Unfair dismissal; what is “continuous service”?

Various forms of unpaid leave under the Fair Work Act do not count towards service when determining whether an employee is protected from unfair dismissal; thus

“[4] For the reasons set out below I find that Ms Corrie was not a person protected from unfair dismissal having not completed the minimum employment period and that her application must therefore be dismissed. [5] The Fair Work Act 2009 (FW Act) defines eligibility for the making of an unfair dismissal application in the following manner: “382 When a person is protected from unfair dismissal A person is protected from unfair dismissal at a time if, at that time: [2023] FWC 858 DECISION [2023] FWC 858 2 (a) the person is an employee who has completed a period of employment with his or her employer of at least the minimum employment period; and (b) one or more of the following apply: (i) a modern award covers the person; (ii) an enterprise agreement applies to the person in relation to the employment; (iii) the sum of the person’s annual rate of earnings, and such other amounts (if any) worked out in relation to the person in accordance with the regulations, is less than the high income threshold.” “383 Meaning of minimum employment period The minimum employment period is: (a) if the employer is not a small business employer—6 months ending at the earlier of the following times: (i) the time when the person is given notice of the dismissal; (ii) immediately before the dismissal; or (b) if the employer is a small business employer—one year ending at that time.” “384 Period of employment (1) An employee’s period of employment with an employer at a particular time is the period of continuous service the employee has completed with the employer at that time as an employee. (2) However: (a) a period of service as a casual employee does not count towards the employee’s period of employment unless: (i) the employment as a casual employee was as a regular casual employee; and (ii) during the period of service as a casual employee, the employee had a reasonable expectation of continuing employment by the employer on a regular and systematic basis; and (b) if: [2023] FWC 858 3 (i) the employee is a transferring employee in relation to a transfer of business from an old employer to a new employer; and (ii) the old employer and the new employer are not associated entities when the employee becomes employed by the new employer; and (iii) the new employer informed the employee in writing before the new employment started that a period of service with the old employer would not be recognised; the period of service with the old employer does not count towards the employee’s period of employment with the new employer.” [6] Section 396 of the FW Act provides that whether a person is protected from unfair dismissal must be decided by the Commission before considering the merits of an application. [7] On a simple calendar basis Ms Corrie was employed for longer than 6 months, having commenced employment on 5 July 2022. LMHS contends that there are several periods of unpaid leave which should not be counted as continuous service which thereby extends the minimum employment period in Ms Corrie’s case. In particular LMHS argue that Ms Corrie took 15.53 days of unpaid leave during her employment meaning “the Applicant’s minimum employment period required to qualify for protection from unfair dismissal would have expired on 26 January 2023”.1 [8] That she took leave during her employment is not contested by Ms Corrie and neither are the dates of her leave. However, the basis of the leave and how it should be treated for the purposes of continuous service in any assessment of the minimum employment period are matters contested by Ms Corrie. [9] Continuous service is defined in s.22 of the FW Act which provides so far as is relevant: “22 Meanings of service and continuous service General meaning (1) A period of service by a national system employee with his or her national system employer is a period during which the employee is employed by the employer, but does not include any period (an excluded period) that does not count as service because of subsection (2). (2) The following periods do not count as service: (a) any period of unauthorised absence; (b) any period of unpaid leave or unpaid authorised absence, other than: [2023] FWC 858 4 (i) a period of absence under Division 8 of Part 2-2 (which deals with community service leave); or (ii) a period of stand down under Part 3-5, under an enterprise agreement that applies to the employee, or under the employee’s contract of employment; or (iii) a period of leave or absence of a kind prescribed by the regulations; (c) any other period of a kind prescribed by the regulations. (3) An excluded period does not break a national system employee’s continuous service with his or her national