17 Aug News Alert: Annual Leave Loading Payable Upon Termination

Full Bench Confirmed – Annual Leave Loading Payable Upon Termination

In March 2015, we reported on Judge Buchanan of the Federal Court of Australia’s ruling on the interpretation of section 90(2) of the Fair Work Act 2009 (Cth) (“FW Act”).  In the matter of Centennial Northern Mining Services Pty Ltd v Construction, Forestry, Mining and Energy Union (No 2) [2015] FCA 136, Judge Buchanan clarified that the annual leave owing to an employee whose employment comes to an end must be paid out at the same rate they would have received had the employee taken the annual leave whilst at work.

Judge Buchanan’s decision means that any employee entitled to annual leave loading whilst employed, is entitled to be paid out the annual leave loading upon the termination of their employment (where the employee has accrued but untaken annual leave).

Centennial Northern Mining Services Pty Ltd appealed Judge Buchanan’s decision.

The appeal before the Full Bench of the Federal Court of Australia confirmed Judge Buchanan’s decision, holding that:

“The intention of the legislation is that untaken annual leave is payable at the rate at which it would have been paid had the employee taken it at the time the employee was eligible for it.”

What does this mean for Employers?

This decision clarifies that if your employee/s are entitled to annual leave loading when they take leave during their employment, you will need to pay the employee/s’ annual leave loading on all accrued but untaken leave at the end of their employment, irrespective of whether there is a Modern Award or Enterprise Agreement term to the contrary.

Other Considerations

Section 90(2) was raised in the Labour Government’s 2012 review of the FW Act.  A bill was proposed whereby section 90(2) would be amended to clarify that annual leave loading would not be payable unless expressly stated in a Modern Award.  That bill is still before the Senate for consideration and until it passes (if it passes), the Full Bench’s decision, as noted above, prevails.

HR Law would be happy to answer any questions you may have about the payment of annual leave loading.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.