As the world reopens and people start planning holidays, employers might be faced with resourcing issues. In this instance, are they allowed to deny an annual leave request?

You might have noticed more people posting photos from overseas trips on social media of late. As European summer draws close, many people are taking advantage of their bank of annual leave to go on a holiday – or simply just to take time off to recharge.

However, what happens if a large portion of your employees want to take time off at the same time? Are you allowed to deny someone’s request if it brings up operational challenges? 

HRM asked two experts to give us the legal lowdown.

What’s a reasonable reason to deny a request?

Employers can deny someone’s leave request, says Andrew Jewell, Principal at Jewell Hancock Employment Lawyers. 

“The most obvious reason for refusing a request is that an employee provides unreasonably short notice – for example, a few days’ notice for a period of several weeks’ leave. 

“If reasonable notice is provided – say, at least a month – then an employer can only refuse on reasonable business grounds, such as it being a particularly busy period at work or in a situation where leave has already been approved for other employees in a similar position.”

However, be careful of unreasonably refusing an employee’s request for leave, as it may be considered in a later finding of unfair dismissal. In Stevens v Horsley Park Supermarket, an employee was dismissed for failing to attend work following the employer’s refusal to approve her request for annual leave. 

The FWC found that it was unreasonable for the employer to have delayed determination of the request as sufficient notice to cover the absence was provided, and the delay resulted in the employee incurring a late change fee for international travel of $4000. 

The employer’s unreasonable refusal meant the employee’s failure to attend work did not represent misconduct. Therefore there was no valid reason for the employee’s dismissal, and the claim for unfair dismissal was established. The applicant did not seek reinstatement and was awarded $13,400 (16 weeks’ wages).

While this case acts as a cautionary tale, employers should remember they have a right balance annual leave requests with their operational needs, says Fay Calderone, Partner at Hall and Wilcox Lawyers. 

“The National Employment Standards (NES) state that leave can be taken by agreement, or otherwise in accordance with the awards or industrial instruments. However, awards or industrial instruments can have a mechanism in them which formally says, ‘You must give a certain period of notice when requesting leave.”

So let’s assume the employee has given ample notice of their intention to take leave. What would constitute a reasonable reason to deny their request?

“If it’s a retail entity, for example, and Christmas time is your busy period, an employer could put parameters in place which state that it would be operationally challenging for employees to take leave during that time,” says Calderone. “Or it might be an accountant who wants to take leave around 30 June. It might not be reasonable to ask an employer to take that accountant’s entire portfolio and give it to someone else at such an important time of year.

“Employers may enforce ‘block out periods’ during annual holidays where they can refuse any requests for annual leave falling within those periods. In Stevens v Horsley Park Supermarket, the FWC found that block out periods during Christmas, New Year and Easter may be reasonable for retail business operations. Similarly, entities that experience seasonal demands, such as agricultural businesses, may reasonably deny requests for leave during busy periods.”

For example, in Australian Workers’ Union, The (002N) v Manildra Stockfeeds Manufacturing Pty Ltd & NSW Sugar Milling, the FWC found the employer’s denial was reasonable given the leave request coincided with sugarcane crushing season, and operational requirements meant all employees were required to be available.

While instances of an unreasonable denial would differ on a case-by-case basis, Calderone says it’s harder for employers to argue their case if an employee has ticked all the boxes.

“It might be unreasonable to deny the request if the employee has given you six months notice, for example.”

It could also depend on the type of work the employee is engaged in, she adds. 

“If we’re talking about a receptionist role or admin position where we have labour hire available on tap, and there’s no intricate [business] knowledge needed for that role, then there might be an unreasonableness argument to be made.”

The size of the business matters too. In small and medium size businesses, the FWC has emphasised that greater difficulty would be faced in making arrangements to cover those employees who are on leave, says Calderone.

What about canceling pre-approved leave?

You’d be hard pressed to cancel a pre-approved annual leave request, says Jewell. 

“The Fair Work Act does not allow for approved leave to be cancelled by an employer,” he says. “It’s likely this cannot be done without an employee’s agreement. The reason for this is that employees will likely have made plans, which could include overseas travel or non-refundable payments which cannot be easily amended.”

This would hold true even if the business had reasonable grounds to want to cancel the pre-approved leave, he says. Employees would have a right to complain to the Fair Work Ombudsman if their employer sought to cancel pre-approved leave without gaining agreement.

