In most states or territories, if you have been working for an employer for more than 7 years of continuous service you are entitled to Long Service Leave (LSL) paid pro-rata, or full pay after 10 years of continuous service. Entitlements to LSL derives from the relevant laws of each state or territory under the Fair Work system, and they set out the following:
- how long an employee must work to be entitled to LSL; and
- how much LSL an employee is entitled to.
A more difficult situation arises where an employee’s employment contract is subject to the laws of Queensland (QLD), but the employee works in another state.
Which state or territory laws apply?
The simple answer is that LSL is determined by the relevant state or territory legislation in which the employee performs the work.
For example; if the work is performed in New South Wales (NSW), but the employer’s registered office is located in QLD, the employee’s LSL entitlements will be subject to the NSW Long Service Leave Act 1955. The employer would not be in breach of QLD laws in paying LSL entitlements in accordance with NSW laws.
Furthermore, if an employee works in multiple states or territories over the accrued period relevant to LSL (note that it must be continuous service), case law suggests that the employer should apply the relevant laws of the state or territory in which the employee takes LSL, or when termination of employment occurs.
This is particularly important for employers who have terminated an employee’s employment to take notice of.
Are employees entitled to Long Service Leave if employment terminated by the employer?
In accordance with section 95 of the QLD Industrial Relations Act 2016 (the QIR Act), employees who have completed 10 years of continuous services are entitled to full pay of LSL irrespective of why their employment has been terminated. However, if an employee’s service is terminated after 7 years continuous service but prior to completing 10 years continuous service, they are only entitled to a pro-rata payment under the QIR Act if:
- their employment is terminated as a result of their death (s 95(4)(a));
- the employee terminates the service because of:
- illness or incapacity (s 95(4)(b)(i)); or
- a domestic or other pressing necessity (s 95(4)(b)(ii));
- the termination is because the employer:
- dismisses the employee for a reason other than the employee’s conduct, capacity or performance; or
- unfairly dismisses the employee;
- the termination is because of the passing of time and:
- the employee has a reasonable expectation that the employment with the employer would continue until the employee had completed at least 10 years continuous service (s 95(d)(i)); and
- the employee was prepared to continue the employment with the employer (s 95(d)(ii)).
In contrast to QLD laws, other states or territories may have more “lenient” provisions in favour of employees with respect to the reason for termination and LSL entitlements.
For example; in NSW, Australian Capital Territory, South Australia and Tasmania an employee is entitled to pro-rata payment of LSL if the employer terminates the employee’s services for any reason other than serious or wilful misconduct. In Northern Territory and Western Australia, termination of employment by the employer must be for a reason other than serious misconduct. Employees in Victoria (VIC) are entitled to LSL irrespective of the reason for termination.
What does this mean for QLD employers?
Employers located in QLD should be wary that it is an offence to withhold LSL entitlements from an employee whose employment was terminated merely as a result of performance or capacity if the employee accrued LSL in another state or territory.
Furthermore, for states and territories other than VIC, termination by reason of conduct must be at the very least serious misconduct for an employer to withhold LSL entitlements.
It is important that employers and employees access the relevant state laws for each state or territory to address any concerns they have in relation to LSL entitlements.
If you have any questions regarding employment contracts and employee entitlements, please feel free to contact me.