An answer to the $36 million question - annual leave and workers compensation?

Those of you who follow our bulletins will recall that in November 2010 we asked: To accrue or not to accrue?  That is the $36 million question!

Did the Fair Work Act 2009 change the law from January 2010 so that injured workers in NSW would no longer accrue annual leave when receiving workers compensation benefits – a loss to those workers of about $36 million a year.

In our view the law had not changed.  We can now report that a Full Bench of the Federal Court of Australia has just agreed.

On 5 June 2015 the Full Bench decided the Fair Work Act did not remove the existing entitlement within NSW to accrue annual leave during periods of workers compensation, and in fact expressly permitted it - Anglican Care v NSW Nurses’ and Midwives Association [2015] FCAFC 81.

A nurse injured in December 2009 was off work and receiving workers compensation until her employment ended in May 2011.  The nurse was paid her accrued untaken annual leave but not for the period when she was on workers compensation, worth about $3,000.

The amount in dispute was relatively small but the NSW Nurses and Midwives' Association took up the case and argued the point.

The dispute was all about s130 of the Fair Work Act.  Subsection 130(1) of the Act provides that a person is not entitled to take or accrue leave during periods of workers compensation.  But then s130(2) provides that s130(1) would not prevent the taking or accruing of leave during a period of compensation if that was permitted by a compensation law.

The arguments for the change in the law were technical – in order for s130(2) of the Act to operate, it was said,  there had to be an explicit provision in a compensation law permitting the accrual.  Yes, the NSW Workers Compensation Act was vague on its wording but it had always been accepted that annual leave accrued during periods on workers compensation.

The NSW Nurses and Midwives' Association won the first round before Justice Emmett of the Federal Circuit Court, and then there was an appeal.  In a joint judgment Justices Bromberg and Katzmann said:

It would be odd if Parliament’s intention were to confine the operation of s130(2) to compensation laws which actually created or conferred entitlements to leave.  After all, compensation laws create or confer rights to compensation.

And Justice Jessup agreed. The $36 million question has been answered – those on workers compensation will accrue annual leave, at least if they are NSW workers.

But wait, there’s more!

In a decision just out - 4 yearly review of modern awards - Annual leave [2015 FWCFB] (11 June 2015) - a Full Bench of the Fair Work Commission has decided that most modern awards will be amended to permit the buying out of excess annual leave. 

Up until now annual leave has only been able to be bought out by way of an enterprise agreement, or a side agreement for those not covered by an award or enterprise agreement.  Theoretically a modern award could have included such a provision but none did.

But as part of its four yearly review the Fair Work Commission Full Bench has decided to provide for this ability in most awards, subject to certain requirements still being met.

So for those employees accruing leave while on long term workers compensation there may be the opportunity to buy out that excess leave.

Author: Mark Paul