Fair Work Act – which absences affect service?

Analysis

Fair Work Act – which absences affect service?

Absences from work can affect the accrual of leave entitlements or an employee’s right to an entitlement or protection. So what type of absences are included or excluded from the definition of ‘service’ under the Fair Work Act?

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Absences from work can affect the accrual of leave entitlements or an employee’s right to an entitlement or protection. So what type of absences are included or excluded from the definition of ‘service’ under the Fair Work Act? 

What is considered service?

 
While there is a general meaning of the term “service” in the context of modern awards and enterprise agreements, the Fair Work Act (s22) provides a specific definition of “service” for the purposes of the Act.

It is defined to mean a period during which an employee is employed by an employer, but does not include any period (an excluded period) that does not count as service. 

What is an excluded period?

 
This refers to a period of absence that does not count as service for the purposes of accrual of leave and entitlements under the National Employment Standards, such as annual leave, personal/carer’s leave and redundancy pay.

An excluded period includes:
  •  any period of unauthorised absence, or
  • any period of unpaid leave or unpaid authorised absence (except community service leave or a period of stand down).
 An excluded period does not break an employee’s continuity of service with the employer.
 
Examples of unauthorised absence include:
  •  period of industrial action engaged in by an employee
  • other absences from work contrary to the lawful direction of the employer.
 Examples of unpaid authorised absence or unpaid leave include:
  • unpaid parental leave
  • unpaid personal/carer’s leave
  • leave without pay authorised by the employer

Unpaid personal leave – motor accident compensation


In a matter heard before (then) Fair Work Australia, an employee had been on authorised leave during his employment due to a motor accident injury. The employee did not receive any payment from his employer during this period but was in receipt of payments from the Traffic Accident Commission (Vic).

It was held that this period was an excluded period because it was unpaid leave. See Webster v Toni and Guy Port Melbourne t/a Toni and Guy Port Melbourne [2010] FWA 4540

Income protection payments – super fund


In a matter heard before (then) Fair Work Australia, an employee was absent from work for five weeks because of illness, and was paid income protection insurance payments by a private insurer through his superannuation fund.

It was held that because the employer was under no legal obligation to provide income protection insurance, the employee was on unpaid leave or authorised unpaid absence. This was distinguished from workers’ compensation payments which arise from a legal obligation on the employer. See L.M. v Standard & Poor’s (Australia) Pty Ltd [2012] FWA 9634

Unpaid leave that is service

 
Unpaid periods of absence that do count as service include a period of stand down, and a period of absence under community service leave.

Workers compensation


In a matter heard before (then) Fair Work Australia, an employee was in receipt of workers compensation and accident pay during a period of leave. It was found that the payments, even though they were being made by insurers, were made on behalf of the employer pursuant to a legal obligation imposed directly on the employer.

Therefore the absence was not an authorised unpaid absence and was not an excluded period. See Workpac Pty Ltd v Bambach [2012] FWAFB 3206

Parental leave, termination notice, flexible work


Under the Fair Work Act (s22(4)), service, in relation to requests for flexible working arrangements, parental leave and related entitlements, and notice of termination or payment in lieu of notice, only excludes a period of unauthorised leave.

The effect of this definition is that an employee’s absence from work on unpaid parental leave, for example, counts as service for the purpose of determining the employee’s entitlement to a later period of unpaid parental leave, but does not count as service for the purposes of accruing other entitlements under the National Employment Standards, such as paid annual leave or paid personal/carer’s leave. 

Transfer of employment

 
The Fair Work Act (s22(5)) provides that where a transfer of employment occurs, an employee’s service with one employer is treated as service with another employer. It also provides that any period that occurs between an employee’s employment with the first employer and the second employer does not break the employee’s continuity of service (although the period does not count towards the length of the employee’s continuous service with the second employer).
 
The Fair Work Act (s22(7)) defines a transfer of employment as:
  •  where an employee’s employment with the first employer ceases and the employee accepts new employment with an associated entity of the first employer within three months; or
  • where an employee is a transferring employee in relation to a transfer of business and the second employer is not an associated entity.
 Broadly, these provisions are intended to ensure that an employee’s service-related entitlements under the NES are not affected merely because the employee’s employer changes as a result of a transfer of business, or because the employee’s employer changes within a group of employers who are associated entities.
 
However, a legislative note under s22(5)(b) makes clear that this subclause does not apply to a transfer of employment between non-associated entities in relation to the annual leave and redundancy pay provisions under the National Employment Standards if the second employer decides not to recognise the employee’s service with the first employer.
 
Section 22(6) of the Fair Work Act is an ‘anti-double dipping’ provision. Where an employee has taken the benefit of an entitlement – which was calculated against service with the first employer – then s22(5) does not result in the employee’s period of service with the first employer being counted again when calculating that entitlement with the second employer.
 
For example, entitlement to accrued annual leave with a second employer does not include any paid annual leave already taken with the first employer. This includes annual leave paid to the worker when employment with the first employer ended.
 
Likewise, an amount of notice of termination or payment in lieu of notice that an employee receives from a first employer is not counted again by the second employer when calculating notice of termination or payment in lieu of notice. 

Break in continuous service

 
The following periods will break an employee’s continuous service and may result in a new period of employment for re-engaged employees:
  •  termination of employment – resignation or dismissal
  • transfer of employment that does not meet the definition of a ‘transfer of employment’ in the Fair Work Act (s22(7)).

Long service leave

 
The definition of ‘service’ with respect to the accrual of long service leave is determined by the relevant Commonwealth, state or territory long service leave legislation. In the case of ‘award-derived long service leave terms’, service is determined by the terms of the applicable award.
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