Employee entitlements: No leave accrued during lockout period

Facts

For 74 days ending on 1 July 2017, Carter Holt Harvey Woodproducts Australia Pty Ltd (CHH) "locked out" a number of its employees from the workplace during an industrial dispute. The lockout constituted protected industrial action that was employer response action within the meaning of section 408 of the Fair Work Act 2009 (Cth) (FW Act).

Following the lockout, the Construction, Forestry, Mining & Energy Union and the Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing & Allied Services Union of Australia applied to the Fair Work Commission (Commission) to resolve a dispute about whether the employees who were "locked out" during the industrial action were entitled to accrue annual leave and long service leave during the period of lockout.

The employees were covered by an enterprise agreement which provided that annual leave accrued in accordance with the National Employment Standards (NES).

In relation to long service leave, one group of employees were entitled to long service leave under the applicable award-derived long service leave terms of the Metals, Engineering and Associated Industries Award 1998 (Metals Award), and another group of employees were entitled to long service leave under the Long Service Leave Act 1992 (Vic) (LSL Act).

The Commission's decision on annual leave

In relation to annual leave, the Commission found that the employees were not entitled to accrue annual leave during the lockout period because it did not count as "service" under the FW Act.

The entitlement to annual leave under section 87 of the FW Act only arises in relation to the "service" of an employee. The Commission looked at the definition of "service" in section 22 of the FW Act, which excludes a period of unpaid authorised absence, and held that a lockout period does not count as "service" as it is a period of "unpaid authorised absence".

In this regard, Deputy President Gostencnik considered the meaning of "authorised" as being endowed with authority or approval, as is the case with a lockout. Further, the Commission held that it is irrelevant that the employees may not have wished or agreed to be absent, as long as it is authorised by the employer.

No entitlement to long service leave

The Commission held that the lockout was not a qualifying period of "service" for long service leave under the NES, the LSL Act, the Metals Award, or the relevant enterprise agreement, and therefore neither group of employees accrued long service leave during the lockout period.

In relation to the LSL Act and the Metals Award, the Commission found that the lockout was a period of service interrupted by reason of a dispute about industrial matters, which is expressly excluded from the definition of "continuous employment" under the LSL Act and "service" under the Metals Award. The Commission held that employer response action falls within the ordinary meaning of a dispute relating to industrial matters, and therefore the employees were not entitled to accrue long service leave during the lockout.

Bottom line for employers

• The Commission's decision confirms that employees will not accrue annual leave or long service leave during a lockout that constitutes employer response action where:
  • the entitlement to annual leave arises under the NES; and
  • the entitlement to long service leave arises under the NES, the LSL Act, or the Metals Award.
• This adds further financial pressure on employees during negotiations for enterprise agreements that culminate in protected industrial action in the form of a lockout.
• However, employers should be mindful that the result may be different where the entitlement to annual leave or long service leave arises under another industrial instrument such as an enterprise agreement or modern award — "service" under such instruments may not exclude an unpaid authorised absence.
• Even if employees do not accrue annual leave or long service leave during a lockout, in all cases the service of the employment remains continuous when the employee returns to work. That is, although the period of unpaid authorised leave does not count towards the period of continuous service, it does not break an employee's continuous service.