• an employee to whom a direction has been given may request to take a period of paid annual leave as if the direction had not been given.

An employee may still make their own leave request (as detailed above) that is inconsistent with the direction given by the employer. In this case, the employer must not take the direction into account when deciding whether to agree to the request, and, in accordance with s. 88(2) of the Fair Work Act, must not unreasonably refuse.

Many modern awards also allow for employers to direct employees to take annual leave during a close-down, or shut-down, period. In these cases the relevant clauses should be referred to.

Further assistance

For further information or advice regarding excessive annual leave balances or annual leave in general, please call the Workplace Advice Line on 1300 55 66 77.