Significant shift in NSW long service leave case law could be the trigger for broader national reform

Luis Izzo AUSTRALIAN BUSINESS LAWYERS AND ADVISERS and Ian Latham DENMAN CHAMBERS

Over the past five decades, regulatory reform has seen changes to most employment-related legislation enacted both at the federal and NSW levels. However, one regulatory regime that has operated relatively unchanged over this period is NSW’s long service leave law — the Long Service Leave Act 1955 NSW (LSL Act).

That legislation provides that employees accrue an entitlement to long service leave after 10 years and may also have a ‘pro-rata’ entitlement to long service leave paid out to them on termination of employment after 5 years’ service, provided they do not resign from their employment and are not terminated for serious misconduct.

This article comes from the experts behind the Employment Law Bulletin.

This bulletin examines changes both in the law and government policy, keeping readers at the forefront of new liabilities and legal procedures and helping them minimise the risk of non-compliance.

Subscribers to Employment Law Bulletin can read the full article HERE.

The LSL Act also has long-standing ‘deeming provisions’ that, amongst other things, ensure that:

• service of an employee with an employer’s related bodies corporate counts as continuous service with the employer, provided that there has been less than a 2-month break in service; and
• an employee’s service with a prior employer’s business that has been transmitted to a new employer is counted as service with the new employer, provided that there has been less than a 2-month break in service.

A vexed question has been the extent to which service with an employer interstate or related entities overseas can count as service under the LSL Act.

What counts as service?

The term “service” is defined by s 4(11)(a) as follows:

service of a worker with an employer means continuous service, whether on a permanent, casual, part-time, or any other basis, under one or more contracts of employment.

“Continuous service” itself has been found to mean “uninterrupted or unbroken employment”.

The LSL Act does not, however, expressly deal with whether such service occurring outside of NSW necessarily counts as service for the purposes of the Act.

This is a matter that has, however, been considered sporadically by Courts and tribunals since at least 1971.

The approach taken historically

The first case to squarely deal with this issue was Australian Timken Pty Ltd v Stone (No 2) (Timken). In this case, an Australian worker was:

• initially engaged to work in Victoria;
• almost immediately then worked in the USA for 2 years; and
• then returned to NSW where he worked for a further 8 years and 7 months before resigning.

The worker remained employed by the Victorian company the entire time and accordingly had 10 years and 7 months of service with the Company, although only 8 years and 7 months of service was in NSW.

The Industrial Relations Commission of NSW (NSWIRC) held that when considering whether the worker had reached 10 years’ service under the LSL Act:

• the service must be said to be connected with NSW;
• “the whole of the service must be examined to see if liability exists”; and
• the benefits of the LSL Act would accrue if at the time the relevant trigger event occurs (that is, the employee reaches 10 years’ service, resigns or is terminated), the service to that point can be said to have a substantial connection with NSW.

Under this approach, the NSWIRC held that if the service “looked at as a whole, may fairly be said to be to a substantial extent New South Wales service”, then a long service leave entitlement can accrue, even if 10 years’ service has not been actually service in NSW.

This approach was then adopted in International Computers (Australia) Pty Ltd v Weaving (Weaving) and Rogers v Taubmans Pty Ltd.

In Weaving, an employee commenced employment in NSW in 1963, worked in Victoria in 1966 before transferring to South Africa in 1969 and the United Kingdom, then returned to NSW from 1975 to 1978 — when his employment terminated. He was nevertheless found to have service under the LSL Act because at the time the relevant trigger event occurred (in this case, termination), the worker’s service could be “fairly said” to be NSW service.

This approach was then further developed by the Federal Court in Cohen v iSoft Group Pty Ltd, where Flick J adopted the reasoning in Weaving but further held that a Court should not consider whether an employee’s service could be said to be more substantially connected to NSW rather than some other jurisdiction. Rather, the approach identified by Flick J was to simply consider whether, at the time of the relevant event occurring, the employee’s service can be said to have a substantial connection with NSW.

Wipro

In Wipro Limited v State of New South Wales, the NSW Court of Appeal held that the historical approach that had been adopted to service outside of NSW was incorrect. One is not to determine service retrospectively, at the point at which some relevance arises, in order to assess whether service has a substantial connection with NSW.

Instead, the entitlement to long service leave hinges on “continuous service” being connected to NSW throughout the relevant period. The Court held that to constitute continuous service, all periods of service need to have a substantial connection to NSW, or else the service will be broken. In particular, the Court held that the existence of a substantial connection should be assessed as the service occurs rather than retrospectively on cessation of the service.

This does not mean that the service necessarily needs to take place in NSW. For instance, the connection might arise because the contract was formed in NSW or directions being issued from NSW for an employee working in an outside jurisdiction.

In Wipro, the relevant employee had close to six years of service in India and close to five years of service in NSW. The Court held that the Indian service had no substantial connection to NSW and accordingly could not be counted for the purposes of determining whether the employee had an entitlement to long service leave. The employee’s claim for long service leave accordingly failed.

Implications

The implications of Wipro are significant. It will require a much closer analysis of each period of employment to determine entitlements to long service leave.

Competing provisions in each jurisdiction

The uncertainties as to the meaning of service identified above are compounded when one considers that long service leave entitlements accrue differently in each jurisdiction.

As is evident from the table below, each jurisdiction triggers long service leave entitlements at different points in time:

Further, the amounts that accrue are different.