Employees have an entitlement under the National Employment Standards to accrue and take long service leave when they have worked for the same employer for a specified minimum period of service. Unlike most employee entitlements which are prescribed by Commonwealth legislation, each state and territory has its own specific legislation dealing with long service leave.
Employers are required to comply with the regulations in their specific state or territory. In this particular article, we consider the impact of the recent decision of Wipro Limited v State of New South Wales [2022] NSWCA 265 (“Wipro”) on long service leave entitlements for employees who have transferred to NSW from overseas. The decision departs from the longstanding authority which held that periods of service outside Australia with a related entity, will count towards determining an entitlement to long service leave in NSW.
Previous Legal Position
We have previously written articles on Long Service Legal and what occurs in circumstances when an employee works for the same or a related employer over a number of years in different states and/or countries. As is set out in a prior article, International or Interstate Employees – Are They Entitled To Long Service Leave?, the previous legal position was that all continuous periods of service with an employer and its related entities would be counted towards long service leave entitlements, including periods of service which occurred overseas. For instance, if an employee spent 8 years working in France and then arrived in NSW to work for a related entity to the French company, and left employment after 3 years, all the service would count, and the employee would be entitled to the NSW Long Service Leave entitlement.
Redefining Long Service Leave in NSW
In the recent case of Wipro, the New South Wales Court of Appeal changed the NSW position on how statutory long service leave operates. This decision narrows who may have an entitlement to long service.
In particular, the decision held that in order for the employment period to count towards ‘continuous service’ and qualify for long service leave, the work must have a substantial connection to NSW.
Further, the Court of Appeal also clarified that the question of whether there is a substantial connection between the out of state or overseas work done by the employee, must be assessed at the time it occurred, rather than at the time of the employment terminated.
What Happened in the Wipro Case?
The employer, Wipro Limited, is a company headquartered in India and registered in Australia as a foreign corporation. It has an international workforce with employees working both at its headquarters in India and globally.
One employee worked for Wipro Limited for almost 6 years in India before he was transferred to NSW and worked for a further 5 years in NSW. Once the employee left the employment, he demanded payment for his long service leave and approached the state regulator for assistance. Wipro Limited asserted that the employee was not entitled to long service leave under the NSW Long Service Leave Act 1955. Consequently, proceedings were commenced in the Supreme Court.
The question before the Court was whether the employee’s service in India counted towards his continuous service with Wipro Limited in NSW. The parties agreed to move the proceedings to the NSW Court of Appeal given the need to provide a determinative decision in relation to this question.
The NSW Government relied on past authorities which dealt with circumstances where an employee worked interstate or overseas and were still entitled to long service leave.
However, the Court of Appeal departed from the longstanding authority and determined that the employee’s service must be continuous service with a connection to the state when the service is performed.
Interestingly, this decision now brings the NSW position into line with Victoria, following the decision of Infosys Technologies Limited v State of Victoria [2021] VSCA 219. Similarly, in this decision, the Victorian Court of Appeal had found that any work with an employer which was done outside of Victoria will only count towards a worker’s long service leave entitlements if there was sufficient connection with Victoria.
Factors to Consider
To assess whether there is a ‘substantial connection’ with NSW, it is imperative to consider the following factors:
• Whether the contract of employment was created in NSW and is drafted to include the governing law as NSW;
• Whether the service outside of NSW was simply a secondment to another office or related entity outside of NSW;
• Whether the NSW employer directed the employee to work outside of NSW;
• Whether the service outside of NSW was intended to be only a short period either before coming to NSW, or before returning to NSW;
• There was a connecting factor between the interstate or overseas service and NSW – for example: the person the employee reports to is in NSW; the rest of the team is in NSW, etc.
Key Takeaways
The Wipro decision significantly narrows the circumstances in which an employee will be entitled to long service leave in NSW. It is important for employers to review their practices for calculating long service leave to ensure employees are being paid correctly. In particular, employers should review the long service leave entitlements for employees who are working interstate or overseas and are either coming to NSW or moved from NSW.
To that end, if you require any assistance or information in relation to this alert, please do not hesitate to contact us.
This alert is not intended to constitute, and should not be treated as, legal advice.