Accrual of annual leave and workers’ compensation payments

Posted on Nov 6, 2017 by Private: Rebecca McKenzie   |   Categories: Employment Law

It is an unfortunate, but common occurrence, for employees to be injured in the workplace and entitled to some form of workers’ compensation. It can be a stressful and difficult time – for both the injured worker and the employer – and needs to be managed carefully, considerately and properly.

On behalf of some clients, we’ve recently had cause to assess the entitlements of injured workers following the termination of employment. Sometimes it’s the case that an injured worker cannot return to work, if they’re deemed unfit to perform their duties. Other times, the business may be unable to continue the employ of the injured worker, and steps may be taken to terminate the services of that worker, following the proper, lawful procedures in this area of law.

Whilst assessing and calculating accrued employee entitlements can often be a fairly simple payroll exercise, what’s not so straightforward is the need to consider an accrued annual leave component during the worker’s physical absence from work during the receipt of workers’ compensation payments. Indeed, this calculation can be excluded all together, not deliberately by the employer but due to a lack of knowledge that the entitlement continues to accrue.

As a starting point, Section 87(1) of the Fair Work Act 2009 (Cth) – being part of the National Employment Standards provisions – provides for the accrual of paid annual leave to each employee, with related pay out provisions on the cessation of employment.

Next, Section 130 of the Fair Work Act 2009 (Cth) talks about the restriction on taking or accruing leave or absence while receiving workers’ compensation, and disallows it by virtue of Sub-section 130(1) (effectively, disallowing a “double-dip” of entitlements). However, Sub-section 130(2) does not prevent if “the taking or accruing of the leave is permitted by a compensation law”.

We then go on to consider Section 49 of the Workers Compensation Act 1987 (NSW) – being “a compensation law”) – which allows for the payment of weekly compensation payments despite any concurrent entitlement to receive “holiday pay” under any Act (Commonwealth or State), award or industrial agreement or contract of employment. The Full Court decision of Anglican Care v NSW Nurses and Midwives’ Association [2015] FCAFC 81 (5 June 2015) (‘Anglican Care’) confirms that an employee may recover both annual leave entitlements and compensation during the same period of absence from work as long as a compensation law permits it.

As recently as 1 September 2017, two Fair Work Commission cases were handed down (Full Bench decisions), being United Firefighters Union of Australia v Emergency Services Telecommunications Authority T/A ESTA [2017] FWCFB 4537 and Australian Nursing and Midwifery Federation v Alfred Health [2017] FWCFB 4420 which both considered the accrual of paid leave entitlements whilst on a period of workers’ compensation. In both of these cases – which were heard together given the similarity in the legal issues to be determined – the decision in Anglican Care was considered to be binding and held to still be good law.

In a nutshell, in New South Wales, employees receiving workers’ compensation are also entitled to accrue an annual leave entitlement. There has been some talk from the Federal Government to amend this entitlement, however at this point in time it’s WATCH THIS SPACE and employers should ensure the accrued entitlements for injured workers are carefully and properly considered.