The Act requires an employee to have continuous employment with one employer to become entitled to long service leave (a more detailed explanation of the special meaning of ‘continuous employment’ is contained elsewhere in this guide).
The Act sets out several situations where an employee is regarded as having been employed by one employer, even though in the strict legal sense they may have worked for more than one employer, as summarised below.
When a business changes hands
If the ownership of a business employing an employee changes, but the employment of the employee continues, then the employee is taken to have started employment with the new owner on the date on which they started employment at that business.
This means that where a business is sold, transferred or assigned and an employee remains with the business, the new employer becomes responsible for the employee’s long service leave entitlement. The period of employment with the old employer effectively transfers to the new employer, who becomes liable for the employee’s long service leave entitlement in respect of the employee’s entire period of employment at that business.
Similarly, if an employee is dismissed by the old business owner but is employed by the new business owner within 12 weeks after their dismissal to do work which is the same (or substantially the same) as the work the employee did for the old owner, employment is deemed continuous for the purposes of long service leave accrual under the Act.
It is common for the sale of business documents to reflect this liability, but such documents cannot lawfully exclude an employee’s entitlement. Even if the contract for the sale of business does not deal with a transferring employee’s long service leave, the employee still has an entitlement under the Act that the new employer must recognise.
It is also common for the parties to a sale of business to factor long service leave liabilities into the purchase price, or for an amount of money to be put into trust for the employee’s benefit to cover the amount of long service leave the employee accrued during their employment with the old employer. However, any agreement between the seller and purchaser has no bearing on an employee’s entitlement under the Act.
When assets are transferred
If an employee performs work in connection with any assets used in the carrying on of a business, and those assets are transferred, employment will remain continuous if the new owner of the assets continues the employee’s employment.
Employment will also be deemed continuous in relation to the transfer of assets where an employee is dismissed by the old owner of the assets but commences with the new owner of the assets within 12 weeks of the dismissal.
Assets are defined in the Act to include tangible and intangible assets.
Example one
Michael works as a graphic designer.
The company he works for has no physical office, and he works from home. The company becomes insolvent and is liquidated. The liquidated company’s online domain name (which has positive online branding recognition), is sold to another business. The new business employs Michael, and he commences work on the day following the transfer of the domain name.
The Act defines assets to include intangible assets, and in this example, the positive branding recognition associated with the online domain name satisfies this definition.
Michael will be entitled to have his prior period of employment recognised, and his employment will remain continuous for the purposes of long service leave accrual under the Act.
Example two
Lativa has been continuously employed by Nadia of Nadia’s Vegan Confectionery Factory for nine years. She works with the chocolate making equipment.
Nadia’s Vegan Confectionery Factory closes down, but the chocolate making equipment is sold to Jackie. Jackie runs her business as Jackie’s Chocolate Factory. Lativa obtains a job working with Jackie’s Chocolate Factory, working with the same chocolate making equipment she used when working for Nadia’s Vegan Confectionery Factory.
In this situation, Lativa’s employment is continuous. Jackie becomes liable for Lativa’s accrued long service leave.
When work is performed for a related employer
Where an employee has worked first with one employer and subsequently works with a related body corporate, or a corporation with substantially the same directors and/or management, then the employee is taken to have been employed by latter employer during any period that they were employed by the former employer; the two employers are treated as one. In such circumstances, the latter employer will assume liability for the employee’s long service leave entitlement from the time when the employee first commenced with the previous employer(s).
Insourcing and outsourcing
If an employer enters into a contract with another person, like an agency or contractor, to outsource work to that person, and as a result an employee ceases employment with that employer and commences employment with the contracted person, the employee is taken to have commenced employment with the contracted person on the day on which they had commenced employment with the previous employer.
Where work is contracted in and out over a period the same rule applies- there must be a contract in place between the host and the agency relating to the movement of the employee’s employment.
Example
Leanne is employed in IT for an accounting company, Accounting Co Ltd. Accounting Co Ltd decides to outsource the IT work performed by Leanne. After a brief tender process, Accounting Co Ltd enters into a contract with IT Contractors Pty Ltd for the IT work.
As a result, Leanne continues to work at the offices of Accounting Co Ltd and to perform the same work, but is now employed by IT Contractors Pty Ltd.
Even though Leanne has worked for two different employers during the course of her employment, she will be entitled to long service leave as if she were employed by only one employer.
Apprentices/trainees?
If an employer re-employs a person who was formerly the employer’s apprentice within 52 weeks after completion of the employee’s apprenticeship, then the period of their apprenticeship counts towards the period of employment with that employer.
How leave affects continuity of employment
Certain periods of leave and/or absences from work can impact both the continuity of employment and the period of continuous employment for the purposes of assessing the accrual of long service leave. Certain absences do not break continuous employment under the Act, while others do. Similarly, certain absences count towards the period of continuous employment for long service leave purposes, while others do not.
There are therefore two key questions that can usefully guide an assessment of a person’s entitlement to long service leave under the Act, as follows:
- Has an employee taken any leave or absences of a type that breaks their period of continuous employment?
- Does any period of leave or absence from work count towards the employee’s period of continuous employment for the purposes of the accrual of long service leave?
Absences that will not break continuous employment
For an employee to become entitled to long service leave, their employment with the employer must be continuous. However, some periods of leave and absences from work do not break continuous employment for long service leave purposes.
Illness or injury
Any paid or unpaid absence from work for any duration because of illness or injury (including WorkCover absences) will not break continuous employment.
Paid or unpaid leave
Annual leave, paid or unpaid parental leave for full-time or part-time employees (or up to 104 weeks’ paid or unpaid parental leave for seasonal or casual employees), or long service leave itself, will not break continuous employment. Any other form of leave provided for under an oral or written employment agreement or fair work instrument will also not break continuous employment.
