LSL: can agreement override state/territory law?

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LSL: can agreement override state/territory law?

Can an enterprise agreement provide for cashing out of long service leave? Paul Munro explains.

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Can an enterprise agreement allow cashing out of accrued long service leave?

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Q Our company has operations in each mainland state and the Northern Territory and is currently negotiating an enterprise agreement. One condition which has been proposed by the bargaining representatives is to draft a term which would permit employees to cash out their accrued long service leave. The reason for this is that the ability to cash out long service leave already exists for our workers in South Australia.

We have been advised these terms may not pass the Better Off Overall Test (BOOT) because it is detrimental to some employees. Most employees have indicated they would access cashing out of long service leave if it was available in the agreement.

Would this proposed term pass the BOOT?

A An enterprise agreement will fail the BOOT if it contravenes the relevant state or territory long service leave law. This means a proposed enterprise agreement would fail the BOOT if it provided for the cashing out of long service leave in a state or territory whose law prohibited cashing out, such as New South Wales and Victoria.

Conversely, cashing out of long service leave is permitted for South Australian and Western Australian employees and would pass the BOOT in those jurisdictions. See St Marys Rugby League Club Ltd re St Marys Rugby League Club Ltd Employees Enterprise Agreement 2010 [2010] FWA 8300 (12 November 2010).

Where an enterprise agreement has been made after the start of the National Employment Standards (NES):
  • the agreement cannot exclude the long service leave NES, but may supplement the NES subject to the requirement that such terms not cause any detriment to an employee
  • for employees without an award or agreement-derived long service leave entitlement, enterprise agreements will operate subject to the relevant state or territory long service leave law.
Under the Fair Work Act (s27), a state or territory law that regulates long service leave is a non-excluded matter, meaning the Act does NOT override its provisions. Likewise, the effect of the Fair Work Act (s113) seems to be designed to prevent long service leave from being traded away under enterprise agreements.

State/territory long service leave law

The following is a summary of each state and territory long service leave legislation with respect to cashing out of long service leave:
  • Long Service Leave Act 1976 [ACT] – the Act does NOT permit cashing out of leave
  • Long Service Leave Act 1955 [NSW] – the Act does NOT permit cashing out of leave
  • Long Service Leave Act [NT] (s10(4)) – the Act specifically prohibits cashing out long service leave
  • Industrial Relations Act 1999 [Qld] (s53) – if applicable award or agreement permits, otherwise employee may make application to the Queensland Industrial Relations Commission ordering payment. Orders for payment granted only on compassionate grounds or financial hardship.
  • Long Service Leave Act 1987 [SA] (s5(1A)) – cashing out (partial or full payment) permitted by written agreement after 10 years' continuous service with an employer.
  • Long Service Leave Act 1976 [ Tas] (s10) – the Act provides that where an employee becomes entitled to long service leave under the Act, he/she may, by agreement, elect to accept payment in lieu of long service leave.
  • Long Service Leave 1992 [Vic] (s74) – payment in lieu of leave is prohibited under the Act and is only permissible upon the termination of an employee’s employment.
  • Long Service Leave 1958 [WA] (s5)  – a written agreement can be made in which an employee can trade some, or all, of their long service leave for an adequate benefit in lieu of the entitlement.
The bottom line: Cashing out of long service leave is subject to the provisions of the relevant state or territory long service leave legislation. The terms of an enterprise agreement cannot override the provisions of the relevant state/territory long service leave legislation.
 

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