Two common defences failed - and any business using labour hire should take note
A New South Wales court has ruled that a labour-hire company cannot use a casual loading to avoid paying long service leave.
In a decision handed down on July 27, 2026, the Industrial Court of New South Wales found that labour-hire company Allstaff breached the Long Service Leave Act when it did not pay accrued long service leave to 13 former workers. The company had argued the 25% casual loading it paid already accounted for the entitlement. The Court did not accept that.
The workers were pick-packers placed through Allstaff at two Woolworths distribution centres. Woolworths was not a party to the case, and the Court made no findings against it. In mid-2023, Allstaff stopped supplying casual labour to those sites and recommended its workers contact the incoming labour-hire providers. Nine of the 13 had at least 10 years of continuous service, and the company accepted that the remaining four had service that counted as continuous under the Act. None of the workers had ever taken long service leave, and none were paid out for it when their employment ended. A union brought the claim on their behalf, seeking a declaration and compensation.
Allstaff relied on two defences. The first was that the casual loading already covered long service leave. The company pointed to older award decisions in which a casual loading was treated as covering a range of leave entitlements, and to wording it had added to its pay slips in September 2022 stating that the hourly rate included the casual loading "as compensation for any entitlements to paid leave."
The Court rejected that argument. The Act prohibits contracting out of long service leave, so no contract term or pay-slip wording could displace the entitlement. The Court also found the pay-slip wording had been introduced by the company on its own, was not discussed with the workers, and was not agreed to by them. On the company's alternative set-off argument, the Court held that a payment made for one purpose cannot be redirected to satisfy a different entitlement - and long service leave becomes payable only on termination, after 10 years of service, long after the loading was paid. For those reasons, the Court found the casual loading could not be set off against the unpaid long service leave.
The second defence was that the obligation had passed to the incoming providers as a transmission of business. The Court rejected this as well. It found no business had been transmitted: no assets moved from Allstaff, the equipment on site belonged to the host, and the workers had to apply for positions with the incoming providers rather than being transferred across. The Court described that arrangement as purely administrative.
The Court declared that Allstaff contravened section 4(5) of the Long Service Leave Act each time it failed to pay a worker's untaken long service leave on termination, and ordered the company to pay compensation. During the hearing, the company's state manager accepted in cross-examination that the decision not to pay had been a deliberate one, and gave evidence that the company maintained long service leave records for the workers.
For HR and payroll teams, the practical signal is clear. A casual loading is treated as compensation for the absence of leave, not as an advance payment of leave that can later be netted off - and that distinction is sharpest for long service leave, which builds over years and falls due only at the end. Employers who use or supply labour hire cannot assume that a change of provider extinguishes accrued entitlements. Where workers simply re-apply and move to the new provider, the outgoing employer may remain liable.
The amount of compensation, and whether costs will be ordered, are still to be decided. The Court will hear the parties further on both.