Interruptions - termination and re-employment
If there is a gap in employment caused by either the employee or employer terminating the employment, but the employee is re-employed within 12 weeks, then employment will remain unbroken and continuous for the purposes of long service leave.
Similarly, where an employee’s employment ends because of the expiration of a specified term in their employment contract, but they are re-employed within 12 weeks of the expiration of that term, continuous employment is not broken.
Example one
Alex works in a factory that manufactures building products.
The factory purchases new equipment. As a result, Alex and two other workers are made redundant. However, there are problems with the new equipment and so the factory reinstates its previous work practices. Because of the problems with the new equipment, ten weeks after being made redundant, Alex is offered his old job back. Alex accepts the job offer and returns to work the following week.
Because the gap in employment was less than 12 weeks, Alex’s employment is deemed continuous for the purposes of long service leave.
Example two
Naj works as a bartender at his local pub.
Naj resigns from his employment to take up a job at a café nearby. Unfortunately, after eight weeks the café owner decides to close her business. Naj approaches the local pub to see if he can have his old job back. The publican agrees and Naj re-commences work the following day.
Because the break in employment was less than 12 weeks, Naj’s employment is deemed continuous for the purposes of long service leave.
Other interruptions – casuals
For casual employees, continuous employment remains unbroken in a range of circumstances. This topic is discussed in detail elsewhere in this guide. For more information about casual and seasonal employees and continuous employment under the Act, contact the Wage Inspectorate on 1800 287 287.
Transfer of assets
If an employee is absent from work solely because assets have been transferred from one employer to another, and the employee usually performs duties in connection with those assets, then continuous employment will not be broken for the purposes of long service leave. This is provided the gap between the first employer dismissing the employee and the new employer employing the employee is no longer than 12 weeks.
In certain circumstances, if an employee is stood down because of a lack of work, machinery breakdown, or during industrial action, their employment will remain unbroken for long service leave purposes.
Example one
Alex works in a factory that manufactures building products.
The factory purchases new equipment. As a result, Alex and two other workers are made redundant. However, there are problems with the new equipment and so the factory reinstates its previous work practices. Because of the problems with the new equipment, ten weeks after being made redundant, Alex is offered his old job back. Alex accepts the job offer and returns to work the following week.
Because the gap in employment was less than 12 weeks, Alex’s employment is deemed continuous for the purposes of long service leave.
Example two
Naj works as a bartender at his local pub.
Naj resigns from his employment to take up a job at a café nearby. Unfortunately, after eight weeks the café owner decides to close her business.
Naj approaches the local pub to see if he can have his old job back. The publican agrees and Naj re-commences work the following day.
Because the break in employment was less than 12 weeks, Naj’s employment is deemed continuous for the purposes of long service leave.
Parental leave, accrual and continuous employment
No amount of paid or unpaid parental leave will break continuous employment for long service leave purposes.
Unpaid parental leave up to 52 weeks will count towards accrual of Long Service Leave, and leave exceeding 52 weeks will also count if the employment contract or fair work instrument provides for this, or by agreement in writing between the employer and employee.
The Act’s transitional provisions mean that certain types of absence from work that occurred before 1 November 2018 will continue to not count towards the period of continuous employment for the purposes of long service leave purposes.
If the Act commenced during an employee’s absence on unpaid parental leave, only that part of the period of unpaid absence occurring on and from 1 November 2018 counts towards the employee’s period of employment for the purposes of long service leave
Example
Lola commences 52 weeks of unpaid parental leave 26 weeks before the commencement of the Act on 1 November 2018.
When calculating her entitlement to long service leave, the last 26 weeks of Lola’s unpaid parental leave will count towards the period of continuous employment because the leave occurred under the Act, but the first 26 weeks will not count because it occurred under the previous 1992 Act.
Transitional rules and continuous employment
Under the 1992 Act, the types of unpaid absences from work that would break continuous employment, and which unpaid absences would count towards the period of employment, were not always the same as they now are under the Act. However, the Act preserves these rules (called ‘transitional provisions’) where the absence in question occurred before 1 November 2018.
Tables: effect of absences/leave on long service leave
| Does not break continuous employment | Does break continuous employment |
|---|---|
| Annual leave | In the case of a casual or seasonal employee, paid or unpaid parental leave exceeding 104 weeks (note: a longer absence may not break a casual or seasonal employee’s continuous employment in certain circumstances) |
| Long service leave | Termination of employment at the initiative of the employer or the employee if the employee is not re-employed within 12 weeks |
| Absence from work because of illness or injury | |
| Personal/carer’s leave | |
| Paid or unpaid parental leave for permanent employees | |
| In the case of a casual or seasonal employee, paid or unpaid parental leave up to 104 weeks (note: a longer absence may not break the continuous employment of a casual or seasonal employee in certain circumstances) | |
| Termination of employment at the initiative of the employer or the employee if the employee is re-employed within 12 weeks | |
| Any other form of paid or unpaid leave provided for under the relevant employment agreement or fair work instrument |
| Does not break continuous employment | Does break continuous employment |
|---|---|
| Annual leave | Termination of employment at the initiative of the employee |
| Long service leave | The dismissal of an employee where the employee is not re-employed within three months |
| Absence from work because of illness or injury | Parental leave exceeding 12 months unless otherwise specified in the relevant employment contract or federal instrument, or provided for under the National Employment Standards |
| Personal/carer’s leave | |
| Any other leave approved by the employer, excluding parental leave | |
| Parental leave up to 12 months or any other period specified in the relevant employment contract or federal instrument, or provided for under the National Employment Standards | |
| The dismissal of an employee if the employee is re-employed within three months of the dismissal |
Updated