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12 February 2018 Long service leave and resignation because of "domestic or other pressing necessity"

By Richard Ottley, Partner and Simon Obee, Associate

Introduction

An issue which arises from time to time is, whether long service leave is payable where an employee leaves their employment due to some pressing personal domestic circumstance. Can an employer decline to pay long service leave in this situation?
An employee's entitlement to long service leave is regulated by State or Territory based legislation.

In all such legislation there is provision that that once an employee has been employed for a certain minimum period of time the employee will not lose their entitlement to long service leave if they resign their employment. In other words, if they resign – for whatever reason - after this minimum period of service, they will always be entitled to have their long service leave paid out on termination of employment.

In addition, certain State/Territory based legislation makes provision for employees to be paid out pro rata long service leave after a lesser period of employment has been served where they resign in certain circumstances.
In other words there is often two discrete minimum periods of service set out in applicable legislation to keep in mind when determining eligibility to long service leave upon resignation.

A common exclusion from the entitlement to payment of pro rata long service leave on resignation (if resignation occurs within a particular period of service) is where the employee terminates the employment for reasons other than illness, incapacity, or "domestic or other pressing necessity". In such circumstances, therefore, the reason for an employee's resignation will be critical in determining whether they are entitled to a payment for pro rata long service leave or not.

Whilst it is relatively straight-forward for an employer (or a court) to determine whether an employee's resignation is because of illness or incapacity, the question becomes more difficult if an assessment is required as to whether a resignation is because of "domestic or other pressing necessity".

This article first examines the provisions in State and Territory legislation relating to long service leave and resignation, before focusing on how courts have interpreted the meaning of "domestic or other pressing necessity".

Legislation
Long Service Leave Act 1976 (ACT)

The minimum period of continuous service required to potentially entitle an employee to receive a pro rata long service leave payment (in the context of resignation) is five years (s 11C(1)(b)).

However pro rata payment is only available upon resignation if the resignation is:

  • "because of illness or incapacity or a domestic or other pressing necessity of such a nature to justify the termination" (s 11C(1)(a)(i); or

  • on or after the person has attained the minimum retirement age set by an applicable award or agreement, or in other case 65 years old (s 11C(1)(a)(ii)).

Long Service Leave Act 1955 (NSW)

The minimum period of continuous service required to potentially entitle an employee to receive pro rata long service leave payment (in the context of resignation) is five years (s 4(2)(a)(iii)).

Pro rata payment is only available upon resignation if the resignation is “on account of illness, incapacity or domestic or other pressing necessity” (s 4(2)(a)(iii)).

Long Service Leave Act 1981 (NT)

The minimum period of continuous service required to potentially entitle an employee to receive pro rata long service leave payment (in the context of resignation) is seven years (s 10(2)).
Pro rata payment is only available upon resignation if the resignation is:

  • “on or subsequent to attaining the age at which he or she may retire” (s 10(2)(a)); or

  • “on account of illness, incapacity or domestic or other pressing necessity of such a nature as to justify so ceasing to be an employee” (s 10(2)(c)).

Industrial Relations Act 2016 (QLD)

The minimum period of continuous service required to potentially entitle an employee to receive pro rata long service leave payment (in the context of resignation) is seven years (s 95(3)).
Pro rata payment is only available upon resignation if the resignation is because of:

  • “the employee’s illness or incapacity”; (s 95(4)(b)(i)); or

  • “a domestic or other pressing necessity” (s 95(4)(b)(ii)).

Long Service Leave Act 1987 (SA)

The minimum period of continuous service required to potentially entitle an employee to receive pro rata long service leave payment (in the context of resignation) is seven years (s 5(3)).

Pro rata payment is available upon resignation unless “the contract of service is unlawfully terminated by the worker” (s 5(4)(b)). This exclusion, it would seem, covers a situation where the worker fails to provide adequate notice.

Long Service Leave Act 1976 (TAS)

The minimum period of continuous service required to potentially entitle an employee to receive pro rata long service leave payment (in the context of resignation) is seven years (s 8(2)(b)), (or 5 years in the case of mining employees (s 8A(2)(b)).

Pro rata payment is available upon resignation if the resignation is:

  • in respect of “an employee who attains the age for retirement” (s 8(3)(a), s 8A(3)(a)) which includes someone eligible for a service pension under the Veterans' Entitlements Act 1986 (Cth) (s 8(3A), s 8A(3A));

  • on account of illness of such a nature as to justify the termination of that employment” (s 8(3)(b), s 8A(3)(b)); or

  • on account of incapacity or domestic or other pressing necessity of such a nature as to justify the termination of that employment” (s 8(3)(c), s 8A(3)(c)).

Long Service Leave Act 1992 (VIC)

The minimum period of continuous service to receive pro rata long service leave payment is seven years (s 58(1)).
The entitlement is not affected by the reason for termination of employment.

Long Service Leave Act 1958 (WA)

The minimum period of continuous service required to potentially entitle an employee to receive pro rata long service leave payment (in the context of resignation) is seven years (s 8(3)).

There is an exclusion from entitlement where the employment is terminated for serious misconduct (s 8(3)(b)). However, it would appear that resignation for any reason would entitle an employee to payment for pro rata long service leave.

