5 February 2018


Doesn’t add up: no accrual of leave entitlements during a lockout

 

Roseanna Smith, Graduate Associate

The Fair Work Commission (“FWC”) has held that a lockout constituted an “excluded period” of service under the Fair Work Act 2009 (Cth) (“FW Act”), and consequently that the employees affected by such action did not accrue annual leave or long service leave during this period.

What is an “excluded period”?

The FW Act provides that a period of service is a period during which the employee is employed by the employer, but does not include an “excluded period”.

An excluded period is defined to include any period of unauthorised absence or any period of unpaid leave or unpaid authorised absence (other than certain specified categories).

When calculating leave entitlements, an excluded period will not be included in a period of service, although it does not break the employee’s continuous service.

In April 2017, after a year of enterprise agreement negotiations, an employer locked out its employees in response to notified industrial action that was to take the form of work bans and four-hour stoppages. A dispute then arose as to whether the lockout constituted an “excluded period”.

Annual Leave

The FWC decided that a lockout was an unpaid authorised absence, as it was an absence “that is endowed with authority or approval” by the employer. The FWC determined that it did not matter whether the employees who were absent “agreed or wished to be absent”; what is relevant is that the absence was authorised by the employer.

The FWC was of the view that because the FW Act expressly deals with the situation where employees are stood down as being included in a period of service, it considered that the legislature had turned its mind to the issue. Hence, if a lockout period was meant to be included for the purpose of calculating leave entitlements the legislature would have expressly included that within the FW Act provisions.

Long Service Leave

Both the relevant Modern Award provisions and the relevant state long service leave legislation (Long Service Leave Act 1992 (Vic) (“LSL Act”)), referred respectively to an “unbroken contract of employment” and “continuous employment”. The Modern Award and the LSL Act provided for exclusions when calculating long service leave, including “service interruptions”, such as industrial disputes. The Commission agreed with the employer that the ordinary meaning of industrial dispute included disputes arising from enterprise agreements and lockouts. Consequently, during the period of the lockout the accrual of long service leave was effectively paused.

The decision is significant because it highlights that the consequences of industrial action can extend to employee entitlements. It remains to be seen whether the decision will discourage industrial action by employees.

 

Key takeaways

  • The taking of industrial action, including by an employer in response to actions by employees, can have consequences for leave entitlements.
  • Certain actions may give rise to an “excluded period” and will not count towards the length of the employee’s service, but do not break the employee’s continuous service.
  • In the case of long service leave, industrial action may have an effect on the entitlement depending on the terms of the exclusions in the relevant state legislation and industrial instrument.

 

Posted in Legal Tips.
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