The NSW Court of Appeal has today overturned long-standing case law pertaining to how overseas service is to be treated when determining NSW long service leave entitlements in
Wipro Limited v State of New South Wales [2022] NSWCA 265.
Summary: 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.
We briefly outline the historical approach taken to service outside of NSW for the purposes of the
Long Service Leave Act 1955 (LSL Act) and how this has now been changed.
The previous approach to service outside of NSW
Since 1981, decisions of the Industrial Relations Commission, Chief Industrial Magistrates Court and Federal Court have held that the determination of whether an employee is entitled to long service leave is to be assessed at the time the relevant liability is said to arise. For instance, at the time of reaching a service milestone (10 years) or any other trigger for the liability, such as the termination of employment.
The historical authorities stated that, at the time the relevant ‘trigger event’ occurs, the Court must assess whether the
whole period of continuous service (both inside and outside NSW) can be said to have a substantial connection with the State of NSW.
Under this approach, employees who had partial service outside of NSW (say four years) and partial service in NSW (say six years) would likely accrue long service leave on their 10 year anniversary, even though their service included substantial periods outside of NSW.
For companies with related entities overseas, the deeming provisions in the LSL Act often meant that employees transferred into NSW from outside the State could still rely on prior service to accrue long service leave.
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.
In August 2021 ABLA wrote about developments in the case law
for long service leave in the State of Victoria that align with the approach now adopted in
Wipro. So if you have businesses across Victoria and NSW, these new principles are relevant to your business.
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.
What should employers do next?
The change in the law will most likely affect those employers with related entities overseas or operations interstate who transfer employees between jurisdictions.
For these employers, it would be prudent to review how you treat LSL for employees transitioning between jurisdictions as your historical approach may now be significantly more generous than the approach required by the LSL Act. Clarifying the way entitlements are accrued with employees who work overseas and interstate at the time of transition may also prevent disputation in future.
If you need to review your policies or have any questions regarding your obligations, please get in touch with our workplace and employment team at
info@ablawyers.com.au.
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