Employers gain clarity and comfort about their long service leave obligations to casual employees
In the recent decision of Conroy’s Smallgoods v Australasian Meat Industry Employees Union  FCAFC 59, the Full Court of the Federal Court of Australia determined whether certain casual employees are entitled to long service leave (LSL) under State legislation. This has provided much needed clarity to employers.
Employers whose employees are covered by a pre-modern award now have comfort that those employees are only able to receive LSL under the terms of the award, to the exclusion of State LSL legislation. This is the case even for casual employees who may have no LSL entitlement under the pre-modern award but would otherwise have an LSL entitlement under State laws.
The facts and issues
A casual employee of Conroy’s Smallgoods Pty Ltd, Mr Finch, claimed he was entitled to LSL under the Long Service Leave Act 1987 (SA) (LSL Act). Like all State LSL legislation, the LSL Act provided an entitlement for casual employees to receive LSL after a certain length of service. However, Conroy’s Smallgoods had not paid him any LSL on termination of employment because he had received a loading in lieu of LSL under a pre-modern award. Under the award, casuals were not entitled to LSL.
Mr Finch’s union brought proceedings on his behalf, seeking a declaration from the South Australian Employment Tribunal (Tribunal) that Mr Finch was entitled to LSL. The Tribunal ruled in Mr Finch’s favour. It found an employer could be found to be liable for not paying long service leave to employees under relevant state-based legislation, as section 113 of the Fair Work Act 2009 (Cth) (FW Act) excluded an applicable award that did not provide an entitlement to long service leave.
The result of the Tribunal’s decision meant the employer was suddenly liable to pay LSL under the LSL Act and in breach of a civil penalty provision under the FW Act for failure to do so. In certain States an employer failing to pay LSL could also have committed a criminal offence.
Conroy’s Smallgoods challenged the decision with the support of an intervener, National Australia Bank. The NAB intervened because it has a large number of casual employees who would otherwise be entitled to LSL. The Union and two interveners (the Wage Inspectorate of Victoria and the State of New South Wales) supported the decision of the Tribunal.
The Full Court’s decision
The Full Court decided the LSL scheme under an award is meant to be preserved and not overridden by a State or Territory law. It held, section 113 of the FW Act provides that if there are LSL entitlements that apply under an award (which the FW Act terms ‘applicable award-derived long service leave terms’), the employee is entitled to receive LSL only under those terms. This is to the exclusion of state-based LSL legislation.
In other words, the FW Act intended for a scheme under a pre-modern award to govern the employment, without being disturbed by another scheme set out in state-based legislation.
The decision provides much needed clarity to employers about their employees’ entitlements to LSL. However, many employers will still find it difficult to determine whether their employees’ LSL entitlements arise under LSL legislation in their State or Territory or alternatively, under a pre-modern award.
What should employers do now?
An employer failing to comply with LSL obligations will face prosecution (potentially for criminal offences in certain jurisdictions) and orders to pay damages and penalties. It is important for employers to be accurate about their employees’ LSL entitlements, including for casual employees.
It remains to be seen whether national LSL harmonisation will form part of the future employment reforms the Federal Government intends to usher in during 2023 and beyond. For now, employers unsure of how to determine their employees’ LSL entitlements should seek advice from an employment lawyer.