Do Employees on Workers Compensation Claims Accrue Annual Leave Entitlements in WA?

Whether an employee on a workers compensation claim accrues annual leave entitlements will be dependant on the relevant State’s workers compensation legislation.

In Western Australia, it is the general position that an employee will accrue annual leave while on a workers compensation claim, as confirmed in Touhey v Salini Australia Pty Ltd [2022] FCA 55.

In this case, Mr Touhey was absent from work and receiving workers compensation payments under the Workers Compensation and Injury Management Act 1981 (WA) from 15 January 2019 to 20 January 2020 (workers compensation period).

After the Mr Touhey’s employment ended he claimed that Salini had underpaid him 154.5 hours of annual leave plus the 17.5% leave loading component which accrued during the workers compensation period.

Justice Banks-Smith laid out the relevant law as follows –

Section 87 of the Fair Work Act  
Entitlement to Annual Leave
For each year of service with an employer (other than periods of employment as a casual employee of the employer) an employee is entitled to:

(a) 4 weeks of paid annual leave 
 
Accrual of Leave
An employee’s entitlement to paid annual leave accrues progressively during a year of service according to the employee’s ordinary hours of work, and accumulates from year to year.

Section 90 of the Fair Work Act 
Payment for Annual Leave
(1) if, in accordance with this Division, an employee takes a period of paid annual leave, the employer must pay the employee at the employee’s base rate of pay for the ordinary hours of work in the period.

(2) if, when the employment of an employee ends, the employee has a period of untaken paid annual leave, the employer must pay the employee the amount that would have been payable to the employee had the employee taken that period of leave.

Section 130 of the Fair Work Act 2009 –
Restriction on taking or accruing leave or absence while receiving workers’ compensation
(1) An employee is not entitled to take or accrue any leave or absence (whether paid or unpaid) under this Part during a period (a compensation period ) when the employee is absent from work because of a personal illness, or a personal injury, for which the employee is receiving compensation payable under a law (a compensation law) of the Commonwealth, a State or a Territory that is about workers’ compensation.

(2) Subsection (1) does not prevent an employee from taking or accruing leave during a compensation period if the taking or accruing of the leave is permitted by a compensation law. 
 
In Western Australia, the relevant compensation law is provided for in the Workers Compensation and Injury Management Act 1981 (WA) which states:

Section 80 of the Workers Compensation and Injury Management Act 1981 
Effect of leave entitlements; effect on sick leave.
(1) Compensation is payable in accordance with this Act to a worker in respect of any period of in capacity notwithstanding that the worker has received or is entitled to receive in respect of such period any payment, allowance, or benefit for annual leave or long service leave under any Act of the Commonwealth or of the State, any industrial award under any such Act, or any other industrial agreement applicable to his employment, and the amount of compensation so payable shall be the amount which would have been payable to the worker had he not received or been entitled to receive in respect of such period any such payment, allowance, or benefit. 

Justice Banks-Smith Concluding
At paragraph [42] –
Mr Touhey as Salini’s employee was entitled to accrue and take annual leave in accordance with Division 6 of Part 2-2 of Chapter 2 of the FW Act. This division constitutes part of the National Employment Standards being the minimum standards applying to the employment of an employee as section 61 of the FW Act provides that an employer must not contravene a provision of the National Employment Standards. It is a civil remedy provision.

At paragraph [64] –
I am therefore satisfied that Salini failed to pay to Mr Touhey upon the end of his employment the amounts for untaken annual leave was entitled to accrue in the period from 15 January 2019 to 20 January 2020, and that Salini thereby contravened section 90(2) and section 44 of the FW Act.

Currently, breaching a civil remedy provision may attract penalties of up to $93,900.00 for corporations and $18,780.00 for individuals (directors, pay roll, management, HR).

This case is an excellent example as to why business owners and payroll should seek guidance on employee entitlements in unfamiliar circumstances as underpayments can attract back payments and significant penalties under the FW Act.