Long service leave

Most Victorian employees are covered by and entitled to long service leave in accordance with the Act, unless they derive their long service leave entitlement from another source. In short, almost all Victorian workers will have a right to long service leave, but that right may be under the Act, an enterprise agreement, a pre-modern award or under some other workplace law.

Additionally, the Act does not apply to:

• employees who are entitled to long service leave under another Victorian Act, to the extent of any inconsistency
• workers covered by the Construction Industry Long Service Leave Act 1997 (Vic).

There are also specific arrangements for portable long service for some industries under the Long Service Benefits Portability Act 2018 (Vic) that commence in 2019.

After at least 7 years’ continuous employment with one employer, an employee is entitled to:

1. take their long service leave
2. be paid any unused long service leave entitlement if employment ends.

Example

The Act provides ‘employees’ with an entitlement to long service leave. An employee is defined by the Act to include a person employed by an employer to do any work for hire or reward. It includes an apprentice and any person, such as a trainee, whose oral or written contract of employment requires them to learn or be taught an occupation.

Full time, part time, casual and seasonal employees, and employees under certain fixed-term arrangements, all accrue long service leave.

An employee may have a more generous entitlement under a common law employment contract than under the Act. However, where a contract contains long service leave entitlements that are not more generous than those under the Act, then the Act will nonetheless apply. In addition, an employer cannot lawfully use a contract, agreement or deed of any kind to avoid their obligation to pay the full amount of long service leave owed to an employee.

Independent contractors

Genuine independent contractors are not employees and are generally ineligible for long service leave under the Act. However, whether a person is truly an independent contractor or employee needs to be assessed on a case-by-case basis.

You can seek assistance in assessing whether a person is a genuine independent contractor or an employee from the Fair Work Ombudsman.

Outworkers in the clothing industry are deemed by the Outworkers (Improved Protection) Act 2003 (Vic) to be employees for the purposes of the Act and entitled to long service leave in accordance with the Act.

Example one

Example two

Yes, casual and seasonal employees, and employees engaged for a specified term, are entitled to long service leave under the Act. Their employment must still be ‘continuous’ under the Act.

The rules for casual and seasonal employees mean that employment will be deemed continuous providing there is no absence of more than 12 weeks between any two instances of employment. A casual or seasonal employee’s employment will also remain continuous for long service leave purposes, despite an absence from work exceeding 12 weeks, if:

• the employee and the employer so agree before the start of the absence; or
• the absence is in accordance with the terms of the engagement; or
• the absence is caused by seasonal factors; or
• the employee has been employed by the employer on a regular and systematic basis and has a reasonable expectation of being re-engaged by the employer; or
• the absence is due to the employee taking up to 104 weeks’ paid or unpaid parental leave.

Paid or unpaid absences of any duration because of illness or injury will also not break continuous employment. There is more detailed information about the impact of leave and absences on long service leave under the Act on page 25 of this guide.

The casual hourly rate does not include an amount to cover long service leave. A casual hourly rate cannot be loaded to compensate for non-payment of long service leave. In most cases, it is also unlawful to cash out an employee’s long service leave entitlement instead of allowing the employee to access the leave as a break from work, though some exceptions apply such as where the employment has ended.

Fixed term employees

The Act provides that where employment terminates because of the expiration of a specified term (known commonly as ‘fixed term’) of an employment contract, but the employee is re-employed within 12 weeks, employment will be deemed continuous for the purposes of long service leave.

Example one – casual or seasonal employee and employer agree

Example two – seasonal employment

Example three – regular and systematic casual employment

Example four – casual or seasonal employee takes unpaid parental leave

Example five – fixed term employment

Sometimes, an employee may have been continuously employed by the one employer for more than seven years, however part of their employment has been undertaken outside Victoria. In these circumstances, their employer may not be liable to pay long service leave if there is not a sufficient connection to that external employment and the State of Victoria. In order for there to be a sufficient connection, continuous employment must be employment ‘in and of Victoria’, which may include:

• employment performed wholly in Victoria,
• employment pursuant to a direction coming from Victoria, or
• employment offered and accepted in Victoria but where an employee is seconded to work in offices outside of Victoria.

