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Payment of Annual Leave while on Compensation By Sam Kennedy | August 2010 Area of Expertise | OHS, Work Injury Damages, Workers Compensation & Workplace Relations

Summary NSW employers have previously been obliged to pay annual leave to workers who were off work on compensation. While this appeared to be double-dipping, section 49 of the Workers Compensation Act 1987 permitted the payment of annual leave and compensation concurrently. However, the Fair Work Act 2009 now provides that employees no longer have an entitlement to annual leave while they are in receipt of workers compensation payments. This is good news for employers, but we will have to wait and see what action the NSW Government takes to turn the clock back and reimpose the obligation on employers by amending the Workers Compensation Act.

Who Does This Impact? All private sector employers.

What Action Should Be Taken? Injured workers should be informed that their entitlement to accrue or take annual leave and other forms of leave other than unpaid parental leave, is suspended during any period the workers are absent from work and receiving compensation payments.

All private sector employers and their employees in NSW have been covered by the federal Fair Work Act 2009 since 1 January 2010.1 Section 130 of the Fair Work Act 2009 provides: 1. An employee is not entitled to take or accrue any leave or absence (whether paid or unpaid)… 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 compensation payable under a law (a compensation law) of the Commonwealth, a State or a Territory that is about workers compensation. 2. Subsection 1 does not prevent an employee from taking or accruing leave during the compensation period if the taking or accruing of the leave is permitted by a compensation law. 3. Subsection 1 does not prevent an employee from taking unpaid parental leave during a compensation period. In other words, if an employee is absent from work because of a work-related illness or injury and is receiving workers compensation payments for that absence, the employee is not entitled to accrue or take any other form of leave, with the exception of unpaid parental leave, unless the taking or accruing of the leave is ‘permitted by a compensation law’. Is Section 49 of the Workers Compensation Act 1987 a compensation law that permits the taking or accruing of leave during a compensation period?

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Payment of Annual Leave while on Compensation by Sam Kennedy

Section 49 states: Compensation is payable under this Division [entitlement to weekly compensation] 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. Section 49 clearly permits the payment of compensation to a worker even though the worker ‘has received or is entitled to receive’ payment for annual leave in that period. However, the critical aspect of this provision is the reference to ‘entitled to receive’. Section 130 of the Fair Work Act makes it quite clear that ‘an employee is not entitled to take or accrue any leave’ while on workers compensation. Section 49 permits the payment of compensation during a period of annual leave, but it does not permit the taking or accruing of annual leave where an employee is not otherwise entitled to such leave. Accordingly, it appears that Section 49 is not a compensation law which permits the taking or accruing of leave while the worker is absent on workers compensation. Section 49 works in reverse – it allows for the payment compensation where an employee is entitled to receive annual leave; but, if there is no entitlement to take or accrue annual leave then Section 49 has no application. This is good news for employers who in the past have been required to pay an injured worker’s annual leave and long service leave despite the employee being absent from work and in receipt of weekly compensation. 2 However, we will have to wait and see whether or not the NSW Government recognises this change in the law and takes steps to return to the previous situation where workers could ‘double-dip’ by claiming for payment of annual leave while in receipt of compensation.

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Payment of Annual Leave while on Compensation by Sam Kennedy

Endnotes 1

Previously only incorporated employers were subject to the Workplace Relations Act 1996 under the Work Choices reforms, but as a result of the NSW Government’s referral of industrial relations powers to the Federal Government, coverage under the new Fair Work Act 2009 was extended to all private sector employees in the state. 2

The Fair Work Act 2009 does not apply to state public sector workers. Accordingly, NSW public sector employees are unaffected by Section 130 and still have the right to take and accrue annual leave while in receipt of compensation payments.

For more information, please contact: Sam Kennedy Partner T: 02 8257 5733 sam.kennedy@turkslegal.com.au

Sydney | Level 29, Angel Place, 123 Pitt Street, Sydney, NSW 2000 | T: 02 8257 5700 | F: 02 9239 0922 Melbourne | Level 10 (North Tower) 459 Collins Street , Melbourne, VIC 3000 | T: 03 8600 5000 | F: 03 8600 5099 Insurance & Financial Services | Commercial Disputes | Workers Compensation | Business & Property

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Payment of Annual Leave while on Compensation 1  

NSW employers have previously been obliged to pay annual leave to workers who were off work on compensation. While this appeared to be doubl...

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