On Thursday 1 November 2018, the Long Service Leave Act 2018 (Vic) (LSL Act 2018) took effect.
Although the rate at which long service leave (LSL) accrues (0.8667 weeks per year) will not change, there are other significant changes that businesses operating in Victoria need to ensure they comply with to avoid exposure to penalties which have tripled under the new law.
What are the key changes?
Under the LSL Act 2018, which repeals the LSL Act 1992:
- Employees are entitled to take LSL after 7 years’ continuous employment instead of 10 years.
- Employees can take their LSL entitlement in any number of days, including single days if they wish. Under the LSL Act 1992, employees were restricted to taking LSL in longer blocks. This will be a welcome flexibility for many employers as well as employees (eg by assisting full time employees transition to part time without reducing their income).
- Up to 52 weeks’ unpaid parental leave (and all paid parental leave) is included when calculating an employee’s period of continuous employment, and unpaid parental leave in excess of 52 weeks will not break continuity of employment. This is intended to ensure that women who often take on caring responsibilities do not miss out on LSL when doing so.
- If an employee’s ordinary hours of employment fluctuate in the 2 years before they take LSL, the number of hours they are entitled to be paid whilst taking LSL (or when pro rata LSL is paid out on termination) is the greater of the average hours they have worked over the past 12 months, the past 5 years or over the entire period of their employment.
- If an employee is re-employed within 12 weeks of termination due to dismissal or resignation, expiry of a fixed term contract or completion of their apprenticeship, their employment is taken to be continuous (under the LSL Act 1992, this only applies if the employee is dismissed).
- Payments in lieu of LSL are now permitted if this is provided for in a relevant enterprise agreement.
- Maximum penalties for failing to pay LSL have increased from 20 penalty units to 60 penalty units ($9514.20). Criminal rather than civil penalties will now apply for taking adverse action against an employee because s/he is entitled to LSL and for failing to disclose that an employment agreement would modify or remove an employee’s LSL entitlements. Authorised officers have new powers to compel the production of documents from employers (but they will still not have right of entry powers).
What should employers do?
- If you have not already done so, immediately update relevant policies and procedures (including payroll systems) to ensure LSL entitlements will be correctly calculated and administered from 1 November.
- If you also have employees in other States/Territories, consider whether you will apply the more generous aspects of the LSL Act 2018 across the board for consistency.
- Consider whether you wish to provide for cashing out of LSL in an enterprise agreement.
- Keep copies of all records that may be relevant to an employee’s entitlement to LSL to ensure that entitlements are correctly calculated and you can defend any claims as necessary.
- Remember that if LSL entitlements are not paid correctly on cessation of employment, employers are liable for penalties and interest until the payment is rectified.
- If purchasing a business, ensure you take LSL accruals into account when negotiating a purchase price and obtain appropriate warranties and indemnities from the vendor.
Note: Some employees are entitled to LSL in accordance with the provisions of pre-modern awards or enterprise agreements rather than the LSL Act 2018. Seek advice if you are unsure what applies in your business.