Despite Award exemptions, Federal Court holds that Act’s relevant section prevails
A recent Federal Court judgement serves as a reminder that to transport and logistics employers that annual leave loading is payable upon and employee’s termination, the Australian Road Transport Industrial Organisation (ARTIO) points out.
While the case in point, Centennial Northern Mining Services Pty Ltd v Construction, Forestry, Mining and Energy Union (No 2), was not transport oriented, it clarified whether section 90(2) of the Fair Work Act negates exemption provisions in certain awards.
“If this case is followed then the Fair Work Act 2010 would apply to negate that part of clause 23.2 (b)(ii) of the Road Transport (Long Distance Operations) Award 2010 which exempts the payment of leave loading on termination,” the ARTIO says.
The ruling holds that annual leave owed to workers whose employment is terminated has to be paid out at the same rate they would have received had they taken the leave while still at work.
Justice Robert Buchanan found s.90(2) “is not confined to a statement of a minimum obligation, but is a statement to the effect that an employee should not suffer a reduction in the value of unpaid annual leave if employment comes to an end while paid annual leave remains untaken”.
The ARTIO notes that the Road Transport (Long Distance Operations) Award 2010 exempts the loading from termination pay and is only one of a handful that does so, though the Road Transport & Distribution Award 2010 specifically includes it.
“The meaning of s. 90(2) has long been in dispute, and the Fair Work review panel established by the former Labor government recommended amending the provision to specify that annual leave loading is not payable on termination unless expressly provided for in an award or agreement,” the ARTIO states.
“While Labor’s Workplace Relations Minister Bill Shorten did not include this in his post-review amendments to the legislation, current minister Eric Abetz is seeking to adopt the recommendation in his Fair Work Amendment Bill.
“The current Bill has little likelihood of passing through the Senate.
“The issue however is still under consideration despite the recent decision and has been raised at the four-yearly review stages.”
Meanwhile, at least one legal expert believes there will be more court action on the matter.
Allens senior associate Andrew Stirling says the Centennial enterprise agreement that requires employees taking annual leave to be paid the greater of: their ordinary weekly rate plus a 20 per cent loading; or their ordinary weekly rate plus rostered overtime, shift allowance, weekend penalty rates and bonus.
The court was asked to declare that the enterprise agreement’s rate of payment for annual leave on termination complied with the Fair Work Act.
To make the declaration, the court needed to decide that the Fair Work Act required annual leave to be paid out at the employee’s base rate.
“The court refused to make the declaration,” Stirling says.
“It interpreted the Fair Work Act as requiring annual leave to be paid out using the same rate that the employee would have been paid had the employee actually taken the leave during their employment.
“In this case, this was the greater of the ordinary weekly rate plus the 20 per cent loading or the ordinary weekly rate plus rostered overtime, shift allowance, weekend penalty rates and bonus.”
“Given the ambiguity in the Fair Work Act, it would not surprise us if the matter was appealed.”