What is the situation if an employee falls ill whilst on paid annual leave? Sec 89(2) of the Fair Work Act provides, as part of the National Employment Standards, (which as we know cannot be contracted out of) that if the period during which an employee takes paid annual leave includes a period of any other leave, (with one exception not currently relevant to this question) the employee is taken not to be on paid annual leave for the period of other leave or absence.
I have seen it argued (https://workplaceinfo.com.au/payroll/leave/q-a/what-happens-if-you-re-sick-while-on-annual-leave#.V3IHb_l94dU) that not only does this mean that the effect of the section is that any time during which an employee is ill and unable to work should not be treated as paid annual or personal leave, but that the employer and the employee cannot agree that it should be.
I am not so sure. In my view the fact that an employee may become incapacitated for work during annual leave does not mean that the period of the incapacity cannot constitute a period of annual leave. For example, surely sick leave only becomes an entitlement upon the employee fulfilling certain qualifying criteria such as the provision of satisfactory and compliant medical evidence.
I am unaware of any case law on the issue so for the time being, we will just have to disagree.