Facts

For 74 days ending on July 1 2017 Carter Holt Harvey Woodproducts Australia Pty Ltd (CHH) 'locked out' a number of its employees from the workplace during an industrial dispute. The lock-out constituted protected industrial action that was employer response action within the meaning of Section 408 of the Fair Work Act 2009 (Cth).

Following the lock-out, the Construction, Forestry, Mining and Energy Union and the Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia applied to the Fair Work Commission in order to resolve a dispute over whether employees who had been locked out during the industrial action were entitled to accrue annual leave and long service leave during the lock-out.

The employees were covered by an enterprise agreement which provided that annual leave was accrued in accordance with the National Employment Standards.

With regard to long service leave, one group of employees were entitled to long service leave under the applicable award-derived long service leave terms of the Metals, Engineering and Associated Industries Award 1998, and another group of employees were entitled to long service leave under the Long Service Leave Act 1992 (Vic).

Commission decision on annual leave

With regard to annual leave, the commission found that the employees were not entitled to accrue annual leave during the lock-out because it did not count as 'service' under the Fair Work Act.

The entitlement to annual leave under Section 87 of the Fair Work Act only arises in relation to the 'service' of an employee. The commission looked at the definition of 'service' in Section 22 of the Fair Work Act, which excludes a period of unpaid authorised absence, and held that a lock-out does not count as 'service' as it is a period of "unpaid authorised absence".

In this regard, Deputy President Gostencnik considered the meaning of 'authorised' as being endowed with authority or approval, as is the case with a lock-out. Further, the commission held that it was irrelevant that the employees may not have wished or agreed to be absent, as long as it was authorised by the employer.

No entitlement to long service leave

The commission held that the lock-out was not a qualifying period of 'service' for long service leave under the National Employment Standards, the Long Service Leave Act, the Metals Award or the relevant enterprise agreement, and therefore neither group of employees accrued long service leave during the lock-out.

With regard to the Long Service Leave Act and the Metals Award, the commission found that the lock-out was a period of service interrupted by reason of a dispute about industrial matters, which is expressly excluded from the definition of 'continuous employment' under the Long Service Leave Act and 'service' under the Metals Award. The commission held that employer response action falls within the ordinary meaning of a dispute relating to industrial matters and the employees were therefore not entitled to accrue long service leave during the lock-out.

Bottom line for employers

The commission's decision confirms that employees will not accrue annual leave or long service leave during a lock-out that constitutes employer response action where:

  • the entitlement to annual leave arises under the National Employment Standards; and
  • the entitlement to long service leave arises under the National Employment Standards, the Long Service Leave Act or the Metals Award.

This adds further financial pressure on employees during negotiations for enterprise agreements that culminate in protected industrial action in the form of a lock-out.

However, employers should be mindful that the result may be different where the entitlement to annual leave or long service leave arises under another industrial instrument such as an enterprise agreement or modern award – 'service' under such instruments may not exclude an unpaid authorised absence.

  • Even if employees do not accrue annual leave or long service leave during a lock-out, in all cases the service of the employment remains continuous when the employee returns to work. That is, although the period of unpaid authorised leave does not count towards the period of continuous service, it does not break an employee's continuous service.

This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.

For further information on this topic please contact Mark Diserio, Kaitlyn Gulle or Emily Bowly at Lander & Rogers by telephone (+61 3 9269 9000) or email (mdiserio@landers.com.au, kgulle@landers.com.au or ebowly@landers.com.au). The Lander & Rogers website can be accessed at www.landers.com.au.