Can an employee on workers comp cash out leave?

Q&A

Can an employee on workers comp cash out leave?

Employees who are in receipt of workers compensation payments may seek to supplement their income by cashing out some of their accrued annual leave — is this permissible?

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Employees who are in receipt of workers compensation payments may seek to supplement their income by cashing out some of their accrued annual leave — is this permissible?

This question was recently sent to WorkplaceInfo.

Q  We have an employee who is currently on workers compensation, with a return to work not expected for several months.

Because of his financial situation, the employee originally requested to take his accrued balance of annual leave, but this request was rejected because of restrictions imposed by the Fair Work Act 2009.

The employee is employed in South Australia where the relevant workers compensation legislation appears to be silent with respect to an employee taking annual leave during a period of workers compensation.

The employee has asked whether he can cash out his accrued annual leave, as an alternative to taking it, thereby circumventing the provisions of the Act.

We have no problem with acceding to his request but are unsure whether this is possible under the current legislation?

A  This is a moot point because the question has not been the subject of judicial review. 

Section 130 of the Fair Work Act states that an employee is not entitled to take or accrue any leave or absence (whether paid or unpaid — except unpaid parental leave) under the National Employment Standards (NES) when the employee is absent from work because of a personal illness, or a personal injury, for which the employee is receiving workers compensation.

The arguments
 
It would seem the fundamental issue is the interpretation of the term ‘take’ in s130, in the context of annual leave. In cashing out annual leave, it could be argued the employee is ‘taking’ annual leave from their accrued balance.

In addition, the intention of cashing out annual leave is to enable the employee to receive the equivalent amount of pay while also receiving earnings from continuing to work.

An employee on workers compensation is already absent from work, making it difficult to discern the difference between this circumstance and an employee taking paid annual leave in the normal course of events. It could also be argued that the intent of s130 is to prevent an employee from receiving two separate payments (although for separate reasons) for the same period of absence.

Taking all of these arguments into account it may be advisable for the employer not to enter into a cashing-out arrangement during an employee’s absence on workers compensation.

Cashing out annual leave
 
It should be noted that cashing out annual leave is not an arrangement that is widely available to an employee. Its application is restricted to an award/agreement-free employee, under certain conditions (s94), or where cashing out of annual leave is provided by the applicable modern award or enterprise agreement.

While the Fair Work Act regards cashing out of annual leave is an acceptable term in a modern award, the incidence of cashing out provisions in modern awards is almost non-existent.

Source: Paul Munro, IR Consultant.
 
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