Employment outside NSW won’t automatically count for long service leave in NSW, so review how you track it now

Cynthia Elachi
15 Dec 2022
Time to read: 2 minutes

Employers should be looking at how they track their employees’ entitlements to long service leave in NSW, following a decision by the Court of Appeal which overturned the previous understanding of how the Long Service Leave Act 1955 (NSW) applied to employees who have moved between States or countries during their continuous service (Wipro Limited v State of New South Wales [2022] NSWCA 265; Clayton Utz acted for the successful employer).

Long service leave: the problem with crossing borders

Long service leave is determined by the legislation in each State or Territory. This made a lot of sense when nationwide employers were fairly rare. In our modern world, where an employer can cross borders, and employees can too during the course of their employment, multiple laws might be in play.

In NSW the position has long been thought to be this: you look at whether an employee has continuous service and if that continuous service has a substantial connection to New South Wales. Take the Wipro case as an example. The employee had been employed in India for six years, and then transferred to NSW. He worked in NSW for four years before resigning. He argued that as he had spent 40% of his time with his employer based in NSW, his continuous service had a substantial connection, and so he was entitled to long service leave under the NSW regime.

Calculating long service leave in NSW

There are two key points from the Court of Appeal’s decision:

  • “The performance of service within New South Wales is an obvious connecting factor” but there may be other factors connecting the service to the State. For example, the contract might have been made in NSW, or the employer in NSW might have directed the employee work outside it.
  • “A ‘substantial connection’ between the ‘continuous service’ [is] to be assessed by reference to the service when it occurs rather than retrospectively on cessation of the service.” The employee in this case had two separate periods of employment: six years overseas, and four years in NSW. To determine his long service leave, only his four years in NSW counted.

The upshot is that while a substantial connection between the continuous service and NSW might be created by (for example) where a contract was made, it won’t necessarily be made by a deployment decision, even one that lasts for years.

The Court acknowledged that there will be cases which are not as clear-cut as this one, but said that this approach would make it easier for employees to know their long service leave entitlements, and encourage employers to keep track of them.

Key takeaway for employers

If you have employees who have moved to or from NSW while employed by you, their entitlements might have been affected by this decision, so as a priority those should be reviewed now.

More broadly, how you track and calculate long service leave should be reviewed to ensure you are capturing NSW service accurately, and neither over- or under-paying your employees.

Finally, as the Court noted that a substantial connection can be created by where the contract is formed or other circumstances, you should consider getting advice to ensure you and your employees properly understand what entitlements have been created.

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.