Home - Court clarifies rules around workers’ comp and annual leave

UpdatesJun 29, 2015

Court clarifies rules around workers’ comp and annual leave

One of the enduring complications for any Australian employer that wants to follow the rules is knowing where to look.

By Joseph Nunweek

One of the enduring complications for any Australian employer that wants to follow the rules is knowing where to look.

We’ve got the Fair Work Act and its associated employment standards & and they apply in most of Australia. The legislation is complex, but at least it’s the standard virtually everywhere you go.

But what about things like long service leave and workers’ compensation? Each State and Territory has its own law around these important areas.

So what happens when a State law governs workers’ compensation, and the Fair Work Act sets out your obligations on annual leave?

The current position

To figure it out, you need to flip through a copy of the Fair Work Act and land somewhere in section 130.

To be brief, it says that an employee isn’t entitled to accrue annual leave when they are receiving workers’ compensation – unless the compensation law in their jurisdiction ‘permits’ it.

But what does ‘permit’ mean in that context? It’s something that the Federal Circuit Court of Australia has now clarified. And it could mean that what you’ve assumed about your annual leave obligations is mistaken…

Federal Court: State laws need to spell out annual leave rules

The decision, Anglican Care v NSW Nurses and Midwives’ Association [2015] FCAFC 81, concerned an aged care provider that had not accrued annual leave to a nursing assistant while she was absent and on workers’ compensation.

When her employment was terminated, she received no payment for any annual leave accrued after her workers’ compensation had kicked in.

Her employee association claimed that the provider had breached the Fair Work Act by not accruing annual leave during her absence.

The provider argued that because the NSW Workers Compensation Act did not expressly say employees had an entitlement to take or accrue annual leave when receiving workers’ compensation, they did not have to pay annual leave.

But the Court disagreed.

They view was that state workers’ compensation laws ‘permit’ an entitlement if they do not expressly prevent or prohibit it.

So, because the NSW Workers Compensation Act does not clearly state that workers’ compensation recipients cannot take or accrue annual leave, it has permitted the taking or accruing of that leave.

In other words, the law actually has to say ‘no’ if it is going to mean ‘no’.

What it means for your workers’ compensation and annual leave rules

This decision means that NSW employees receiving workers’ compensation are also entitled to annual leave accrual.

In Victoria and WA, which have similarly worded provisions about employee entitlements for workers’ compensation, it is likely that the question about annual leave accrual would be decided the same way.

This means that if you currently do not allow your employees to accrue annual leave on compo, you could see this decision challenged in court in the near future.

In Queensland, South Australia, and the ACT, the legislation already confirms that employees on workers’ compensation continue to accrue annual leave.

Tasmania is currently the only jurisdiction that expressly says employees may not ‘double dip’ by receiving workers’ compensation and annual leave entitlements at once.

One more thing on the horizon?

The mistakes employers make around a matter like this are usually the product of a misunderstanding – not malice.

As I said at the top of this email, the interaction of state laws and federal laws is complex – and it sometimes takes a higher court to straighten them out.

However, the Federal Government does have a provision in its proposed workplace reform package that would remove all employees’ entitlements to take or accrue leave when receiving workers’ compensation. That would override what other compensation laws say right now.

But that package, the Fair Work Amendment Bill, is currently stranded in the Senate. So don’t jump the gun just yet.

In the meantime, the sometimes complex rules around annual leave aren’t going anywhere. To make sure you’re fully-compliant and worry-free, the Annual Leave Guide should be an essential part of your workplace toolkit.

Until next time,
Joseph Nunweek

Editor, Workplace Bulletin


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