15 May, 2016
Venier v Baker Hughes Australia Pty Ltd [2016] WAIRC 00210 (14 April 2016) 21 April 2016
What you need to know
- An employee who worked for a number of related companies overseas, and who was then transferred to Australia, has had his 26 years of previous service with those related entities counted as "continuous service" for the purposes of long service leave.
- The employee's employment, which commenced at a UK company which was then acquired by a US company, as well as the employee's service with various other international related entities of the US company, was found to be continuous for the purposes of the Long Service Leave Act 1958 (WA).
- The decision provides useful guidance for employers about how long service leave accrues under the WA LSL Act. However, whilst the decision concerns the WA LSL legislation, applicable legislation in other states and territories expressly include employment with at least some related companies in the calculation of employee long service leave entitlements. Accordingly, the principles from the decision may be applicable to other jurisdictions.
What you need to do
- Review how employee long service leave accrues under your applicable state legislation (and internalpolicies) to determine whether any periods of employment at related companies (both in Australia and overseas) should be included in accruals for the purpose of calculating employee long service leave entitlements.
- When entering into contracts with employees who have been repatriated, consider whether, under your applicable state legislation, the employee's length of service with related companies should be included for the purpose of calculating long service leave entitlements, at least for accounting accrual purposes. If in doubt, do not contractually bind your organisation to recognising overseas service.
- Develop a clear process for recording and keeping track of employees who are transferred (interstate or internationally) to related companies, and their entitlements to long service leave.
Do you have employees who are currently based interstate or overseas, or who have previously worked for related companies interstate or overseas? Do you include this service in the calculation of long service leave entitlements?
Employers need to be aware that an employee's length of service for long service leave purposes may include periods of employment with related companies, such as:
- those that have been acquired (through a transmission of business); or
- other related bodies corporate within an organisation's corporate structure.
This may have a significant impact on accruals for long service leave.
Venier v Baker Hughes Australia
In Venier v Baker Hughes Australia Pty Ltd [2016] WAIRC 00210 (Venier), the Western Australian Industrial Magistrates Court ruled that an employee's employment with related companies was to be regarded as "continuous employment" for the purposes of calculating long service leave entitlements under the WA LSL Act.
The employee began working for an employer in the UK in 1988. In 1992, the employer became a division of a US company. This did not interrupt the continuity of his service. The employee was then promoted and transferred a number of times between different related entities within the US company, including for two years in China. Finally, the employee was transferred in his employment with the Australian entity of the US company in 2008.
Upon his transfer to Australia, the employee entered into an employment contract with the Australian entity. This contract provided that the employee was entitled to long service leave in accordance with the legislation that was applicable in Western Australia.
The employee's employment terminated on 16 July 2015. The employee claimed 23.01 weeks' long service leave on the basis of 26.64 years' continuous service with his Australian employer and its related companies.
Section 8(1) of the WA LSL Act states that:
'An employee is entitled in accordance with, and subject to, the provisions of this Act, to long service leave on ordinary pay in respect of continuous employment with one and the same employer ….'
The employee argued that the term 'one and the same employer' should include employment with related entities, including having regard to the statutory definition of 'employer' (which was framed in the plural) and to the history and purpose of the WA LSL Act. The Court agreed with this interpretation, finding that the term 'one and the same employer' should be construed to contemplate employment with related bodies corporate, as that term is defined in section 50 of the Corporations Act 2001 (Cth).
It should be noted that this was only a determination of a preliminary issue. The case has not been finalised, and it may still be appealed.
Calculating long service leave
There have not been any recent legislative changes to the WA LSL Act. Rather, the Venier case is the first to interpret this legislation with regard to the issue of related companies. So, the decision provides useful guidance for employers about how long service leave accrues, and should be calculated, under the WA LSL Act.
Although the Venier case considered the WA LSL Act, applicable LSL legislation in New South Wales, Victoria, South Australia, Tasmania, the Australian Capital Territory and the Northern Territory each provide that employment with at least some related companies is to be specifically included in the calculation of long service leave entitlements. This means that the lessons from the Venier case may also apply to other jurisdictions.
In light of the Venier case, employers should review how employee long service leave accrues under their applicable state legislation (and internal policies) to determine whether any periods of employment at related companies (both in Australia and overseas) should be included for the purposes of calculating employee long service leave entitlements.
This is particularly important given that companies are becoming increasingly globalised, either by establishing overseas related companies, or through mergers and acquisitions. The transfer of employees overseas has consequently become more frequent. Employers need to be aware of an employee's period(s) of employment with related companies overseas and consider how that service is to be treated should the employee commence working in Australia. In some jurisdictions, such as Victoria and New South Wales, it is arguable that the employee needs to demonstrate that they have a "substantial connection" to the relevant state in order to have an entitlement.
What you can do
Employers need to develop a clear process for recording and keeping track of employees who are transferred (interstate or internationally) to related companies, and their entitlements to long service leave.
There is only a very limited scope for employers and employees to seek to otherwise vary an employee's entitlement to long service leave. Western Australia is the only jurisdiction that explicitly allows employees to forgo an entitlement to long service leave. However, there are requirements around this, including that the employer must provide the employee with an adequate benefit in lieu of the entitlement, and any such agreement must be in writing.
Contracting out of long service leave is specifically prohibited in New South Wales, Victoria, Queensland, the Australian Capital Territory, the Northern Territory and Tasmania.
Employers should be also be aware that some awards and agreements set out how long service leave accrues for employees covered by those instruments.
If you are unsure of an employee's entitlement to long service leave or whether an entity may be classified as a related company under state or federal legislation, you should seek legal advice.
MAKING THE CASE: Insights from Geoff Giudice
Generally speaking, the national system established under the Fair Work Act 2009 (Cth) – comprised of modern awards and the National Employment Standards – regulates minimum wages and conditions of employment in the private sector throughout Australia. The Venier decision is a reminder that long service leave is excluded from the national system and regulated on a state and territory basis. The position is even more complicated for some employers because there are still some long service leave provisions in federal awards and agreements operating on a transitional basis. In its recent review, the Productivity Commission was equivocal on the need for a national long service leave standard and suggested that the issue should be addressed through cooperation between the State Governments. If recent history is any guide, the chances of a co-operative approach succeeding are slim. The development of a national standard was mooted when the FW Act was being drafted, but no progress has been made. The present situation is likely to continue indefinitely unless the Commonwealth Government takes legislative action.
For further information, please contact:
Vince Rogers, Partner, Ashurst
vince.rogers@ashurst.com
