The legalities of Christmas close-downs

Many companies grind to a temporary halt over the holidays with workers obligated to take time off – but is that approach actually legal?

The legalities of Christmas close-downs
Christmas close-downs may be popular with most employees but there’s always someone who complains about taking involuntary time off – so is there any weight to their annual complaints? Here, one employment lawyer explains the legalities behind the controversial end-of-year custom.

“The Holidays Act 2003 specifically provides for annual closedowns, which are a traditional practice for many New Zealand employers, particularly during the Christmas period,” says Andy Bell, a principal at Wellington-based law firm Bell & Co.

“Employers may implement such a closure once a year provided they give affected employees 14 days’ notice before the closedown commences,” he continues.

According to Bell, the Act doesn’t specify a maximum or minimum period of closedown and employers can implement one across the entire business or have different closedown periods for separate parts of the business

So what about workers who don’t have enough annual leave to cover the holidays or simply don’t want to take the time off? According to Bell, they’ll just have to come around to the idea.

“If an employer has an annual closedown, employees are required to take time off even if they don’t have any annual leave,” he says.  “If an employee doesn’t have enough annual holidays to cover the entire closedown, they must take all of their available annual holidays and then either take annual holidays in advance, if the employer agrees, or take unpaid leave.”

When it comes to employees who are yet to reach the 12 month mark and therefore aren’t entitled to annual leave, Bell says there are two options for employers to choose from.

“The employer must pay the employee eight per cent of their gross earnings since they started working for the employer, minus any annual leave taken in advance or holiday pay paid with their ordinary pay,” he tells HRM.

“The payment of eight per cent at the commencement of a closedown period effectively cancels previous service for the purpose of calculating entitlements to annual leave,” he explains. “The next year of the employee’s employment is deemed to commence on the date on which the premises are closed or the work is discontinued.

“Alternatively, the employer can choose to let the employee take paid annual leave in advance of entitlement, in which case, they would not receive the eight per cent but rather simply have the leave in advance noted in the employer’s payroll system.”

So, employers are well within their rights to implement annual Christmas close-downs but that doesn’t mean they shouldn’t take the time to explain the knock-on effects, says Bell.

“If an employer is going to have a closedown period, best practice is for them to tell employees in writing about when the business will close and reopen and that employees will need to take annual holidays,” he says. “If specific employees do not have sufficient holiday entitlements, the employer should send them a personal letter explaining the options.”

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