Can an employee accrue annual leave while receiving workers’ compensation entitlements?
Recent case law has made a contentious finding regarding whether or not an employee, who is receiving workers compensation payments, is simultaneously entitled to accrue leave benefits.
It is commonly understood that a person receiving compensation payments is not entitled to also accrue leave entitlements/benefits as they are not working their normal hours of work. However, in the case handed on 11 November 2014 of NSW Nurses and Midwives Associate v Anglican Care  FCCA 2850 overturned this understanding.
It was held that the employee was entitled to accrue annual leave while not at work and receiving workers’ compensation.
This left the employer liable to pay out an additional $2,993.26 when the employee left their role, due to the leave that accrued while the employee was receiving workers’ compensation.
So, how did the judge come to this finding? Naturally the judge looked to the two primary pieces of legislation.
1. Federal Legislation:
Federal legislation specifically deals with the issue of leave entitlements during compensation payment periods under section 130(1) of the Fair Work Act 2009 (Cth) (“FWA”). This section states that ‘an employee is not entitled to take or accrue any leave or absence (whether paid or unpaid) under this Part during a period (a compensation period) when the employee is absent from work because of a personal illness, or a personal injury’ for which the employee is receiving workers’ compensation payments.
Section 130(2) goes on to state that if a piece of state “compensation law” or legislation permits an employee to take or accrue leave, then it is allowed to do so.
2. Workers’ Compensation Act 1987 (NSW):
The relevant section under NSW based workers’ compensation law is section 49 of the Workers’ Compensation Act 1987 (NSW) (“WCA”). It states:
- Compensation is payable under this Division to a worker in respect of any period of incapacity for work even though the worker has received or is entitled to receive in respect of the period any payment, allowance or benefit for holidays, annual holidays or long service leave under any Act (Commonwealth or State), award or industrial agreement under any such Act or contract of employment.
- The amount of compensation so payable is the amount which would have been payable to the worker had the worker not received or been entitled to receive in respect of the period any such payment, allowance or benefit.
Previously, the above sections were applied where an employee took annual leave then later had a compensation claim approved, and it was accepted that they were to be paid annual leave and receive compensation payments. The workers compensation was payable despite the fact that the employee had received annual leave payments.
Findings in the Case:
The FWA precludes an employee from accruing leave unless the state based WCA permits so. However s49 of the WCA does not prevent, or expressly permit, an employee to receive both workers compensation and accrue annual leave.
The judge considered the history of section 49 of the WCA and referred to the Second Reading Speech of its predecessor which was outlined to ‘have the effect that a worker who is injured is entitled to accrue benefits while receiving compensation’. It is commonly accepted that ‘benefits’ includes accrual of leave entitlements.
The judge considered the WCA to have been ‘beneficially constructed’ in favour of protecting the safety of workers’ and providing compensation to injured workers’ and so made his finding with this in mind.
Impact on Employers:
This case impacts employers by requiring annual leave entitlements to be accrued by employees who are on workers’ compensation. These accrued entitlements become payable on termination of an employees’ employment.
Proposed Changes to Federal Law:
Whilst the recent decision may raise concern for employers, the proposed Fair Work Amendment Bill which was passed through the House of Reps and introduced to the Senate on 27 August proposes numerous changes including the removal of section 130(2) of the FWA.
Removal of s130(2) will have the effect that an employee who is absent from work and receiving workers’ compensation will not be able to take or accrue leave under the FWA during the same period. However, this may not come into effect for some time and so the finding in this case will be relevant for the time being.