If the ownership of a business employing an employee changes, but the employment of the employee continues, then the employee is taken to have started employment with the new owner on the date on which they started employment at that business.

This means that where a business is sold, transferred or assigned and an employee remains with the business, the new employer becomes responsible for the employee’s long service leave entitlement. The period of employment with the old employer effectively transfers to the new employer, who becomes liable for the employee’s long service leave entitlement in respect of the employee’s entire period of employment at that business.

Similarly, if an employee is dismissed by the old business owner but is employed by the new business owner within 12 weeks after their dismissal to do work which is the same (or substantially the same) as the work the employee did for the old owner, employment is deemed continuous for the purposes of long service leave accrual.

It is common for the sale of business documents to reflect this liability, but such documents cannot lawfully exclude an employee’s entitlement. Even if the contract for the sale of business does not deal with a transferring employee’s long service leave, the employee still has an entitlement that the new employer must recognise.

It is also common for the parties to a sale of business to factor long service leave liabilities into the purchase price, or for an amount of money to be put into trust for the employee’s benefit to cover the amount of long service leave the employee accrued during their employment with the old employer. However, any agreement between the seller and purchaser has no bearing on an employee’s entitlement.

Yes. An employer may direct an employee to take long service leave by giving at least 12 weeks’ written notice.

If the employee does not want to take their leave as directed by the employer, they can apply to the Industrial Division of the Magistrates’ Court for an order that they are not required to do so.

Yes. An employer may agree to an employee taking a period of long service leave at half pay. For example, an employee with 13 weeks’ accrued long service leave could take 26 weeks’ long service leave at half pay.

An employer must grant the request unless they have reasonable business grounds for refusing the request.

Taking half the leave at double pay is not permitted.

Resignation, redundancy, termination, death

On the day that employment ends, an employee with at least 7 years’ continuous employment with 1 employer is deemed to have started to take long service leave on that day, and is entitled to receive payment for the full amount of their accrued but untaken long service leave entitlement. This will apply whether the employee has resigned, has had their employment terminated by the employer, has been made redundant or has died.

In the event of death, payment must be made to the employee’s personal representative.

Where employment ends before the employee has completed 7 years’ continuous employment with one employer, the employee is not entitled to any payment in respect of long service leave.

It is an offence for an employer not to pay an employee the full amount of the employee’s accrued but unused long service leave entitlement on the day the employment ends. The penalty for this offence is 12 penalty units for a natural person and 60 penalty units for a body corporate. These penalties apply for each day that the offence continues. If an employer is found guilty of this offence, a criminal conviction may also be recorded.

Example 1

Example 2

Example 3

No. In most circumstances, it is an offence to give or receive payment for long service leave instead of the employee taking the break from work.

Both an employee and an employer can be liable for this offence and, if found guilty, a criminal conviction may be recorded.

An employee can only receive payment in respect of any unused long service leave if their employment ends before the leave is taken, or as otherwise provided for in certain fair work instruments.

For an employee to become entitled to long service leave, their employment with the employer must be continuous. However, some periods of leave and absences from work do not break continuous employment for long service leave purposes.

How common absences affect continuous employment

No amount of paid or unpaid parental leave will break continuous employment for long service leave purposes.

Unpaid parental leave up to 52 weeks will count towards accrual of Long Service Leave, and leave exceeding 52 weeks will also count if the employment contract or fair work instrument provides for this, or by agreement in writing between the employer and employee.

The Act’s transitional provisions mean that certain types of absence from work that occurred before 1 November 2018 will continue to not count towards the period of continuous employment for the purposes of long service leave purposes.

If the Act commenced during an employee’s absence on unpaid parental leave, only that part of the period of unpaid absence occurring on and from 1 November 2018 counts towards the employee’s period of employment for the purposes of long service leave.

Any paid or unpaid absence from work because of illness or injury occurring on and from the commencement of the Act on 1 November 2018 counts towards the period of continuous employment for long service leave purposes.

Where the unpaid absence because of illness or injury occurred before the commencement of the Act, only 48 weeks’ unpaid absence for that reason in any year counts towards the period of employment, as it occurred under the previous 1992 Act.