Most employees in Australia qualify for long service leave once they have worked continuously for their employer for at prescribed period of time (at least seven years in many States and Territories, and ten years in others). However, this entitlement only arises if there has been "continuous employment" with the employer for that period and what qualifies as "continuous" is not always straightforward and can vary from state to state.
A recent decision of the Court of Appeal in the Supreme Court of Victoria found that employees of a Victorian-based employer, whose period of employment with the employer had exceeded seven years, did not meet the "continuous employment" threshold under Victoria's Long Service Leave Act 2018 (the "LSL Act") on the basis that for much of the relevant seven-year period the employees had worked overseas. We note we have addressed this topic in earlier articles in respect of long service leave entitlements in Western Australia where an employee had completed a period of employment with an employer's associated entities overseas, and the Court in that case reached a different view.
The employer in this case, a provider of digital marketing, commerce and workplace services, has a practice of engaging software engineers in India to perform work for it and frequently deploys those staff to work in its Australian offices, including in its Melbourne digital studio.
The employees in question had completed more than seven years of employment with the employer when their employment was terminated, although for extended periods of the employment they had worked in India, and one in both India and the United Kingdom, before relocating the employment to Victoria.
The employer argued that it was not liable to make long service leave payments to the employees on the basis that "continuous service" in the LSL Act meant employment in Victoria and that the periods of employment in India and the United Kingdom did not constitute continuous employment for the purposes of the LSL Act.
The Court stated that the key issue it needed to decide was whether "continuous employment" in the LSL Act included any periods of employment outside of Victoria.
The State of Victoria, which challenged the employer's decision not to make the long service leave payments, argued that the periods of employment in which the duties of the employment were carried out overseas should be included in the period of continuous employment on the basis that the connection between the employment and the State of Victoria could be met in different ways, including by reference to the instruction or direction to perform the duties of employment emanating from Victoria.
Long Service Leave and "continuous employment" in Victoria
The Court stated that while it was a given that there must be some connection between the entitlement to long service leave under the LSL Act and Victoria, it noted that the LSL Act is silent on the matter. Specifically, the LSL Act does not state that employment outside of Victoria for the same employer can or cannot be counted towards "continuous employment" for the purposes of calculating long service leave entitlements in Victoria.
The Court considered it appropriate to consider the issue with reference to the principles of statutory interpretation in the Interpretation of Legislation Act 1984 (the "ILA"), and stated that:
"in the absence of a contrary intention, the subject matter of legislation has a territorial connection regardless of the generality of the language used. It reflects the common law principle that, 'the persons, property, and events in respect of which Parliament has legislated are presumed to be limited to those in the territory over which it has jurisdiction'...".
Accordingly, the Court found that the "seven years of continuous employment with one employer" requirement in the LSL Act is to be interpreted as meaning "seven years of continuous employment with one employer in and of Victoria", and that "in and of" Victoria means a "close identification" between the continuous employment and Victoria.
While the Court did not consider it necessary to exhaustively define the circumstances as to when such a "close identification" will arise, the Court ultimately found that the employment of the two former employees in India had "no connection with Victoria at all".
Accordingly, neither employee had completed seven years of "continuous employment" at the time their employment came to an end for the purposes of the LSL Act. The Court made a declaration to that effect and that the employer was not obliged to pay the employees any long service leave entitlement.
- Any period of employment in which an employee has been based overseas before relocating their employment to Victoria is unlikely to count towards the employee's period of continuous employment for the purposes of calculating long service leave under the LSL Act.
- However, each State and Territory has its own legal framework governing long service leave and what constitutes "continuous employment", and there are important differences between these frameworks. Special care must be taken to ensure compliance with applicable long service leave laws.