A decision of the Western Australian Industrial Magistrate’s Court which has since been reversed on appeal (see related article), has demonstrated the potential for long service leave schemes to provide significant entitlements to employees in relation to their prior service with their employer’s associated entities overseas.

Background

In Australia’s globalised economy, it is not uncommon for an Australian business to have employees who are transferred to or from related companies overseas. As with any transfer of an employee from one entity to another, overseas transfers often raise serious issues regarding the entitlements of the employee and the obligations of the different employing entities. This is especially the case with long service leave.

The legislative entitlement to long service leave is unique to Australia. The current long service leave schemes have their origins in Australia’s colonial history, when British civil servants were provided with paid leave to visit home after a period of employment in the colonies. The entitlement was eventually legislated by State and Territory governments in the 1950s. To this day, unlike most other employment entitlements, the entitlement to long service leave remains largely governed by State and Territory legislation.

Each of the State and Territory long service leave schemes provide leave entitlements on the basis of the length of an employee’s “continuous service” with the employer. The various schemes have their own rules on what service will count as “continuous service” for the purposes of long service leave. Usually, the schemes are designed to protect an employee’s entitlement in circumstances where an employee is transferred between related entities. For example, in New South Wales and Victoria, the relevant legislation expressly provides that prior service with an associated entity will count as service with the current employer.¹

The decision of the Western Australian Industrial Magistrate’s Court in this case demonstrates that, while such proposition may seem fair and reasonable, it may give rise to unexpected outcomes.

The Facts

Between 1988 and 2008, Mr V was employed by various companies within the Baker Hughes group of companies, firstly in the United Kingdom and later in China. In 2008, Mr V commenced employment in Western Australia with the group’s Australian subsidiary, Baker Hughes Australia. His employment with Baker Hughes Australia ended in 2015.

While Mr Venier was employed in Australia for less than 7 years, the total duration of his employment within the Baker Hughes group of companies was approximately 26 years. He claimed long service leave on the basis of his entire service within the Baker Hughes group.

Baker Hughes Australia argued that Mr V was not entitled to long service leave on the basis that his service in the United Kingdom and China did not count as continuous service with Baker Hughes Australia.

The law

There is no entitlement to long service leave under the laws of the United Kingdom or China.

In Western Australia, as in other State and Territories, an employee’s entitlement to long service leave is based on the length of the employee’s continuous employment with the employer. The Long Service Leave Act 1958 (WA) (“LSL Act”) relevantly provides 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 term “employer” is defined to include “persons, firms, companies and corporations”. However, unlike NSW and Victoria, the LSL Act does not expressly deal with the question of service with associated entities.

The decision

Industrial Magistrate Cicchini noted that the LSL Act is beneficial legislation and should be construed broadly in accordance with its historical context and purpose. He found that denying long service leave to long serving employees of related entities would be inconsistent with the historical application of the LSL Act and the purpose of the legislation as amended from time to time. He also put significant weight on the fact that the definition of “employer” was framed in plurals.

Consequently, it was found that Mr V’s prior employment within the Baker Hughes group, and his subsequent employment with Baker Hughes Australia, was “continuous employment with one and the same employer” for the purposes of calculating Mr V’s entitlement to long service leave.

Commentary

The decision confirms the proposition – well established in other Australian jurisdictions – that an employee’s uninterrupted prior service with an employer’s associated entities will count as service with that employer.

It also demonstrates the peculiar outcomes that may be produced by long service leave schemes around the country. The first 19 years of Mr V’s employment with the Baker Hughes group were not, at the time, subject to any long service leave scheme. Nonetheless, once Mr V commenced employment in Australia, this same period of employment gave rise to a significant entitlement under Australian law.

The decision is also interesting in that it did not deal with the question of whether Mr V’s overall service was sufficiently “connected” to Western Australia.

In an early decision of the NSW Industrial Relations Commission, it was found essential that an employee’s service, looked at as a whole, could be said to be “substantially New South Wales service”. The application of this test to Mr V’s circumstances may have raised serious questions over his entitlement to long service leave. However along with the present case, other decisions from the NSW Industrial Relations Commission seems to suggest that the preferred approach is that it is only essential for the employee to be substantially working in NSW at the time they seek to take or be paid out their long service leave in order to be entitled to it.

1. For example: Section 4 (13) of the Long Service Leave Act 1955 (NSW) and section 60 of the Long Service Leave Act 1992 (VIC).