Unreasonable refusal – it’s time to take some leave

In response to the COVID-19 crisis, new provisions were introduced into the Fair Work Act 2009 (Cth) to support business continuity and job security for employees.  Along with the jobkeeper scheme, the FW Act now permits qualifying employers to request eligible employees to take annual leave. But can an employee refuse such a request?

Two recent decisions of the Fair Work Commission supported the employer’s request for employees to take annual leave preferring longevity of the employer’s business rather than protecting an employee’s leave balance and future holiday plans.

The leave request

Section 789GJ(1) of the FW Act provides that an employer that qualifies for jobkeeper can, in respect of an employee entitled to jobkeeper payments:

…

(c)      … give… the employee a request to take paid annual leave; and

(d)      [if] complying with the request will not result in the employee having a balance of paid annual leave of fewer than 2 weeks;

the employee:

(e)      must consider the request; and

(f)       must not unreasonably refuse the request.

The critical issue is whether a subsequent refusal by an employee is unreasonable.

McCreedy v Village Roadshow Theme Parks Pty Ltd [2020] FWC 2480

At the time of the Commission’s decision, Village Roadshow Theme Parks had been, and was, unable to operate its theme parks.  Ms McCreedy had been issued a jobkeeper enabling direction to not attend work and was also requested by her employer to take some of her annual leave.  At the time, Ms McCreedy had accrued a substantial amount of annual and long service leave of approximately 18 weeks.

Ms McCreedy refused Village’s request to take annual leave and lodged a dispute in the Commission. Some of the reasons Ms McCreedy provided when refusing the request included: her lengthy period of service, her desire to take future holidays (that had been paid for in advance) and a medical condition.  Ms McCreedy was also critical of her employer arguing senior management should be doing the heavy lifting in reducing costs.  Ms McCreedy was critical of the unfair impact of the law on long serving employees with large balances. 

Was Ms McCreedy’s refusal unreasonable?  Yes.  The test is not whether Village’s request was reasonable or unreasonable, but whether Ms McCreedy’s refusal was unreasonable. 

Commissioner Hunt found that Ms McCreedy’s refusal was unreasonable in all the circumstances.  Even before considering the impact of COVID-19 on the business, Ms McCreedy’s refusal did not pass critical analysis:

• Ms McCreedy worked part-time (meaning she could take leave when not rostered to work);

• Ms McCreedy was only being asked to take annual leave one day a week (and would retain the minimum statutory balance);

• Ms McCreedy would accrue further leave during the period of the request;

• Ms McCreedy’s future holidays in September and October did not require more than four days of leave;

• Ms McCreedy had not obtained approval for leave in September, October and November before booking her holidays as required under the employer’s leave policy;

• Ms McCreedy had substantial long service entitlements available to her; and

• Ms McCreedy’s medical condition was not serious and did not require a maintenance of an annual leave balance.

Ms McCreedy’s criticisms of her employer were irrelevant and without basis.  “I consider that Ms McCreedy’s rejection of the request has been excessive, and disappointingly vitriolic”, Commissioner Hunt said.  The Commission concluded that Ms McCreedy had “little to no regard to [the employer’s] … reasonable request … to assist in reducing [it’s] annual leave liabilities during a time when it is unable to operate its business”.

Powell v H & M Hennes & Mauritz Pty Ltd [2020] FWC 2514

Similarly, in this dispute, Ms Powell refused a request of her employer to take paid annual leave. Ms Powell worked part-time and had accrued significant leave, not having taken any leave in the last 12 months.  Ms Powell felt it was unfair to be required to take leave, with employee entitlements being attributed less value than the financial position of the employer.

Commissioner McKinnon was sympathetic to H&M’s financial position as a result of store closures. The purpose of H&M’s request was to reduce its contingent liabilities, thereby improving its financial stability and fast-tracking the recovery of the business from the impacts of the pandemic.

Commissioner McKinnon was of the view that Ms Powell’s refusal to take paid annual leave was unreasonable, stating at [17]:

In my view, the need to support business continuity and job security for all employees of H&M outweighs the inconvenience to Ms Powell of not being able to plan her annual leave at a time of her choosing.

Key lessons

For the immediate period to September 2020, Parliament had determined that employees must not unreasonably refuse a request to take annual leave.  The protection provided for employees includes the retention of a minimum balance of two weeks leave.

It is clear that the temporary laws are about supporting business continuity and job security.  In this context, an employee will need good reasons to refuse a leave request.

Commissioner Hunt alluded to the fact that a more serious medical condition might give grounds for refusing a leave request.  If, for example, an employee had cancer requiring time off work for treatment then this could be a consideration of the reasonableness of the employee’s refusal.  But arguing about the fairness of the direction is unlikely to give much support to an employee.

Employers should not however assume they can simply issue directions without some rationale or careful planning.  As Commissioner McKinnon stated at [18]:

This is not to say that Ms Powell does not have understandable reasons for wanting to preserve her leave for a later time, but rather that the current situation requires compromise and contribution from all concerned.

Any organisation-wide directions to take leave should:

• Where possible, give some notice to workers of the need to take annual leave; and

• Allow some flexibility (including as to the quantum and scheduling of leave) to account for different individual circumstances.

Authors: James Mattson and Hannah Dawson