Is annual leave loading payable on termination of employment?
An interesting local court decision has provided some clarity to a long-standing question about annual leave. Previously there has been some ambiguity around how much annual leave is payable, and whether annual leave loading should be included, in an employee’s final pay.
In Stephen Edward Ryan v Whitehaven Coal Mining Pty Ltd, the facts were agreed between the parties and the issue was one of interpretation; specifically, how should s.90(2) of the Fair Work Act be interpreted? This section provides that, when employment ends, employees are entitled to any untaken paid annual leave. The court has ruled that the amount payable is that which the employee would have received if they had taken the leave during their period of employment.
In this particular case the employee had a contract of employment and was covered by the terms of an enterprise agreement, both of which referenced leave entitlements. The employee was entitled to the greater of his leave plus a 20% leave loading, or projected roster earnings, when leave was taken during his employment. The confusion arose over whether the leave loading was also payable on termination.
The decision and its implications
The magistrate considered the submissions around statutory interpretation and held that s.90(2) should be read and understood according to its ordinary meaning. The effect of this finding was that the employee was held to be entitled to his untaken annual leave plus the applicable leave loading.
A further implication is that, where the Award or Agreement omits the rate at which leave is payable on termination, the legislation requires that employees be paid their accrued leave plus any applicable leave loading.
The message to employers here is that, where leave loading would apply to annual leave taken during the period of employment, then employees will be entitled to be paid leave loading on any accrued annual leave at the time of their termination.