The Closedown Period under the Holidays Act 2003
The importance of Labour Day coming up on the fourth Monday in October (24 October 2022) is the historic recognition of the 8-hour workday which led to the standard 40-hour week, and also heralded in entitlements to annual holidays, now set out in the Holidays Act 2003.
Labour day which morphs into the traditional long Labour weekend holiday is also the prelude to long summer days that unfortunately coincide with the stressful end-of-year exam period at universities around the country. Notably, it is the last public holiday before Christmas and Christmas is the last public holiday in 2022, falling on Sunday 25 December.
But there is also an important date that falls between Labour Day and Christmas day.
This is called the Closedown Period for some businesses. It is a period when the employer customarily closes its operations or discontinues the work of one or more employees, and requires employees to take all of their, or some of their annual holidays during the closedown.
The Holidays Act 2003 sets out the meaning of the closedown period under section 29:
In this section and sections 12(3A) and 30 to 35, closedown period means a period during which an employer customarily – (a) closes the employer’s operations or discontinues the work of one or more employees; and (b) requires the employer’s employees to take all or some of their annual holidays.
Employers that wish to close their business over the Christmas and New Year period are required to give at least two weeks’ notice before the Closedown.
The Holidays Act 2003 sets out the requirement to take annual holidays during the closedown period under section 32:
- An employee who is entitled to annual holidays at the commencement of a closedown period must, if required to do so by his or her employer, take annual holidays during the closedown period whether or not the employee agrees to take the holidays.
- An employee who is not yet entitled to annual holidays at the commencement of a closedown period must, if required to do so by his or her employer, discontinue the employee’s work during a closedown period.
- If this section applies, the employer must give the employee not less than 14 days’ notice of the requirement to take the annual holidays or to discontinue the work (as the case may be).
The concept of customarily closes has been interpreted by the courts as meaning that a new employer could not have a closedown period under the Holidays Act 2003 during its first year of operation: Kerr v Croisilles Oysters Ltd  NZERA Christchurch 2016. If an employer wants to carry out a closedown in this situation, or any other arrangement for closures, the employer will have to seek agreement with its employees. This requirement is set out in section 30 of the Holidays Act 2003:
(1) For the purposes of sections 31 to 35 , the employer may have only 1 closedown period in any 12-month period.
(2) However, subsection (1) does not prevent an employer and employee from agreeing—
(a) that the employer may close his or her operations and discontinue the work of the employee at other times; and
(b) on the arrangements that will apply during those times.
(3) If subsection (2) applies, sections 32 to 35 do not apply.
Other closedown arrangements can be agreed to between the employer and employee, including closedown periods for separate parts of the business. The latter requirement is set out in section 31 of the Holidays Act 2003 which states:
To avoid doubt, an employer may have different closedown periods for each separate part of the employer’s business.
Discussions in good faith with staff
An early discussion in good faith with employees about the employer’s past practices during the closedown period and present intentions at the end of the year will be helpful to both the employer’s and employee’s holiday plans.
The discussions must include such matters as the requirement of employees to take annual holidays during the closedown period. For staff that are not entitled to annual holidays, conversations must be had around the requirement to discontinue work during this period. These would be casual staff or staff that are not yet eligible for annual leave. Other matters raised above can also be held at any time.
Practically and ensuring the notice period of two weeks is complied with, these discussions should take place at or before 9th December 2022 assuming the last day of work is 23rd December 2022.
How the Employer’s & Manufacturers Association (EMA) can help
EMA are here to advise or assist with the early discussions and the content of the notice. Contact us to discuss what we can do for your business, on 0800 300 362.