Back in March of this year (here), following a Federal Court decision, we happily declared an end to the long debate over whether annual leave loading must be paid on termination payments in respect of accrued but unused annual leave (the Court found that it does). We apparently forgot to touch wood at the time because guess what – appeal!
However, in a win for consistency, the Full Bench of the Federal Court upheld the initial decision on the basis that section 90(2) of the Fair Work Act 2009 clearly states that a payment in lieu of accrued annual leave on termination must be equivalent to the amount that the employee “would have been paid” if he/she had taken the annual leave. That includes any entitlement to annual leave loading even if a modern award or enterprise agreement says otherwise.
The employer in the case argued that this position would cause great confusion as it would mean employers will need to figure out what other variables need to be included in the termination payment such as overtime, allowances and penalty rates. The Full Bench rejected this argument describing it as a “furphy”, which is really just a polite way of saying to the employer’s lawyers “Really guys?” The Full Bench said the legislation is clear – when paying out annual leave on termination, employees get what they would have got had they taken the leave.
And now the debate is officially over. Unless.... oh never mind.