Legislation Update - Long Service Leave Act 2018 (Vic)

The Long Service Leave Act 2018 (Vic) (Act) received Royal Assent on 15 May 2018 and will repeal and replace the Long Service Leave Act 1992 (Vic).

The reforms to the statutory long service leave (LSL) regime in Victoria include:

• A reduction in the number of years of continuous employment required to receive LSL entitlements including greater flexibility for employees when taking LSL;
• Changes to the way in which continuity of employment is determined;
• New methods of calculating LSL entitlements where the employee’s hours of work are not fixed;
• Increased powers for authorised departmental officers; and
• The introduction of criminal liability under the Act.

All employers with a Victorian based workforce whose LSL entitlements are derived from this legislation  will need to be aware of the significant changes to LSL entitlements which will come into effect on 1 November 2018 (unless proclaimed earlier by the Victorian Government).

Taking of LSL

Employees will now be entitled to take long service leave after completing 7 years’ continuous employment with the one employer. Previously, an employee was not entitled to LSL unless they had completed 10 years’ continuous service with one employer. The accrual rate of 1/60^th of the period of continuous employment will not change under the new Act.

The Act also affords greater flexibility for employees and provides that an employee may make a request to take long service leave for a period of not less than 1 day. Employers cannot refuse an employee’s request to take long service leave unless the refusal is based on reasonable business grounds.

Changes to the way in which continuity of employment is determined

The concept of ‘continuous employment’ has been amended to provide that an employee’s employment is continuous despite an absence for:

• annual leave;
• long service leave;
• paid or unpaid parental leave (other than in the case of a casual or seasonal employee);
• in the case of a casual or seasonal employee, paid or unpaid parental leave that is not longer than 104 weeks;
• carer's leave;
• leave on account of illness or injury; or
• any other form of leave that is provided for under the employment contract.

The following absences will count towards the period of employment:

• all paid leave periods;
• if a period of unpaid leave is 52 weeks or less, that period;
• if a period of unpaid leave is more than 52 weeks, the initial 52 weeks;
• if a period of unpaid leave is more than 52 weeks, the entire period of unpaid leave if the period of absence is taken to be a period of employment:
  • in accordance with the employment contract;
  • by written agreement between the employee and the employer; or
  • if the leave is taken on account of illness or injury.
• All periods of absence arising from an interruption to, or termination of, employment caused by the employer with the intention of avoiding an obligation in relation to long service leave;
• All periods of absence arising from the transfer of assets from one employer to another, if the employee usually performs duties which are connected with those assets.

Any period of unpaid parental leave up to 52 weeks will count as service for the purpose of calculating LSL entitlements, where any period beyond 52 weeks will not count as service but will also not break continuity of employment. Previously, unpaid parental leave did not count towards calculating an employee’s period of continuous service.

The Act has also been amended to provide that employment is taken to be continuous despite an absence from work caused by termination of the employment at the initiative of the employer, the employee’s resignation or the expiry of a fixed term contract, if the employee is re-employed by the employer within 12 weeks after cessation of employment.

New methods of calculating LSL

The Act introduces a new method for calculating LSL where an employee’s hours of work are not fixed or where they have changed over a period of employment. If an employee’s working hours are not fixed or have changed during the last 2 years immediately before taking LSL, the employee’s normal weekly number of hours is the greater of the average weekly hours worked over:

• the past 52 weeks;
• the past 260 weeks; or
• the last period of continuous employment (including paid and unpaid leave).

Increased powers regarding operation and enforcement

Employers are no longer able to apply for an exemption from the operation of the Act. Previously, employers could apply to the Industrial Division of the Magistrates’ Court to be exempt from complying with the Act in respect of all or any, or any class of, employees. As a result, all Victorian employers must be aware of, and will be required to abide by, their requirements under the Act, unless they have previously been granted an exemption.

There are increased powers under the Act for departmental officers and employees to require that LSL records be produced by employers. Employers must not refuse a request by an employee (or their representative) to provide long service leave records.

Introduction of a criminal penalty regime

The civil penalty regime has been abolished under the Act.  Criminal penalties will now apply to employers for:

• taking adverse action against an employee because they are entitled to LSL;
• failing to pay LSL entitlements;
• failing to pay additional amounts resulting from wage increases;
• making payment in lieu of LSL or in lieu of any part of LSL, except as permitted under the Act or the relevant fair work instrument;
• employing a person they know to be on LSL;
• failing to keep records relating to LSL in an acceptable form;
• failing to produce document or giving false or misleading documents; and
• failing to disclose that an employment agreement would modify or remove an employee’s LSL entitlements.

If an employer is found guilty of any of the offences listed above, they may be liable to fines of up to:

• $2,520 in the case of a natural person and
• $12,600 in the case of a body corporate,

Fines may be imposed for each day during which the offence continues and an employer found guilty of an offence may also receive a criminal record.

As a part of the amendments to the penalty regime, the limitation period for breaches of the Act has been increased to 6 years.

Key Points

Employers should be aware of these amendments and should review and update any relevant policies, contracts and procedures (including payroll systems) to ensure LSL entitlements will be calculated, administered and recorded correctly.

Important Disclaimer: The material contained in this article is comment of a general nature only and is not and nor is it intended to be advice on any specific professional matter. In that the effectiveness or accuracy of any professional advice depends upon the particular circumstances of each case, neither the firm nor any individual author accepts any responsibility whatsoever for any acts or omissions resulting from reliance upon the content of any articles. Before acting on the basis of any material contained in this publication, we recommend that you consult your professional adviser. Liability limited by a scheme approved under Professional Standards Legislation (Australia-wide except in Tasmania).