Length of employee ‘service’ may include unpaid leave, rules FWA

by 16 Apr 2012

A judgement by the workplace watchdog has overruled the notion that an employee’s ‘length of service’ is calculated according simply to the time the employer is paying wages. And while the judgement was made in an unfair dismissal case, the implications could extend to calculation of annual leave accrual, redundancy payments and more.

Until the case of Bambach v WorkPac, it was commonly understood that employees had to work a minimum of six months (12 for employees in small businesses) to be eligible to allege unfair dismissal. However in this case, Fair Work Australia (FWA) ruled that the period when Michael Bambach was not being paid but was receiving workers’ compensation should also count towards the period of “service”. This meant he had more than six months of service and could therefore claim unfair dismissal.

In a nutshell, Bambach was hired in March 2010 as a casual, suffered a work-related injury in May, and was paid workers’ compensation till being cleared for duties in September. At that point the employer, WorkPac, said it was unable to find work assignments for him issued him with a Separation Certificate. Bambach launched his application for unfair dismissal and the company argued, among other things, that he didn’t have the requisite six months of service.

Within the Fair Work Act, the definition of “service” is a point of legal contention. If a worker is being paid and then they go on unpaid leave, the act says the absence from work is not a break in service but it is also not counted as service, points out Chris Hartigan, partner at employment law firm Herbert Geer said. “The question then is when you go on workers compensation leave you are paid by an external statutory insurer, but it comes through the employer’s payroll although the substance of the payment does not come from the employer,” he says.

The Australian Industry Group (AIG) said the case has wide-ranging ramifications for employers, and has issued an appeal against the finding to FWA.

According to AIG, the definition of “service” is crucial, as there are minimum-service criteria for not only unfair dismissal laws but also redundancy pay and the accrual of annual leave and personal leave for employees. “This meaning is critical for determining the entitlements of employees in a wide range of day-to-day circumstances,” an AIG spokesperson said.

According to the employer advocacy group, the finding should be reversed because this interpretation of length of service would increase costs for employers, and would be inconsistent with what most employers are doing at the moment.

Meanwhile, the central message to employers seems to be to act cautiously wherever such ambiguity may exist, and to presume that time workers are not paid a wage but are being paid workers compensation may well be included in any FWA-tested definition of length of service.


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  • by Patrick McInerney 16/04/2012 3:17:51 PM

    One imagines this would have implications for other periods where employees are on some form of leave which currently may not count as service - what about Government Paid Parental leave? Or service with the Reserve Forces, where the civilian employer tops up their employee's military salary?

  • by Michael 16/04/2012 3:46:00 PM

    The status of the employee was 'casual" surely then if the employer has no work assignments they can lawfully terminate the employee

  • by Maureen 17/04/2012 9:57:10 AM

    Remember that when someone is on Workers' Comp their absence is "caused" by something that happened in the workplace. Why should an employee be penalised by losing service when they are off work through no "fault" of their own but rather by the "fault" of the employer.

    This case is similar to the ruling of Hills under the Workplace Relations Act that said being on Workers' comp should be treated as if the employee was on paid sick leave (for dismissal purposes)

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