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Important changes to long service leave in Victoria

May 13, 2018

By Alex Millman and Lindsay Carroll, NRA Legal

Last week, the Victorian Parliament passed the Long Service Act 2018 (the new LSL law), which will replace the current long service leave legislation in Victoria.

Whilst much will remain the same, there are some key points of which employers in Victoria will need to be aware.

The new LSL law has yet to be proclaimed into force; the Victorian Government has indicated a commencement date of 1 June 2018, however if no proclamation is made it will commence on 1 November 2018.

Earlier access to leave

Under the previous laws, an employee with seven years’ of service was only entitled to be paid a pro rata amount of long service leave if their employment ended.

Under the new laws, an employee with seven years’ service will be entitled to take their pro rata long service leave, rather than having to wait until they reach ten years’ of service or until their employment ends.

Unpaid parental leave will count as service

Previously, periods of unpaid parental leave did not count as service for the purposes of calculating an employee’s long service leave entitlement.

For example, an employee who was with the company for seven years, but had 12 months parental leave, would not be entitled to long service leave until they completed another year of service.

Under the new laws, a period of unpaid parental leave (up to 12 months) will count as service for the purposes of calculating an employee’s long service leave entitlement, so the employee in the above example would be able to take long service leave as soon as they hit the seventh anniversary of their employment with their employer.

Increased rights for casual and seasonal employees

Under the existing law, casual and seasonal employees must not have a gap of more than 12 weeks between engagements in order to maintain continuous service (i.e. a casual employee with more than 12 weeks between engagements will lose their right to long service leave).

The new law maintains this approach, but adds exceptions so that casual and seasonal employees do not lose their continuity of service if:

  • they take up to two years’ parental leave;
  • the employer and employee agree to recognise continuity of service in advance of the absence;
  • where the break is seasonal; or
  • where there is a reasonable expectation of re-employment.

This means that a seasonal employee who is employed only for six months of the year will not lose their long service leave entitlement because of the break in the seasons being greater than 12 weeks.

Increased flexibility in taking long service leave

Under the current law, an employee’s long service leave entitlement must be taken in significant blocks; either in full, or broken down into two or three separate blocks.

The new LSL law will allow long service leave to be taken in periods of no less than a day. An employer may refuse such a request, but must establish reasonable business grounds for the refusal.

For those wishing to manage cash flow issues that come with the old ‘all at once’ approach to long service leave, the new paradigm may assist employers, especially smaller employers, to better manage their liabilities, and also provide additional flexibility to employees.

New method of calculation for employees on variable hours

Under current law, if the employee’s weekly hours have changed in the 12 months prior to the taking of the leave, the value of ‘a week’ of long service leave must be calculated by averaging the employee’s weekly hours over the last 12 months and the last five years. The higher average is the value of ‘a week’ for the purposes of long service leave.

The new LSL law adds a third method – by averaging the employee’s hours over the whole period of their employment. The higher of the three averages is the value of ‘a week’ for the purposes of long service leave.

This will likely have a significant effect on the long service leave owed to employees whose hours have reduced over a period of longer than five years, pushing the value of ‘a week’ of long service leave up when compared to the previous methods.

Termination of employment

The new LSL law also clarifies the circumstances where termination of employment does not break continuous service for the purposes of calculating an employee’s long service leave entitlement.

Under the current law, continuity of service was unbroken only if the employer terminated the employee and then re-hired them within 12 weeks.

Under the new LSL law, continuity of service will remain unbroken in circumstances where:

  • the employee resigns;
  • the employee’s employment ends by the effluxion of time; or
  • in any way ends other than at the initiative of the employer;

so long as the employee is re-hired within 12 weeks.

Additional criminal liability

The new law comes with an additional kick which sits alongside the general protections provisions of the Fair Work Act 2009.

Under the Fair Work Act 2009, an employer cannot take ‘adverse action’ against an employee for exercising a ‘workplace right’ – which includes a right to take or be paid long service leave under a State law.

The new Victorian law goes one step further and makes adverse action against an employee, because of their right to take or be paid long service leave, a criminal offence. It also allows for individual officers and employees of businesses to be held personally liable to extent of their involvement in the adverse action.

The penalty for taking adverse action in this manner is a fine of up to $1,902.84 per day of the contravention for an individual, or $9,514.20 per day for a corporation.

Further information

Adapting to a new legislative framework can be a trying and complex issue; for more information, please call NRA on 1800 RETAIL (738 245) and ask to speak to one of our workplace advisors.

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