Does an Employee Accrue Annual Leave whilst on Workers Compensation?

By Adam Foster

The full Federal Court has confirmed that where relevant workers compensation legislation allows or permits an employee to receive annual leave or absence from work on paid workers compensation, they will be entitled to take and accrue annual leave under the National Employment Standards.

The employee worked in New South Wales for a not-for-profit organisation as an assistant in nursing. In December 2009, the employee sustained a workplace injury and was unable to work from the date of injury until her employment terminated in May 2011. The employee received workers compensation payments from the date of her injury until the termination date. However, on the termination of her employment, she was not paid any accrued annual leave for the period beyond December 2009.

Section 130 of the Fair Work Act deals with entitlements to take accrued leave during periods of absenteeism from work by an employee as a result of compensation. Specifically, subsection 130(2) of the Fair Work Act provides an exception that does not prevent an employee from taking on or accruing leave during that period, if the taking or accruing of the leave is permitted by a compensation law. Section 49 of the Workers Compensation Act permitted this.

It is important that employers remember that employers who fail to record or pay appropriate annual leave taken from employees on termination may be in breach of the Fair Work Act and risk proceedings being commenced. Moreover, employees should ensure that their payroll systems reflect the appropriate accruals where appropriate when employees are terminated. Employee[r]s should also be aware whether relevant state-based workers compensation legislation confers the same benefit upon employees covered by it where appropriate, review payroll systems to assure appropriate accruals and payments upon termination of the employment. This is a contentious decision and one that may be subject to appeal, and an bill currently before the Senate will seek to repeal Section 130(2) of the Fair Work Act, which may end up dispensing with this decision. In the meantime, employers should continue to be cautious.

If you would like to discuss reviewing of your workplace policies and conditions to ensure compliance with relevant legislation, or if you would like to discuss employee termination further, please contact Adam Foster, Associate, Dispute Resolution and Employment Law on (03) 9629 9629.