Pay loadings to cover unpaid leave did not comply with NES

Cases

Pay loadings to cover unpaid leave did not comply with NES

Fair Work Australia has ruled a fast food chain that offered employees a 12% pay loading if they agreed to take four weeks annual leave as unpaid leave would be in breach of the National Employment Standards.

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Fair Work Australia (FWA) has ruled a fast food chain that offered employees a 12% pay loading if they agreed to take four weeks annual leave as unpaid leave would be in breach of the National Employment Standards (NES).
 
Consequently, FWA refused to approve enterprise agreements that contained these provisions.
 
The proposed agreements gave employees a choice between the standard NES provisions for paid annual leave and personal/carer’s leave, or the alternative of a 12% loading on minimum pay rates in exchange for taking up to four weeks or unpaid annual leave and ‘reasonable’ sick/carer’s leave.
 
Breach of NES
 
FWA found that provisions existed to allow cashing in of annual leave, even in ways contrary to NES provisions, but not for payment of a loading in lieu of forgoing entitlement to paid leave.
 
Loadings could be used as compensation for giving up entitlements to paid leave, but not to offset a requirement to take unpaid leave.
 
The proposed loading could not be regarded as ancillary to the NES entitlement to paid leave, nor did it have substantially the same effect as that entitlement. This was because the provision would discourage employees from taking leave, as they would receive no income while taking it. The intention of the NES paid leave provision was to provide an incentive for employees to take leave for the purposes of rest and recreation.
 
FWA applied the same reasoning to the proposal to buy out employees’ sick/carer’s leave. However, it added that while it would not approve the proposed agreements as is, it would accept the employer’s written undertaking that it would not rely on the unpaid leave provisions.
 
FWA did not address the issue of whether substituting a 12% pay loading would pass the BOOT (better off overall test) for agreements — contravention of the NES was sufficient grounds for rejecting the agreements.
 
 
 
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