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Does leave accrue while on income protection payments?

Is absence covered by income protection payments considered to be unpaid leave?
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Does leave accrue while on income protection payments?

Does leave accrue while on income protection payments?

31 August 2020

Do employees accrue leave while receiving income protection payments?

This question was recently sent to our Workplace Advice Line.

Q An employee is off work due to a serious injury sustained outside of work hours. He is absent on paid personal/carer’s leave but is expected to be away for at least another three months.

The employee has income protection insurance which will take effect when his personal leave is exhausted. Our payroll department has asked whether the employee will continue to accrue annual leave, personal/carer’s leave and long service leave while receiving income protection payments.

While the employee would accrue leave if absent on workers compensation, we are unsure whether an absence covered by income protection payments is considered to be unpaid leave? The employee is employed in our Brisbane office.

A This is an area of some conjecture. The question of service and absence on workers compensation is settled based on decisions which consider the relevant terms of the Fair Work Act (s130). The interpretation of what constitutes paid leave for the purposes of the meaning of ‘service’ and ‘continuous service’ in the Fair Work Act (s22) is less clear.

The question in this circumstance appears to be: What differentiates an employee who is absent and paid compensation by reason of a statute and a worker who receives payment because of a private insurance arrangement?

The answer appears based on an interpretation that if an employer has an obligation to pay the employee while absent, then whether the employer pays the employee, or another does on the employer’s behalf, does not matter.

In the above circumstance, it would seem there is no statutory obligation on the employer to pay the employee; rather, the employee is being paid by a third party independent of any employer obligation to pay the employee during the absence.

Consequently, the absence during which the employee is receiving income protection insurance payments would be considered unpaid leave and not be regarded as service for the purposes of the National Employment Standards.


Income protection – superannuation fund

In a matter considered by (then) Fair Work Australia, it determined that the period where the applicant was absent due to illness – during which she was not entitled to paid leave – must be regarded as a period of unpaid leave or unpaid authorised absence (and not counted as service). This was despite the employee receiving income protection insurance payments from her superannuation fund.

The determining factor was whether the payments were made pursuant to a legal obligation upon the employer. See LM v Standard & Poor's (Australia) Pty Ltd [2012] FWA 9634 (12 November 2012).

In another matter before Fair Work Australia, the employee had been on authorised leave during his employment due to a motor accident injury.

The employee did not receive any payment from his employer during this period but was in receipt of payments from the Transport Accident Commission (Vic). It was held that this period was an excluded period because it was unpaid leave. See Webster v Toni and Guy Port Melbourne Pty Ltd t/as Toni and Guy Port Melbourne [2010] FWA 4540 (18 June 2010).

It should be noted that while both these cases were determining a jurisdictional point on whether the absence counted as service for the purpose of reaching the minimum employment period under unfair dismissal law, both cases required an interpretation of the relevant section of the Fair Work Act (s 22), which refers to the meaning of service and continuous service.


Long service leave – Qld

While the accrual of paid annual leave, personal/carer’s leave and unpaid parental leave is determined by the provisions of the Fair Work Act, the accrual of long service leave is usually determined by the relevant state or territory long service leave legislation.

In the case of the Industrial Relations Act 1999 [Qld] (s134), the only absences from work which count as service to determine long service leave entitlement are periods of paid leave. A period of absence on WorkCover may also count as service. This means the period of absence when the employee is receiving income protection payments would not be included in any accrual of  long service leave in that State.

Other state or territory long service leave statutes differ on this point. For example, under Victorian legislation, the first 48 weeks of an absence due to illness or injury are counted as service whereas, under ACT legislation, only the first two weeks’ absence due to illness or injury in any year are counted as service.

Reference should be made to the relevant state or territory long service leave legislation to determine the accrual of leave when an employee is absent from work due to illness or injury.

The bottom line: Generally, an employee does not accrue leave under the National Employment Standards when absent on unpaid leave even if the employee is receiving income protection payments from an insurer. Whether an employee accrues long service leave will depend on the relevant state or territory long service leave legislation.
 

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