In Centennial Northern Mining Services Pty Ltd v
Construction, Forestry, Mining and Energy Union (No 2) 
FCA 136 (27 February 2015,the Federal Court mandated that annual
leave loading is payable upon termination irrespective of any
clause within an award or enterprise agreement stating that it is
only payable when an employee actually takes the annual leave.
The decision deals squarely with the meaning of section 90 of
the Fair Work Act (FWA), which states that:
If, in accordance with this Division, an employee takes a
period of paid annual leave, the employer must pay the employee at
the employee's base rate of pay for the employee's ordinary
hours of work in the period.
If, when the employment of an employee ends, the employee has a
period of untaken paid annual leave, the employer must pay the
employee the amount that would have been payable to the employee
had the employee taken that period of leave.
Section 55 of the FWA prohibits a modern award or enterprise
agreement from excluding any provision of the NES, with section 56
confirming such a term would have no effect (to the extent of the
In this case the enterprise agreement stipulated (clause 19.5)
that "On termination of employment an employee is paid for
accrued but untaken annual leave at their hourly rate of pay
applicable to their ordinary weekly rate of pay... plus average
bonus". It also provided (clause 19.6) that an employee
taking annual leave must be paid the greater of:
the employee's ordinary weekly rate of pay plus a loading
of 20% of that rate, or
the employee's ordinary weekly rate of pay plus rostered
overtime, shift allowance, weekend penalty rates and bonus.
The employer argued that section 90(2) of the FWA created an
entitlement which is referrable only to the obligation arising
under section 90(1) (the base rate of pay for ordinary hours which
would have been worked during the period of annual leave).
The employees argued that section 90(2) required payment of the
whole amount which would actually have been payable during a period
of annual leave (as calculated under clause 19.6 of the Enterprise
The Court agreed with the employees. Given the uncertainty
created by section 90(2) of the FWA, the Court looked at the
intention behind the legislation. The intention behind section 90
was to ensure "than an employee should not suffer a
reduction in the value of unpaid annual leave if employment comes
to an end while paid annual leave remains untaken". Thus
the Court concluded that clause 19.5 of the enterprise agreement
had no effect.
It will be interesting to see if this decision is appealed. In
the meantime it opens the floodgates for employees (terminated
since 1 January 2010) to claim they have been underpaid.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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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.
Australian employees receive certain entitlements (such as annual leave and superannuation) where contractors do not.
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