Summary of legislation

ACT, NSW, NT, QLD and TAS all contain exclusions from the entitlement to pro rata long service (if resignation occurs within a particular period of service) where the resignation is for a reason other than illness, incapacity or domestic or other pressing necessity (or broadly similar wording).

The courts' approach to resignations because of "domestic or other pressing necessity"

Having reviewed the legislation we now turn to consider the courts’ approach to resignations claimed to be by reason of “domestic or other pressing necessity”.

Examples of resignations which have held to have been to be for domestic or other pressing necessity include:

  • a pregnant employee leaving work to take on the responsibility of “home duties” (Donnelly v South Maitland Railway Pty Ltd 1964 AILR 450)

  • an employee forced to leave work to take care of a sick wife or take care of children (Franks v Kembla Equipment Co Pty Ltd 1969 AILR 55 ('Franks'))

  • changing jobs to lessen travel expenses when in difficult financial situation (Crennan v Oliver Furniture Pty Ltd (1962) 17 IIB 799 ('Crennan'))

  • the taking of a higher paid job to cope with increasing financial commitments (Eyles v Cook (1967) 13 FLR 42 ('Eyles'))

  • leaving a job because the night shift has become a strain on the employee’s family relationships and repeated requests for a transfer to the day shift had not been met (Williams v MacArthur Press (Sales) Pty Ltd 1990 AILR 137(14))

  • leaving employment because the employer was relocating and the employee would have been required to drive two hours each way to and from work, and the employee was not prepared to move houses or to require her husband to change jobs (Kershaw v Electricity Commission of NSW 1991 AILR 91(7)).

In Robert John Vermeer v Montague Fresh Qld Pty Ltd (2007) 185 QGIG 220 Brown C adopted the dictionary definition of “domestic” meaning “of or pertaining to the home, the household or household affairs.”

In Ahern v IA Group Pty Ltd [2014] QIRC 31 ('Ahern') at para 60, Black IC held that an employee’s resignation purportedly for reasons including the need to rekindle his relationship with his ex wife “cannot appropriately be defined as pertaining to the home or household affairs.”

Given that the relevant legislation makes provision for resignation for "other pressing necessity" it would seem prudent for employees seeking to rely on resignation for a "domestic" reason to argue (in the alternative) that the reason is also a "pressing necessity".

The test in AWU v Sunshine Coast Private Hospital [2003] QIR Comm 241 ('Sunshine Coast')

In Sunshine Coast the court drew on the previous judgments of British Motor Corporation v Chance [1965] AR (NSW) 364 and the Full Bench decision in Computer Sciences of Australia Pty Ltd v Leslie [1983] AR (NSW) 828 to pose six questions relevant to determining whether a resigning employee was entitled to pro rata long service under the relevant section of the QLD legislation:

 

“1. Was the reason for the termination one which fell within the section?
2. Was the reason genuine and not simply a rationalisation of another reason which did not fall within the section; or a reason that while having the appearance of truth or right, is in reality a pretence or a deception; or a frivolous reason?
3. Although the reason claimed may not be the sole ground which caused the employee to make a decision to terminate his or her employment, was it the real or motivating reason?
4. Did the reason claimed cause the employee to terminate his or her employment?
5. Did the reason claimed affect the employee in relation to the particular service he or she terminated?
6. Was the situation which the employee was in at the point of the termination, one in which a reasonable person might have felt compelled to seek to resolve by terminating his or her employment?"

This test has been followed in subsequent decisions including in one of the most recent decisions on the topic in NSW: Stockwell International Pty Ltd v Solyali [2014] NSWIC 7.

From the six questions posed in the test in Sunshine the following points emerge:

  • As to the requirement that “domestic or other pressing necessity” is the genuine reason for the resignation, it is clear that courts do not take assertions about the reasons for resignations at face value. In Ahern (one of the most recent cases on this question), part of the reason for the court dismissing Mr Ahern’s claim was that he did not disclose the purported reason for his resignation at the time of his resignation or in discussions that led to the resignation. It was later claimed to be for reasons including the effect of his job on his health and efforts to rekindle his relationship with his ex wife. That led the court to infer that this was not the genuine reason for resignation. That is not to say that it is always necessary for an employee to state the reason for the resignation at the time they resign (see for example: Franks, mentioned above, where the court noted of the former employee "…it may well have been that, in exercising his legal right to terminate his employment, he felt no obligation to be forthcoming or even frank with the managing director".

  • The question posed at number 3 (motivating reason) makes clear that the “domestic or other pressing necessity” does not have to be the sole reason for resignation. There are a number of cases where an employee has resigned to take on a different job. If the reason for obtaining the new job was itself a “domestic or other pressing necessity” the fact that other factors may have been present should not defeat a claim for pro rata long service leave (see for example: Crennan and Eyles, mentioned above).

  • The question posed at number 6 indicates that a relevant factor to be considered is not only whether the employee felt compelled to leave their employment but also whether it was reasonable for the employee to seek to resolve the issue through resignation. In this sense, this particular criterion introduces a level of objectivity in the overall test.

For advice on long service leave please contract Richard Ottley or Simon Obee.

Richard Ottley, Partner  |  Phone: +61 2 9233 5544  |  Email: rbo@swaab.com.au
Simon Obee, Associate  |  Phone: +61 2 9233 5544  |  Email: sro@swaab.com.au

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This article is not legal advice and the views and comments are of a general nature only. This article is not to be relied upon in substitution for detailed legal advice.

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