It’s a question injured workers and Victorian employers want answered. When an injured worker is off work and receiving WorkCover benefits, do they accrue annual leave?
Key points
- Precedent established in Victoria
- Injured workers now accrue annual leave while off work and receiving WorkCover weekly payments
- Potential for major cost implications for employers
- Retrospective claims could go back as far as 2009
The way it was
For many years, the answer to the question of whether employees receiving workers compensation should accrue annual leave was ‘no’. WorkSafe generally deferred the topic to the Fair Work Commission. Section 130 of the Fair Work Act 2009 (Cth) says an employee on workers compensation is not entitled to take or accrue annual leave unless it is permitted by a compensation law.
The Victorian WorkCover legislation says nothing about an employee’s entitlement to accrue annual leave. The absence of a reference to such an entitlement in the WorkCover legislation was interpreted as meaning it is not ‘permitted’.
It was commonplace that employees would accrue annual leave when they worked (even on light duties) but not while receiving WorkCover benefits. For example, a full-time employee who had returned to light duties working two days per week would only accrue annual leave on the days they actually worked.
What happened in NSW
In 2015 the Federal Court ruled that an employee who had been off work on workers compensation for two years was entitled to accrue annual leave during this period. They further ruled that the leave was to be paid out upon her termination from employment. The court found that ‘…the word “permitted” in s 130(2) of the FW Act should be construed in the sense of not prevented, prohibited or restrained’.
So, since the workers compensation legislation did not expressly prohibit the accrual of annual leave, it was therefore permitted. And, according to the FW Act, if it’s permitted, then the employee is entitled to it.
The end result was that injured workers in NSW now accrue annual leave while on workers compensation benefits.
Precedent in Victoria
Considering the FW Act is Commonwealth legislation, the above case led many to speculate on how it would affect other states. But, as workers compensation legislation varies by state, there would need to be a precedent in Victoria before changes would occur.
In September 2017 two separate cases were heard by the Fair Work Commission (which you can find here and here). The situations were similar to the NSW case. But both WorkCover claims arose in Victoria, paving the way for a precedent here. The conclusions in both cases stated the employees were ‘permitted to take or accrue annual leave whilst in receipt of workers compensation payments’. Both employers were required to accrue annual leave entitlements for the periods their respective employees were in receipt of workers compensation.
Ryan Carlisle Thomas reported that the Fair Work Ombudsman updated their website on 21 May 2018 to include this change. On the question of whether annual leave accumulates during workers compensation in Victoria, the Fair Work Ombudsman’s website now states ‘Yes. Annual leave accumulates during workers compensation’.
What about other types of leave?
SICK LEAVE ACCRUAL
According to the Fair Work Ombudsman, sick leave does not accrue while on workers compensation.
THE TAKING OF SICK OR ANNUAL LEAVE
The same page referenced above states annual leave can be taken (even paid on top of the workers compensation benefits). But sick leave cannot be taken while on workers compensation.
LONG SERVICE LEAVE
Long service leave continues to accrue while on workers compensation. An absence from work due to a workplace injury is not considered to have broken continuous employment according to the Victorian government.
Implications for employers
CALCULATING ENTITLEMENTS
Victorian employers must accrue annual leave for employees if they are still employed, have an accepted WorkCover claim, and are receiving WorkCover weekly compensation payments.
RETROSPECTIVE CLAIMS
The cost implications for employers could be monumental. Some employers may receive queries from employees (or even ex-employees) seeking a review of their leave balance or termination payment. Injury compensation law firms may view this as a new revenue stream.
TIMING FOR DECISIONS TO TERMINATE EMPLOYMENT
This entitlement to annual leave accrual raises the future costs attached to injured employees. Previously, many employers were in no hurry to end the employment of their injured workers.
Now, if a worker remains off work, the employer must budget for the added cost of annual leave accruals. This raises the urgency for employers to consider terminations of employment. And it could mean more injured workers lose their jobs than before.
ADDITIONAL QUESTIONS
This precedent naturally raises a number of questions for employers. But it’s possible the answers will remain unclear until a further precedent is established in the courts. I put some questions to the Fair Work Ombudsman and can report back to you the following:
- How will this ruling be applied retrospectively? The view of the relevant provisions of the Fair Work Act 2009 has been applicable since the Act’s commencement. The Act took effect on 1 July 2009. This suggests to me that a worker could theoretically claim retrospective accrual back to this date.
- If an employee receives WorkCover benefits at a reduced rate (eg. 80% of their pre-injury earnings), at what rate do they accrue annual leave? The Fair Work Ombudsman told me ‘an employee’s entitlement to annual leave accrues progressively during a year of service according to the employee’s ordinary hours of work. There is no linkage between rate of workers compensation payments and rate of accrual of annual leave under the NES’.
I see this as meaning that if a worker receives WorkCover benefits at the normal rate (eg. 80%), their annual leave should accrue at the normal rate (eg. 4 weeks per year). - Is the Fair Work Ombudsman responsible for the additional liability created by this precedent since it is in contrast to previous advice? Taking responsibility for oversight of a complex and ever-changing area is a daunting commitment to say the least. The Fair Work Ombudsman has addressed with this in their Customer Service Charter, specifically under point 5 ‘Accountability’ which reads follows:
If the FWO provides incorrect advice about minimum wages or conditions of employment, and that advice is relied on and followed in good faith, the FWO:
- will not pursue a penalty for not paying the correct entitlements before the person is advised of the mistake
- will assist in any dispute to resolve concerns about outstanding entitlements
- may require that outstanding entitlements be paid and that correct entitlements are paid once the incorrect advice is identified
- will accept legal liability for incorrect advice in accordance with the law.
