In New South Wales (NSW), long service leave is a statutory entitlement for employees who have worked for the same employer for a period of at least 10 years. Long service leave entitlements are governed by the Long Service Leave Act 1955 and are administered by the Long Service Corporation, an independent statutory authority in NSW.
Employers should be looking at how they track their employees’ entitlements to long service leave in NSW, following a decision by the Court of Appeal which overturned the previous understanding of how the Long Service Leave Act 1955 (NSW) applied to employees who have moved between States or countries during their continuous service.
Based on the unanimous decision, clear and discrete periods of service outside of NSW are not likely to count for long service leave purposes, even where an employee ultimately returns to NSW and reaches their anniversary date (or has their employment terminated) in NSW.
There are two key points from the Court of Appeal’s decision:
- “The performance of service within New South Wales is an obvious connecting factor” but there may be other factors connecting the service to the State. For example, the contract might have been made in NSW, or the employer in NSW might have directed the employee work outside it.
- “A ‘substantial connection’ between the ‘continuous service’ [is] to be assessed by reference to the service when it occurs rather than retrospectively on cessation of the service.” The employee in this case had two separate periods of employment: six years overseas, and four years in NSW. To determine his long service leave, only his four years in NSW counted.
Change in approach
The Full Court in Wipro held that this type of approach is wrong. Instead, the entitlement to long service leave hinges on “continuous service” in NSW. The Court held that, to constitute continuous service, all periods need to have a substantial connection to NSW.
As a result, discrete periods of service outside of NSW which do not have a substantial connection to NSW would not ordinarily be subject to the provisions of the LSL Act.
In Wipro, the relevant employee had close to six years’ service in India and close to five years’ service in NSW. The Court held that the Indian service had no substantial connection to NSW and accordingly could not be counted for the purposes of determining whether the employee had an entitlement to long service leave.
This approach does not mean that all service outside of NSW will never be counted for long service leave purposes. As the Court identified, there might be scenarios where an overseas or inter-State worker is subject to other matters connecting them to NSW, such as being directed to work from NSW or having a contract formed in NSW. These matters might still result in the various periods of service being said to have a “substantial connection” to NSW.
Ordinarily, however, clear and distinct overseas or interstate periods of service are now unlikely to qualify as continuous service for the purposes of the LSL Act.