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Legal update: Long service leave under State law - interaction with Federal system

By: David Cross, Deacons
25 Jul 06
Published with permission from Deacons

A recent decision (Beattie & Ors v Commonwealth Bank of Australia [2006] NSWIRComm 238) by the Industrial Relations Court of New South Wales shows that it may not be easy for employers to use Federal instruments to overcome the application of State long service leave rules.

Most State long service leave statutes (particularly the Long Service Leave Act 1955 (NSW)) contain generous rules for calculating an employee's period of service. The NSW Act provides that an employee's period of service will be regarded as continuous where the employee moves from one employer to another as part of a transmission of business. The NSW Act also provides that an employee's past service with any related company anywhere in the world will be counted towards determining the employee's eligibility for long service leave.

However, State laws may be overridden by an inconsistent provision in a Federal award or workplace agreement, because of the operation of s109 of the Commonwealth Constitution. Prior to WorkChoices it was difficult to create a workplace agreement that was less generous than an otherwise applicable State law because the agreement would have to pass the "no disadvantage" test. Under WorkChoices, there is no longer such a test. Even so, the mere existence of a long service leave clause in an award or workplace agreement may not be enough to displace the State law.

The facts
The claim was brought by a number of persons who were originally employed by Colonial State Bank. Some years after their employment with Colonial State Bank commenced they became employees of certain franchising companies as part of a transmission of business. After a further period of years, the franchising companies were acquired by the Commonwealth Bank. The persons then became employed by Commonwealth Bank.

For the purpose of calculating the long service leave entitlements, Commonwealth Bank did not include the period of service with Colonial State Bank (ie. the period of service prior to the first transmission of business). The employees brought proceedings in the Industrial Court of NSW seeking an order that the prior service be counted. The Commonwealth Bank asked the Court to dismiss the claim on the basis that the Court had no power to grant relief because the employees were covered by a Federal award.

The main issue
The pivotal issue in the case was whether the Commonwealth Bank of Australia Employees' Award 1999 (Award) was inconsistent with, and so excluded, the NSW Long Service Leave Act. Under the Long Service Leave Act, the employees' prior service with Colonial State Bank had to be taken into account. The Award contained a detailed long service leave clause but it did not give the employees the same rights as the State legislation. The Commonwealth Bank argued that the long service provision in the Award was intended to cover the field - leaving no room for the continued operation of the State law.

The verdict
The Court rejected the Commonwealth Bank's application to dismiss the claim, ruling that the Award provision was not inconsistent with the Long Service Leave Act.

The Award stated that there would be deemed continuity of service for employees involved in certain prior transmissions of business in which Commonwealth Bank was involved, although transaction involving Colonial State Bank was not mentioned. The Bank argued that this meant that all other transmissions of business would not attract continuity of service.

The Court did not accept this reading and found nothing in the Award that showed an intention to exclude those provisions of the Long Service Leave Act that dealt generally with continuity of service after a transmission of business.

Practical significance
This case serves as a reminder that provisions in a Federal award or workplace agreement will not override a State law unless there is direct and express inconsistency.