Important amendments to Victoria’s long service leave (LSL) laws are taking effect on November 1, 2018 (Long Service Leave Act 2018 (2018 Act)).¹

LSL is a statutory entitlement, allowing employees to take a period of paid leave after completing significant service with their employer.  It is intended to reward the employee for loyalty to the company and has been a mandatory entitlement throughout Australia for many years.  The entitlement varies from state to state.

The new Victorian laws impose additional rights and responsibilities on both employers and employees and, most importantly, will apply to casual, seasonal and fixed-term employees who have a continuous employment arrangement with their employers.  Continuous employment means that there are no breaks in employment of more than 12 weeks, except in cases of some protected paid or unpaid leaves.

Companies with employees in the state of Victoria should therefore be aware that as of November 1, 2018, the following changes to the LSL law will apply:

• Employees are entitled to request LSL after 7 years of continuous service with one employer.  This amendment is a change from 10 years, although previously, and going forward, any accrued and unpaid LSL must be paid out upon termination of employment if the employee has reached at least 7 years of employment.

• Employees can request to take LSL in one-day increments.  Previously, employees were required to take leave in longer blocks of time.  The employer must grant such requests as soon as practicable unless there are reasonable grounds for refusal.

• Unpaid parental leave of up to 52 weeks will be counted as continuous service, for purposes of calculating whether an individual qualifies for LSL.  This time was not previously considered as service.

• If an employee resigns, resulting in his or her separation, and is then re-employed by the same employer within 12 weeks after the day the employee had ceased work, that entire period (including the absence) will count as continuous service.  Under the prior laws, that brief separation period was counted as service only if the employee was dismissed by the employer.

• If an employee’s working hours have changed during the last 2 years immediately before taking LSL, the employee’s normal weekly hours will be deemed to be the greater of the average weekly hours worked over the past: (a) 52 weeks (1 year); (b) 260 weeks (5 years); or (c) the entire period of their employment with the employer.  This approach marks a departure from the previous laws, which provided that full-time and part-time employees would be paid their current salary rate at the time when the LSL was taken.

• Employees can now request double the duration of LSL at half-pay, which is a new option.  Employers can refuse this request on reasonable business grounds but bare the onus of demonstrating that the refusal was reasonable in the circumstances.

• Employers can direct an employee to take a period of LSL once it has accrued by providing at least 12 weeks’ notice.  In practice, this provision means that an employer can provide notice to an employee that they are required to advise the employer of when they intend to take LSL and direct that he or she must make plans to take the leave within a reasonable period of time.  If the employee does not do so, then the employer can mandate when the leave period will be, as long as it provides at least 12 weeks’ advanced notice to the employee.  

• The entitlement to LSL remains the same, at one week of leave for each 60 weeks of continuous employment.

• Payments in lieu of LSL have historically been a violation except upon termination. Under the amendments, however, cashing out will be permitted in limited circumstances if the employee is covered by an enterprise agreement or if another statutory fair work instrument provides for that option.  For example, cashing out could be permitted if the Fair Work Commission decides to implement LSL provisions in any industry- or occupation-based statutory modern awards that may be applicable to an employee.²

• Penalties for breach of the 2018 Act have also increased.  For a corporation, for failure to pay LSL, penalties have increased from a maximum of 20 penalty units ($3171.40) to 60 penalty units ($9514.20).  Importantly, criminal rather than civil penalties now apply for taking adverse action³ against an employee because the employee is entitled to LSL, for failing to notify employees of their entitlements, or for removing an employee’s LSL entitlements.  Designated officers will be appointed with new investigative powers, including the authority to compel the production of documents from employers during a review of the employer and its compliance with the 2018 Act — a review that may occur randomly.

Employers with employees in Victoria, Australia, should ensure that their LSL policies and practices are updated to reflect these new requirements.  It is equally important to confirm that LSL entitlements are paid correctly upon termination of employment because employers can be liable for significant penalties and interest if any errors are made.