As part of a series of articles we are examining five employment law cases that shook the world (or at least members of the Australian HR community).
There was a time when there was some uncertainty as to whether
an employee who was entitled to paid annual leave loading, was also
entitled to the loading when accrued but untaken annual leave was
paid out on termination of employment.
In Centennial Northern Mining Services Pty Ltd v Construction,
Forestry, Mining and Energy Union (No 2) [2015] FCA 136
Buchanan J was required to consider a term in an enterprise
agreement that provided that employees who received annual leave
loading whilst taking annual leave, were not entitled to be paid
annual leave loading when annual leave was paid out on termination
of employment.
Given that enterprise agreements (and modern awards) cannot contravene the terms of the National Employment Standards set out in the Fair Work Act 2009, the question was whether the National Employment Standards (in particular section 90(2)) should be read to mandate that where an employee is entitled to annual leave loading during employment, they must also be paid annual leave loading where annual leave is paid out on termination. If so, the relevant term in the enterprise agreement would have no effect.
Buchanan J noted that the Explanatory Memorandum to the Fair
Work Bill 2008 provided as follows (with his emphasis):
"372. Subclause 90(2) provides that, on termination of
employment, an employee is entitled to receive a payment in respect
of any untaken paid annual leave. The payment will be
equivalent to the amount that the employee would have
been paid if the employee had taken the annual
leave.
In light of this, the judge said that "I am not
prepared, in effect, to read down s 90(2) in the face of the
expectation stated in the Explanatory Memorandum when that
construction is plainly open on the terms of s 90(2)
itself." Accordingly it was held that the relevant clause
in the enterprise agreement had no effect, as it contravened the
National Employment Standards.
The decision was upheld on appeal in Centennial Northern Mining
Services Pty Ltd v Construction, Forestry, Mining and Energy
Union [2015] FCAFC 100.
The case is authority for the proposition that if an employee is paid annual leave loading during employment, they must be paid it when annual leave is paid out on termination.
For further information please contact:
Simon Obee, Associate
Phone: +61 2 9233 5544
Email: SRO@SWAAB.COM.AU
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