Two recent cases shed some light on annual leave and sick leave entitlements for employees during COVID-19

The JobKeeper Scheme introduced urgent flexibilities to meet extraordinary circumstances.  It is not surprising that the Scheme comes with a degree of uncertainty on how it impacts various employment circumstances in these “uncharted” times.  Two areas of uncertainty include the impact of annual leave and sick leave.

Two recent cases have provided some clarification on how annual leave and sick leave entitlements are impacted in these times – especially when the employee is receiving JobKeeper payments.

Annual Leave Entitlements

A JobKeeper dispute application was filed with the Fair Work Commission by an employee who refused an employer’s request to take annual leave.

The part-time employee had been employed for approximately 22 years.  The employer was unable to operate its business due to public health directions.  At the time the employee was stood down from work, she had about 9.3 weeks of accrued annual leave and 8.6 weeks of accrued long service leave.

The employer requested all JobKeeper eligible employees to take half their weekly ordinary hours of work as annual leave.  This request was to apply until the end of the JobKeeper Scheme (September 2020), or until the employee had only two weeks accrued annual leave left.

This meant the employee (who worked 2 days a week) was asked to take 1 day of annual leave each week.  The employee refused the request, despite the JobKeeper payments she was receiving being double her usual weekly wage.

In the Commission, the employee argued:

  1. that the legislation was not designed to allow employers to use JobKeeper payments to set-off against the employees’ accrued annual leave entitlements; and
  2. that the request to take leave was not reasonable because she planned on using her annual leave entitlement to travel to Europe in 2021 to visit family.

The Fair Work Commission disagreed with the employee.

The Commission held that the relevant test is not “was the employer’s request reasonable” but rather “was the employee’s refusal to take annual leave unreasonable”. In this case, the Commission held that the employee’s refusal to take the requested annual leave was unreasonable because:

  1. the employee only intended to take a few days of annual leave in 2020;
  2. by 2021 the employee will have accrued some additional leave to boost her 2 weeks, and in any event, had sufficient long service leave, so that it was not that she did not have access to leave;
  3. her disappointment at reducing her leave balance (while understandable) was not sufficient to make her refusal reasonable; and
  4. the employer did not approve annual leave in advance of 12 months, and so the leave the employee wanted for 2021 had not been approved.

Finally, the Commission expressly stated that the doubling of the employee’s income under the JobKeeper Scheme was not a consideration as to whether the refusal to take annual leave was reasonable or unreasonable.

Implications for annual leave requests

The case makes clear that the test for such a dispute is the reasonableness of the employee’s refusal and not whether the employer’s request was reasonable.  It also means that employers can effectively off-set the JobKeeper payments against the employees’ accrued annual leave entitlements.

Since the test is the reasonableness or otherwise of the employee’s refusal, the employee’s particular circumstances in each case will have to be taken into account.  Mere disappointment at having to use annual leave is not a sufficient basis to make a refusal to take annual leave reasonable.

Paid Sick Leave Entitlements

Following the Fair Work Commission’s decision, the Federal Court handed down a decision involving the entitlement to paid sick leave during a stand down period.

Following the COVID-19 restrictions on travel and social distancing, domestic and international air travel all but ceased.  As a result, in mid-March, Qantas stood down approximately two thirds of its 30,000 employees.  The lawfulness of the stand down was not disputed.  The stand down was not a JobKeeper stand down but a stand down under section 524 of the Fair Work Act 2009.

The question for the Court was whether employees who are stood down could access their accrued entitlement to sick leave, which some Qantas employees had done. Some of these employees had extensive accrued sick leave, having worked for Qantas for some 30 years. The employees faced significant illnesses and required extensive medical treatments (such as cancer surgery) which is why they sought access to their paid sick leave entitlements.

Qantas argued that the employees were not entitled to access paid sick leave, because the stand down power it had lawfully invoked serves 2 important purposes.  The first purpose is to provide financial relief to an employer from paying wages when, through no fault of its own, the employer has no work that the employees can usefully perform.  The second purpose is to protect employees from termination of their employment and the inherent losses that go with termination (such as losing their accrued but untaken sick leave).

The Court agreed with Qantas and decided that the employees could not access paid sick leave entitlements during the period of the stand down.

In deciding this, the Court held that the paid sick leave entitlement is like a statutory form of income protection, in which an employee:

  1. is authorised to be absent from ‘work’ when the employee is unable to work because of illness or injury; and
  2. is to be paid for the absence from work.

The Court held that in the Qantas case, there was not any work from which the employees could be absent. Secondly, the Court concluded that the entitlement to sick leave attaches to a “working” day.  That is, it covers that portion of a 24-hour period that would otherwise be allotted to work.  The sick leave entitlement covers the absence  from “work”.

Because the Qantas employees were lawfully stood down from work and did not have work to perform, the employees are exercising the right to be absent from work.  To allow otherwise, was to act contrary to the very purpose of the sick leave entitlement –to relieve an employee from the obligation to perform work.

Further, to allow paid sick leave was to defeat the protections offered to the employer – financial relief when the employer did not have work for the employees to perform when ill or injured.

Implications for paid sick leave

If an employer provides a stand down notice under section 524 of the Fair Work Act (because of a “stoppage of work” and therefore, no useful employment for the employees) then the employees cannot access paid sick leave during the stand down.

Is it the same for a JobKeeper stand down?  Based on the principles relied on by the Court, we think so, since the a JobKeeper stand down also results in there not being work for the employees and so there cannot be an absence from work.  As well, allowing paid sick leave will defeat the flexibility which the stand down power gives to employers to manage its financial management of the COVID-19 impacts.

What might taking sick leave during a JobKeeper stand down period look like in practice?  Here is an example:

  1. an employee is normally paid $2000 for a fortnight’s work
  2. the employee is stood down (under a lawful JobKeeper stand down notice) and is now only working 3 days a week (6 days for the fortnight)
  3. for 6 days work over the fortnight, the employee is entitled to $1200, but of course, the employee is paid $1500 minimum JobKeeper payment
  4. if the employee becomes sick and has a medical certificate for the fortnight (10 business days):

a) the employee is only absent for 6 days of rostered work;

b) the employer deducts 6 days from the employee’s accrued sick leave entitlement (even though the medical certificate covers 10 business days); and

c) the employee remains entitled to $1200 covered by the 6 days paid sick leave (the days they are absent from work) but of course is still paid the minimum $1500 JobKeeper payment

5. for the 4 days of the fortnight covered by the stand down, the employee does not access nor is the employee entitled to paid sick leave. Similarly, the employer does not deduct these 4 days from the employee’s sick leave entitlement.

Questions

For more information or further assistance on COVID-19 and the legal implications for your company, please contact Robert King, Partner at r.king@cornwallsqld.com.au, Michaela Wauchope, Lawyer at m.wauchope@cornwallsqld.com.au, or Martin Alden, Partner at m.alden@cornwalls.com.au, Jessica Cirnigliaro, Lawyer at j.cirnigliaro@cornwalls.com.au.

Disclaimer

This information and contents of this publication, current as at the date of publication, is general in nature to offer assistance to Cornwalls’ clients, prospective clients and stakeholders and is for reference purposes only.  It does not constitute legal or financial advice.  If you are concerned about any topic covered, we recommend that you seek your own specific legal and financial advice before taking any action.

The Author

Robert King

PARTNER, BRISBANE

Key Contacts

Robert King

PARTNER, BRISBANE

Martin Alden

PARTNER, MELBOURNE