A Full Federal Court has confirmed an earlier contentious decision, that where relevant workers' compensation legislation allows or permits an employee  to receive annual leave while absent from work on paid workers' compensation, they will be entitled to take and accrue annual leave under the National Employment Standards (the NES).

 

Background

 

The employee was engaged in New South Wales (NSW) by Anglican Care as an assistant in nursing. In December 2009, the employee sustained a workplace injury and was unable to work from the date of the injury until her employment terminated in May 2011. The employee received workers' compensation payments from the date of her injury until the termination date.

 

On the termination of her employment, the employee was not paid any accrued annual leave for the period beyond December 2009.

 

Section 130(1) of the Fair Work Act 2009 (Cth) (the FW Act) provides that an employee is not entitled to take or accrue leave during a period the employee is absent from work due to a personal illness or injury for which the employee is receiving compensation. Subsection 130(2) of the FW Act provides an exception and does not prevent an employee from taking or accruing leave during that period, if the taking or accruing of the leave is permitted by a compensation law (our emphasis added).

 

Section 49 of  the Workers' Compensation Act 1987 (NSW) (the WC Act) provides that employees are entitled to workers' compensation even though the employee has received or is entitled to receive annual leave for the period of incapacity to work. 

 

The NSW Nurses and Midwives' Association lodged an application with the Federal Circuit Court on behalf of the employee for the unpaid annual leave accrual. The initial decision found the employee was entitled to accrue annual leave while she was absent from work and in receipt of workers' compensation payments on the basis that s.49 of the WC Act does not prevent the worker from receiving both workers' compensation and accrued annual leave and in that sense it "allows" or "permits" the receipt of both pursuant s.130 of the FW Act . Further Anglican Care had contravened the FW Act by failing to pay the accrued but untaken annual leave on the termination of her employment.

 

Appeal 

 

Anglican Care appealed the matter to Full Federal Court on the basis the exception in ss.130(2) of the FW Act should only apply where the compensation law "provides or confers" an entitlement to take or accrue leave (which s.49 of the WC Act does not).

 

The Full Federal Court rejected Anglican Care's argument finding that s.130 of the FW Act does not require the source of the entitlement to be found in the compensation law, rather it is sufficient that the compensation law "contemplates and allows" for the dual receipt of workers' compensation and annual leave. Accordingly, the employee was entitled to take and accrue, and therefore be paid on termination of her employment, annual leave for the period she was in receipt of workers' compensation. The appeal was dismissed. 

 

Lessons 

 

The decision on appeal continues to be contentious but is authoritative and therefore should be applied. This means, at least in NSW, where employees are absent from work on paid workers' compensation, they will be entitled to accrue annual leave. Employers should ensure their payroll systems reflect the appropriate accruals and where appropriate, the annual leave accruals are paid upon termination of employment.

In other jurisdictions, employers should seek specific legal advice regarding if relevant workers' compensation legislation confers that same benefit upon employees covered by it and where appropriate, review payroll systems to ensure appropriate accruals and payments upon termination of employment.

 

Employers who fail to record or pay appropriate accrued but untaken annual leave to employees on termination of employment, may be in breach of the Act and risk proceedings being commenced. 

 

There is a bill currently before the Senate that will repeal ss.130(2) and dispense with this decision if passed, as it will make it clear that leave does not accrue during periods of workers' compensation. If the bill is passed we will provide a further update.

 

If you would like to know more about this case or leave accruals in general, please contact National Workplace Lawyers on  +61 2 9233 3989.

 

National Workplace Lawyers

Note — this is for information purposes only and does not purport to be comprehensive or to render legal advice.