Calderone adds that if you reach an agreement with an employee to cancel their leave, it should be conditional upon changing it to another date in the short-term, or compensation if they’ve incurred any fees (e.g. cancellation fees for a hotel).

Before seeking agreement from an employee to cancel their annual leave, you should first assess alternatives, says Jewell.

“This could include employing casual staff, allocating work to employees who are present, or delaying non-urgent work.”

Keep workplace safety risks in mind

A key reason for assessing alternatives before cancelling annual leave or denying a request – other than to ensure morale remains high and to treat employees fairly – is to avoid opening yourself up to workplace health and safety risks.

Imagine you’ve identified a reasonable reason to deny someone’s annual leave request, but then they suffer from a physical or psychological injury due to overwork. Does this put you at risk of a worker’s compensation claim?

Calderone says it very well could.

“If an employee indicates that they need to take their leave, and that they are feeling burnt out, and then you deny that, putting aside the question of reasonableness from the NES point of view, there could be a work health and safety risk or a complaint associated with that.

“If an employee hasn’t taken leave for a long time and has requested it, and you’ve then denied that request, they could argue that work could be a substantial contributing factor of any burnout, stress, anxiety or physical manifestations of stress-related illness.”

“If an employee hasn’t taken leave for a long time and has requested it, and you’ve then denied that request, they could argue that work could be a substantial contributing factor of [burnout].” – Fay Calderone, Partner, Hall and Wilcox.

Jewell reminds employers that they can also direct staff to take leave if burnout is a concern.

“The general rule is that leave can only be directed if an accrual is excessive – say, over eight weeks – and the leave balance will be at least four weeks after the directed leave is taken, so that the employee still has a reasonable leave balance,” he says.

The tenure should also be considered, says Calderone.

“There are employees with 20 years’ service who can easily bank up eight weeks of leave because they’ve got a little bit from every year. But if it’s a relatively short-serving employee who’s got eight weeks of leave, I’d suggest they’re not taking enough of a break… annual leave is there so people can rest and rejuvenate.”

Policy provisions to consider

A lot of employers are probably amending their policies at the moment to manage a potential spike in leave uptake, says Calderone. If this is the case, there are a few things to consider.

“In your employment contracts, you might include provisions such as requiring employees to give you four weeks’ notice for leave requests and indicate that you reserve the right to cancel leave.”

You could also include provisions which:

• • State that approval for annual leave should be obtained before booking flights or accommodation for a holiday.
  • Include details around how leave should be taken (e.g. in one or two week blocks rather than taking every Friday off for 20 weeks in a row) to allow for adequate planning for their replacement.
  • Include details about the maximum amount of leave that will be approved (e.g. Leave requests for over four weeks are unlikely to be approved).
  • Outline how many employees can take leave at once. Calderone says this would depend on the size of the company, but you might say only 10 per cent can be on leave at any given time.
  • Offer examples of reasonable and unreasonable reasons to deny a leave request to help provide some clarity and substance.

“Such policies will remove uncertainty which can cause stress, and will also assist if there is a disagreement regarding the reasonableness of any refusal,” says Jewell.

Calderone reminds HR professionals that whenever you update a policy, you need to communicate this to employees for it to be enforceable. She adds that clearly communicating the reason for the policy changes is paramount in building trust. Recognise people’s hard work and need for a break, and make it clear that you intend to help them do that. But also make them aware of the operational realities.

“It’s important to ensure employees don’t feel you’re being autocratic in the implementation of policies or being unreasonable,” says Calderone. “Employees want to understand the purpose of the policy, and see that they’re not just arbitrary rules.”

While policies are important, Calderone warns against making them too rigid.

“HR sometimes wants to just have it all on the page, so that they don’t have to argue about deviations to the rules. But the more prescriptive you are, the less you can account for every circumstance. If you’re too prescriptive, you either have to keep updating your policy, or you’re going to be in a circumstance where, by exception, you have to let something slide because your policy hasn’t helped you.”

Finally, Jewell says to remember that “leave is a very personal matter to employees”, especially when it comes to taking leave to tend to their mental health or family matters.

“So when managing leave, take a conciliatory approach rather than applying minimum standards, as employees can elect to resign over leave disputes,” he says.

Need assistance giving your annual leave policy a refresh? AHRI’s short course, ‘Develop and implement HR policies’, is designed to equip you with the skills you need. Sign up for the next course on 17 June 2022.