What is meant by service? – Fair Work Act

Analysis

What is meant by service? – Fair Work Act

When calculating accrual of entitlements, what absences from work still count as service?

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When calculating accrual of employment entitlements, what absences from work still count as service?

While the general common law meaning of the term ‘service’ usually refers to the performance of duties as an employee, most employment entitlements are subject to a statutory definition.

In the absence of a specific definition, the use of the word “service” when interpreting industrial instruments or employment statutes is distinct when the word “employment” is substituted.

“Service” requires the actual performance under the contract of employment, whereas the use of the word “employment” means an entitlement would apply for as long as the employee remained employed by that particular employer.

So which absences count or do not count as service during the course of employment?

Fair Work Act


While there is a general meaning of the term “service” in the context of industrial instruments, 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.

Periods that do not count as service (excluded periods) are:
  • any period of unauthorised leave, such as when an employee has abandoned his or her employment, is engaging in industrial action or is otherwise absent from work for a period contrary to a direction made by an employer; or
  • any period of unpaid leave, such as unpaid parental leave or unpaid carer’s leave, or unpaid authorised absence, e.g. leave without pay granted by an employer.

Unpaid leave that is service


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

Continuous service


The term "continuous service" generally means a period of unbroken service with an employer by an employee. As continuous service is not specifically defined in the Fair Work Act, its ordinary meaning has been applied in matters before the Fair Work Commission. See Holland v UGL Resources Pty Ltd t/a UGL Resources [2012] FWA 3453.

Unpaid personal leave – motor accident compensation


In a matter heard before (then) Fair Work Australia, an employee had been on authorised leave 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, the employee was absent from work for about 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.

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, notice of termination, requests for flexible working arrangements


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, does count as service for the purpose of determining an employee’s entitlement to a later period of unpaid parental leave. However, it 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 are not associated entities.
Broadly, these provisions are intended to ensure that an employee’s service-related entitlements under the National Employment Standards 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 Standards' annual leave provisions, or the Standards' redundancy pay provisions, of the Fair Work Act if the second employer decides not to recognise the employee’s service with the first employer.

Section 22(6) is an ‘anti-double dipping’ provision. Where an employee has taken the benefit of an entitlement, and that entitlement was calculated by reference to a period of 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 the employee’s entitlements as an employee of the second employer.

For example, an employee with an entitlement to accrued annual leave as an employee of the second employer does not include any period of paid annual leave that the employee has already taken as an employee of the first employer. This includes any accrued annual leave paid to the employee at the end of the employee’s employment with the first employer.

A second example provides that an amount of notice of termination, or payment in lieu of notice, that an employee receives at the end of his/her employment with the first employer is not counted again when calculating an amount of notice of termination or payment in lieu of notice to which the employee is entitled as an employee of the second employer.

Break in continuous service


The following periods will break an employee’s continuous service with an employer and may result in a new period of employment for re-engaged employees:
  • termination of the 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)).
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