The majority decision of a Full Bench of Fair Work Australia in
the recent cases concerning approval of the special annual leave
arrangements contained in the Hull-Moody Finishes Pty Limited
Enterprise Agreement 2011 has come at an interesting time bearing
in mind the scheduled review of the Fair Work Act 2009 (Cth) in
The majority (Vice President Watson and Senior Deputy President
Hamberger) held that the agreement's provisions - whereby
employees were paid a specific "annual leave" component
with their regular wages and then required to take a minimum of two
weeks' leave per year (although unpaid) - was not contrary to
the National Employment Standard's provisions relating to paid
annual leave, and thus were permissible in the proposed
Commissioner Cambridge dissented, the main thrust of his
decision being that the scheme proposed had the effect of
"cashing out" and was both contrary to the "cashing
out" provisions and the overall intention of the NES.
If one looks at the most relevant sections of the NES - namely
sections 90 and 92 of the Fair Work Act - in isolation, one would
have to agree with the majority that there is nothing in those
sections that requires payment for annual leave when the leave is
actually being taken, and the scheme in question was not
"cashing out" because leave still had to be taken
The decision, which will not be subject to further appeal or
review, appears to be a significant one for those employers who
might be looking at methods to prevent annual leave payments
accumulating or to generally "manage" employees'
leave. It also seems to provide a significant alternate option to
the provisions allowing a limited form of "cashing out"
under the FW Act under specific conditions.
On the one hand the majority decision is certainly based on a
logical (although perhaps rather literal) reading of the relevant
provisions. On the other, Commissioner Cambridge contended that the
arrangement amounted in substance to "cashing out" if not
Whichever view is correct, what seems to be the necessary
consequence of the interpretation of section 90 adopted by the
majority is that there is apparently nothing to stop an employer
contracting at common law to pay all its employees their annual
leave pay as an identified "annual leave part payment"
component with their weekly pay. That initiative would immediately
eradicate the problem for employers of having to "manage"
annual leave (ie making sure that employees take their leave so
that the employer does not have a huge annual leave liability
I think this decision is worth considering in the coming review
of the FW Act. In that context it would be worthwhile, in my view,
if there was some dialogue on improvising provisions for the
management of annual leave - so that employers do make employees
take leave regularly and employees do not "hoard" leave.
It is however a complex issue - on the one hand there is the long
established "policy" of annual leave being used for its
real purpose of giving employees a proper break after each year of
service, as against the desire of employees to make their own
decisions about whether they take leave or take "the
But the issue does need attention because the Hull Moody
Finishes decision is a sign that more exotic methods to deal with
the problem are now being pursued.
Long experience representing many of Australia's leading employers has taught us that in employment litigation the identity of an employee's representative is a major factor in how employee litigation runs.
Treasurer Scott Morrison recently announced changes to a number of 2016 Budget superannuation contribution measures.
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