Workers compensation and employment-related issues

Analysis

Workers compensation and employment-related issues

This article summarises the main issues affecting a contract of employment when an employee is absent on workers compensation.

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This article summarises the main issues affecting a contract of employment when an employee is absent on workers compensation.

An employee’s absence on workers compensation can create a number of different issues for an employer, questions from WorkplaceInfo subscribers have arisen ranging from the accrual of leave entitlements during an absence to whether the employer can terminate the employee’s employment.

The impact an employee’s absence on workers compensation has on the contract of employment is subject to the Fair Work Act 2009, the applicable industrial instrument (eg modern award or enterprise agreement), and the relevant state or territory laws covering workers compensation and any non-excluded employment entitlements (eg long service leave).

Accrual of leave — NES

Under s130(1) of the Act, an employee is not entitled to take or accrue any leave or absence (whether paid or unpaid) under the National Employment Standard (NES) during a period when the employee is absent from work due to personal illness, or a personal injury, for which the employee is receiving payments under a Commonwealth, a state or a territory workers compensation law.

An employee may take or accrue leave during a period of workers compensation if permitted by the relevant workers compensation law. An example of a law permitting this is the Vic Accident Compensation Act 1985.  Under s130(3) of the Fair Work Act, an employee is permitted to take unpaid parental leave while absent on workers compensation.

Public holidays
 
A public holiday would be regarded as a ‘paid absence’ for the purposes of s130(1) of the Fair Work Act, therefore, the employee would not be able to ‘take’ any public holiday provided under the NES that falls during a period of absence on workers compensation, unless otherwise allowed by the relevant state or territory workers compensation law.

Superannuation

Under the Superannuation Guarantee (SG), the employer must contribute 9 per cent of an employee’s ordinary time earnings (OTE) to the employee’s nominated (or default) super fund.

The Australia Tax Office SG Ruling 2009/02 identifies the types of payments that are included/excluded from OTE, including a reference to workers compensation payments. The Ruling states that workers compensation payments, including top-up payments where no work is performed by the employee, are NOT included in an employee’s OTE for the purposes of calculating the SG.

Modern award
 
A modern award may require the employer to continue to make the employer superannuation contributions (9 per cent) during a period of workers compensation, regardless of the SG Ruling.  
Example
 
Clause 35.4(b) of the Manufacturing and Associated Industries and Occupations Award 2010 states the employer must make the employer superannuation contributions for the period of absence from work (maximum of 52 weeks in total) of the employee due to a work-related injury or work-related illness, provided the employee is receiving workers compensation payments, and the employee remains employed by the employer.
Rostered days off
 
Many modern awards provide for an hours of work arrangement whereby an employee can accrue credits that allow a paid rostered day off (RDO) every four weeks.

This approach usually allows the hours to be arranged so that 152 hours are worked over 19 working days (19 x 8 hours per day), and the twentieth day in the cycle is the RDO.

The employee will accrue a credit (0.4 hour) for each day they work ordinary hours in excess of the daily average.

The employee does not accrue a credit for a day when absent from duty, unless it is a form of paid leave (eg annual leave, personal/carer’s leave, public holiday, long service leave, etc).

The modern award, however, will usually include workers compensation as an absence that does accrue a credit towards the employee’s RDO.

This means an employee absent on workers compensation is deemed by the modern award to have worked for the purpose of accruing an entitlement to a paid RDO.

Reference should be made to the applicable industrial instrument to determine an employee’s entitlement in this circumstance.

Long service leave

The accrual of long service leave during an employee’s absence on workers compensation is usually determined by the relevant state or territory long service leave legislation, or award-derived long service leave provisions under the NES.

The accrual of long service leave during an absence on workers compensation can vary depending on the jurisdiction. 
Example
 
New South Wales and Queensland legislation provides that an employee continues to accrue long service leave during an absence on workers compensation, whereas, Victorian legislation provides that an employee ceases to accrue long service leave when an absence from work exceeds 48 weeks in any year on account of personal illness or injury.
Reference should be made to the relevant state or territory long service leave law (or award provision where applicable) to determine whether an employee continues to accrue long service leave during an absence on workers compensation.

Accident make-up pay

Some modern awards prescribe ‘accident pay’ — this being a payment that represents the difference between the amount of workers compensation payment and the employee’s ordinary award or actual rate of pay. This is payable when an employee is receiving workers compensation, but is capped at a particular number of weeks (usually 26 weeks but can be greater). The accident pay is usually payable even after an employee is dismissed, and continues to be payable until the employee ceases to receive workers compensation or the cap applies. Because this is not a standard provision, reference should be made to the applicable modern award to determine an employee’s entitlement to accident pay.

Dismissal

A prohibition on the dismissal of an employee who is absent on workers compensation is provided by Commonwealth legislation, as well as some state workers compensation law.

Fair Work Act
 
Under s352 of the Fair Work Act, an employer must not dismiss an employee because the employee is temporarily absent (up to 3 months) from work because of personal illness, or a personal injury.

Under r3.01 of the Fair Work Regulations 2009, an employee’s absence is not a temporary absence if it extends for more than 3 months, or a total of 3 months in a twelve-month period, exclusive of any absence on paid personal/carer’s leave. An employee dismissed within 3 months of an absence on workers compensation could apply for a general protections (unlawful termination) order from Fair Work Australia, which is similar to a claim of unfair dismissal.

Workers compensation legislation

In addition to the prohibition to termination under the Fair Work Act, there may be a prohibition from termination of employment under the relevant state or territory workers compensation legislation.
Example
 
Under Part 8 of the NSW Workers Compensation Act 1987, it is an offence if an injured employee is dismissed by the employer, within 6 months of incapacity, solely or principally because the employee is not fit for employment in a position as a result of an injury that entitles the employee to workers compensation. This applies to all employees in New South Wales, including an employee covered under a modern award or enterprise agreement.
Similar prohibitions to terminating an employee while absent on workers compensation also apply under workers compensation legislation in most other states and territories, although the period of prohibition from dismissal varies depending on the jurisdiction.
 
Source: Paul Munro, IR Consultant.
 
 
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