Five employ­ment law cas­es that shook the world: #2 Annu­al leave load­ing is payable on termination 

As part of a series of arti­cles we are exam­in­ing five employ­ment law cas­es that shook the world (or at least mem­bers of the Aus­tralian HR community).

There was a time when there was some uncer­tain­ty as to whether an employ­ee who was enti­tled to paid annu­al leave load­ing, was also enti­tled to the load­ing when accrued but untak­en annu­al leave was paid out on ter­mi­na­tion of employment.
In Cen­ten­ni­al North­ern Min­ing Ser­vices Pty Ltd v Con­struc­tion, Forestry, Min­ing and Ener­gy Union (No 2) [2015] FCA 136 Buchanan J was required to con­sid­er a term in an enter­prise agree­ment that pro­vid­ed that employ­ees who received annu­al leave load­ing whilst tak­ing annu­al leave, were not enti­tled to be paid annu­al leave load­ing when annu­al leave was paid out on ter­mi­na­tion of employment.

Giv­en that enter­prise agree­ments (and mod­ern awards) can­not con­tra­vene the terms of the Nation­al Employ­ment Stan­dards set out in the Fair Work Act 2009, the ques­tion was whether the Nation­al Employ­ment Stan­dards (in par­tic­u­lar sec­tion 90(2)) should be read to man­date that where an employ­ee is enti­tled to annu­al leave load­ing dur­ing employ­ment, they must also be paid annu­al leave load­ing where annu­al leave is paid out on ter­mi­na­tion. If so, the rel­e­vant term in the enter­prise agree­ment would have no effect.

Buchanan J not­ed that the Explana­to­ry Mem­o­ran­dum to the Fair Work Bill 2008 pro­vid­ed as fol­lows (with his emphasis):
​“372. Sub­clause 90(2) pro­vides that, on ter­mi­na­tion of employ­ment, an employ­ee is enti­tled to receive a pay­ment in respect of any untak­en paid annu­al leave. The pay­ment will be equiv­a­lent to the amount that the employ­ee would have been paid if the employ­ee had tak­en the annu­al leave.

In light of this, the judge said that ​“I am not pre­pared, in effect, to read down s 90(2) in the face of the expec­ta­tion stat­ed in the Explana­to­ry Mem­o­ran­dum when that con­struc­tion is plain­ly open on the terms of s 90(2) itself.” Accord­ing­ly it was held that the rel­e­vant clause in the enter­prise agree­ment had no effect, as it con­tra­vened the Nation­al Employ­ment Standards. 
The deci­sion was upheld on appeal in Cen­ten­ni­al North­ern Min­ing Ser­vices Pty Ltd v Con­struc­tion, Forestry, Min­ing and Ener­gy Union [2015] FCAFC 100.

The case is author­i­ty for the propo­si­tion that if an employ­ee is paid annu­al leave load­ing dur­ing employ­ment, they must be paid it when annu­al leave is paid out on termination.