Australia Employment Law Update: Long Service Leave (including extraterritorial service) and Flexible Unpaid Parental Leave

Long service leave and extraterritorial service

Long service leave is an entitlement regulated by each of the states and territories in Australia. It is, effectively, an entitlement to leave as a ‘reward’ for an employee’s long service to a company. The legislation is, as a result of its State-based specificity, not uniform. Additionally, the legislation is, for the most part, quite dated.

These challenges have historically resulted in conflicting interpretations and uncertainties when assessing eligibility in cases involving extraterritorial (i.e. beyond a State’s borders) service.

Infosys Long Service Leave Case - Victoria

The position in Victoria in relation to the recognition of extraterritorial service was clarified in 2021, following an appeal by Infosys Technologies Limited (Infosys) from the Victorian Supreme Court to the Court of Appeal. The Court of Appeal held that Infosys did not have an obligation to pay long service leave in accordance with the Long Service Leave Act 2018 (VIC) (LSL Act) to employees who claimed they were entitled to the leave on the basis of their continuous service for Infosys and its related entities, including overseas.

The Court held, in effect, that an employee's overseas service is not counted under LSL Act, unless there is a connection between a period of continuous employment and Victoria at the time the service is undertaken, not at the time of the event which triggers, or crystallises, the entitlement. This approach requires that a period of service must be 'in and of Victoria' (as provided by section 48(b) of the Interpretation of Legislation Act 1984 (VIC)) to be counted as 'continuous employment with one employer' for the purpose of long service leave entitlements under the LSL Act.

Updated NSW position

It has long been the position in New South Wales that the relevant consideration is whether there is a substantial connection with New South Wales at the time the entitlement to long service leave crystallises.

However, a similar position to that in the Infosys decision has now been adopted in New South Wales, following the NSW Court of Appeal decision in Wipro Limited v State of New South Wales [2022] NSWCA 265 (Wipro). The Wipro decision confirms that the entirety of an employee’s service, both inside and outside of NSW, must have a substantial connection to NSW to count towards continuous service for the purposes of calculating long service leave.

Takeaways for employers

While the performance of service within New South Wales may be an obvious connecting factor, employers should be live to the fact there are other factors, such as whether the interstate or overseas service was:

• in accordance with a secondment agreement whereby the employee was seconded to another office and/or related entity outside NSW;
• under a contract governed by NSW law or performed in accordance with directions given by someone in NSW;
• for an employing entity based in NSW; or
• there was another connecting factor between the interstate or overseas service and NSW, such as responsibility for, or reporting to, a team or person in NSW.

Flexible Unpaid Parental Leave

Under the Fair Work Act 2009 (Cth) (FW Act), employees are entitled to 52 weeks of unpaid parental leave. Previously employees could take up to 30 days of their unpaid parental leave ‘flexibly’ during the 24-month period starting on the date of birth or day of placement of the child (“Flexible Leave”), as either:

1. a single continuous period of 1 or more days; or
2. separate periods of 1 or more days each.

As a result of the Fair Work Legislation Amendment (Protecting Worker Entitlements) Act 2023, employees are now entitled to take up to 100 days ( or 20 weeks full-time) of their 12-month unpaid parental leave entitlement as Flexible Leave, at any time within 24 months of a child’s birth or adoption.

The only further regulation around the taking of Flexible Leave is that Flexible Leave must be taken AFTER the employee takes a period of unpaid parental leave. This is because an employee’s entitlement to unpaid parental leave (except for Flexible Leave), ends on the first day that the employee takes Flexible Leave.

Working example

Aaron has responsibility for the care of his child following the child’s birth and decides to take 9 months of his 12-month entitlement to unpaid parental leave. He takes the initial 9 months in a single continuous period. After this initial period of unpaid parental leave, Aaron decides that he would like to ease back into work, by only working 3 days per week and taking the other 2 days each week as Flexible Leave. This means that he still has 3 months (or approximately 65 working days) of unpaid parental leave remaining that he could take as Flexible Leave, over the following 15 months.

Takeaway for employers

Many employers (as well as employees!) find it challenging to navigate the intricacies of the parental leave provisions of the FW Act, which can lead to confusion and potential misinterpretation.

As a result of these recent amendments, employers should:

1. seek to update their parental leave policies to ensure that both parties are clear on and can effectively understand and exercise their rights and responsibilities in relation to flexible unpaid parental leave; and
2. be prepared for more employees to come back to work after a period of continuous leave on a more flexible basis, noting that there is no requirement for Flexible Leave to be taken in a regular and/or consistent manner.