New changes to long service leave will affect all employers from 1 November 2018. The new changes represent a huge win for women, parents, and carers across Victoria in terms of flexibility of use of leave entitlements and the calculation of entitlements. But what practical effect will these changes have?
The Victorian Parliament has recently passed a Bill entitled the Long Service Leave Act 2018 (Vic). This will repeal and replace the current Long Service Leave Act 1992 (Vic). The new Act will commence on or before 1 November 2018.
Most of the changes in the new Act are aimed at making Long Service Leave (LSL) more flexible, accessible and fairer. This article will focus on the main changes that will affect employers particularly around the application for LSL, calculation of LSL and potential penalties where LSL is not paid. We address each one in detail below.
Application for Long Service Leave
From 1 November 2018 employees will be able to apply and take LSL after seven years of service. Currently, an employee begins to accrue LSL after seven years and cannot take it until they have reached 10 years.
Taking of Long Service Leave
From 1 November 2018, employees will now be able to take LSL one day at a time, rather than in larger blocks. This allows for increased flexibility for both employers and employees. Most significantly it purports to give carers and parents the option to take smaller blocks of leave as they require.
A failure to grant an employee this flexibility, would be a breach of the Act.
Calculation of leave and continuity of service
From 1 November 2018, some periods of unpaid leave, such as unpaid parental leave will now be counted when the employer is calculating an employee’s continuity of service for the purposes of calculating when LSL takes effect.
Prior to 1 November 2018, any period of unpaid parental leave did not count towards an employee’s period of service in relation to the accrual of LSL. Unpaid parental leave will now count as the service up to a period of 52 weeks.
However, any unpaid leave beyond 52 weeks will not count as service, but it will also not break the continuity of service for the accrual of LSL. This change means that individuals, who go on unpaid parental leave of a period of 12 months will still be able to count that year of unpaid leave when a calculation of LSL entitlements is made.
Long Service Leave still payable if employee terminated
From 1 November 2018, an employee who ceases work because they are terminated from 7 years will be eligible to receive their LSL entitlement. Previously, where an employee was terminated after 7 years, but before 10 years, an employer was not always required to pay out the LSL entitlement.
Where an employee wishes to apply for leave
From 1 November 2018, if an employee’s working hours have changed in the last two years before taking leave, the employee’s normal weekly number of hours will be calculated as the greater of either:
- the average weekly hours worked in the last year, or
- last five years, or
- the last period of continuous employment.
This change means, for instance, that where an employee has been paid on parental leave, the employer will need to look at b. being the last five years, in order to determine the working hours of the employee for leave purposes.
From 1 November 2018, civil penalties are abolished. Any breach of the LSL Act will now attract criminal penalties. The maximum applicable criminal penalty for a Body Corporate will be increased from 20 penalty units to 60 penalty units.
In addition, taking adverse action against an employee, such as termination or demotion, due to an entitlement to LSL may result in a fine of between 12 to 60 penalty units for each day during which the offence continues. Therefore, if LSL entitlements are not paid correctly on the cessation of employment employers will be liable not just for the LSL entitlements, but also (if prosecuted) for penalties until the mistake is rectified. Finally, if there is an employee found guilty of an offence they may also receive a criminal record.
These penalties are markedly more severe than the previous civil penalty regime.
Coercive Government Powers to enforce LSL
From 1 November 2018, an employee can no longer apply to the Magistrates’ Court to be exempted from complying with provisions under the LSL Act.
In the same way, the new enforcement provisions allow for increased transparency by the State Government. The new Act enables an employee to request information from employers regarding LSL. This will mean that all employers will need to be diligent in keeping accurate and up to date records of employee entitlements, as they could be inspected by a State Government official at any time.
From 1 November 2018, there will be a significant change to the way LSL is calculated, monitored and handled within Victorian workplaces.
If you have any questions regarding how the new changes will affect your business, you should contact Adam Foster at Lewis Holdway Lawyers on 03 9629 9629 or firstname.lastname@example.org.