Can employees cash out long service leave?
March 10, 2011
A recent decision of a Full Bench of Fair Work Australia, Armacell Australia Pty Ltd and others [2010] FWAFB 9985 addressed whether the cashing out of long service leave could be included in enterprise agreements. The Full Bench found that if the relevant State law does not permit cashing out of long service leave, the cashing out term of the Agreement would have no effect, as the State law prevails where long service leave is concerned.
In South Australia, Tasmania, and Western Australia, cashing out of long service leave is generally permitted if the employer and employee have a written agreement to this effect.
In the Australian Capital Territory, New South Wales, Northern Territory, and Victoria, cashing out of long service leave is not permitted, except on termination, or the death of the employee.
In Queensland, long service leave can only be cashed out where the relevant “Industrial Instrument” provides for cashing out and the parties mutually agree to the arrangement. Where there are no such provisions or the employee is Award free, long service leave can only be cashed out by order of the Queensland Industrial Relations Commission in cases of financial hardship or compassionate grounds.
In States where cashing out is permitted, an enterprise agreement can include a provision for cashing out of long service leave as long as it does not reduce the entitlement provided for under the relevant State legislation.
Queensland is unique in that whilst there is no automatic entitlement to cash out long service leave, s53(2) of the Queensland Industrial Relations Act 1999 provides that if the relevant industrial instrument allows for cashing out, payment can be made for the leave, by signed agreement, in accordance with the terms under the Industrial Instrument. By definition, an enterprise agreement is an industrial instrument; and the inclusion of a clause in an enterprise agreement specifying that an employer and employee may agree for long service leave to be cashed out in accordance with the relevant legislation will allow the parties to utilise s53(2) of the Act.
A properly drafted clause would not undermine the entitlement to long service leave under the Queensland State legislation, and hence would comply with the Fair Work Australia requirements for approval of an Enterprise Agreement. Fair Work Australia however, is yet to determine the issue of provisions in enterprise agreements relating to the cashing out of long service leave in Queensland.
For more information regarding cashing out of long service leave or enterprise agreements please contact Eloise Bonel.
