Annual leave and workers compensation benefits

In a recent decision of the Federal Court, an employer in Western Australia has been found in breach of the National Employment Standards in the Fair Work Act 2009 (Cth) (FW Act) (which contain minimum terms and conditions of employment) by failing to pay a worker annual leave that was accrued whilst he was on workers compensation benefits.

The Federal Court confirmed that s 130 of the FW Act places restrictions on workers accruing or taking leave whilst on workers compensation benefits, but not where doing so is ‘permitted’ by applicable compensation laws. The Court found that s 80 of the Workers Compensation and Injury Management Act 1981 (WA) allows leave benefits to accrue, such that the employer should have paid the employee on termination of his employment for untaken annual leave he was entitled to accrue while in receipt of workers compensation benefits.

The Federal Court’s decision endorsed an earlier decision of the Full Court of the Federal Court which found that the Workers Compensation Act 1987 (NSW) ‘permitted’ an employee to take and accrue annual leave while receiving workers compensation benefits because it did not expressly prevent or prohibit it. The Full Court in that decision noted that workers compensation legislation deals specifically with workers compensation – not leave entitlements. On that basis, the Full Court considered it was reasonable to infer that the use of the word ‘permitted’ in s 130 of the FW Act could not have had the intended effect of requiring workers compensation legislation to specifically deal with the accrual or taking of leave.

Implications

The case serves as a reminder to all employers that workers are able to accrue annual leave entitlements even during periods in which they are in receipt of workers compensation benefits.

Notably, whether leave entitlements are accrued while an employee is receiving workers’ compensation benefits is dependent on the jurisdiction the worker is employed in and the extent to which the accrual of these entitlements is permitted by applicable compensation laws. It is vital that employers are aware of their employment obligations in relation to leave entitlements, as the right of employees to accrue these entitlements whilst on workers compensation benefits can give rise to significant liability and may in turn impact decisions as to the viability of continued employment.

The interplay between employment-related entitlements and workers compensation laws can be complex and it is important that employers satisfy themselves as to their legal obligations. As a firm with national employment and compensation groups Sparke Helmore is well placed to assist employers in relation to any employment or workers compensation advice or representation they require.

National Summary

A table summarising the entitlement to accrue leave whilst on workers compensation benefits throughout Australia is reproduced below.

* In South Australia if an employer has paid 52 weeks of compensation benefits than a worker has no additional right to accrue annual leave after that period.

**

1. employees accrue annual leave entitlements under the FW Act commensurate with their periods of “service”;
2. the period when an employee is receiving workers’ compensation payments will count as “service” for the purpose of calculating the accrual of their annual leave entitlement under the FW Act;
3. the word “permitted” in the exception to the general restriction on accrual referred to above has been held to mean “not prevented, prohibited or restrained”. In this context, “permitted” does not mean that the accrual must be expressly provided for or permitted under the state compensation law whilst in receipt of workers’ compensation; and
4. where a compensation law and an enterprise agreement are silent on the issue of accrual, an employee will be entitled to accrue annual leave whilst receiving workers’ compensation.

*** Accrues in the first 45 weeks of weekly benefits only.