system employer, but does not count towards the length of the employee’s continuous service. (3A) Regulations made for the purposes of paragraph (2)(c) may prescribe different kinds of periods for the purposes of different provisions of this Act (other than provisions to which subsection (4) applies). If they do so, subsection (3) applies accordingly.” (4) – (8) omitted [10] It may be drawn from the above provisions that unpaid leave is explicitly not counted towards continuous service other than in the limited circumstances of s.22(2)(b). [11] The leave taken by Ms Corrie and how LMHS recorded the basis of the leave is set out in Ms Clarke’s witness statement: “6. Throughout her employment with LMHS, Ms Corrie applied for and was approved to take the following periods of unpaid leave: (a) From 18 July 2022 until 22 July 2022 Ms Corrie took 5 days of unpaid leave. (b) On 2, 9, 16 and 30 September 2022 Ms Corrie took 4 days of unpaid Family and Domestic Violence Leave. (c) On 8 December 2022 Ms Corrie took 4 hours of unpaid leave. (d) On 21 December 2022 until 23 December 2022 Ms Corrie took 3 days of unpaid leave. (e) On 28 December 2022 until 30 December 2022 Ms Corrie took 3 days of unpaid leave.”2 [12] Both parties described LMHS’s leave application and approval process in similar terms; employees access an intranet kiosk and make an application for the leave they want; after the [2023] FWC 858 5 application is made it is forwarded to the employee’s approving manager who considers and approves the request or not. [13] There appears no particular contest between the parties that leave was sought and approved in accordance with LMHS processes and policies. Ms Corrie though is critical that a pre-employment agreement for the taking of annual leave in advance of it accruing shortly after she commenced employment with LMHS was not honoured and that when she came to apply for leave the kiosk would only allow her to apply for unpaid leave and not paid leave. [14] Ms Corrie puts forward several arguments about the leave taken by her. • First, that she negotiated for the taking of the July leave as annual leave before commencing employment on 5 July 2022 only to find after she commenced employment that LMHS would not allow the leave to be taken as annual leave since that would mean she ran a negative leave balance; • Second, that she accrued sufficient annual leave in the course of her employment as to allow the treatment of unpaid leave as paid leave, with it being converted to such after the time it was taken, with the implication being that the leave actually taken by her should be treated as continuous service, which of course is central to determination of whether the minimum employment period has been completed; • Third, Ms Corrie submitted that the Family and Domestic Violence Leave taken by her requires being treated as a non-excluded period of leave for the purposes of s.22(2), submitting about the leave: “I took family and domestic violence leave, which is a National Employment Standard. Family and Domestic Violence leave is ‘a period of leave or absence prescribed by the regulations’ under Section 22 of the Fair Work Act 2009 2(b)(iii) and is accordingly, included as a period included in service.”3 [15] In turning to the parties’ respective arguments it bears noting that Ms Corrie’s dismissal was notified to her and took effect on 16 January 2023. If not extended for reason of gaps of non-continuous service, the minimum employment period would be completed as set out in s.383(a). [16] Ms Corrie’s contention that there was a pre-employment agreement to take annual leave shortly after employment had commenced even though sufficient leave had not been accrued does not assist her case in this matter. [17] Even if it were found that LMHS had not honoured its pre-employment agreement with Ms Corrie such does not change the fact the leave when taken was approved as unpaid leave and has not been re-characterised since. Leave taken by Ms Corrie appears in payslips provided by LMHS as follows, noting both that not all payslips have been provided and that there were delays in approving some of the leave as a result of the debate that transpired about whether Ms Corrie could take annual leave in advance of it being accrued. The table below also includes balances indicated on the payslips for the “Annual Leave Account”.4 [2023] FWC 858 6 Pay date 31 August 2022 • 38 hours leave without pay for 18 July 2022 to 22 July 2022 • Annual Leave Account: 20.82 hours 14 September 2022 • 15.2 hours unpaid Family and Domestic Violence Leave for 2 September and 9 September 2022 • Annual Leave Account: 26.65 hours 28 September 2022 • 7.6 hours unpaid Family and Domestic Violence Leave for 16 September 2022 • Annual Leave Account: 32.48 hours 12 October 2022 • 7.6 hours unpaid Family and Domestic Violence Leave for 30 September 2022 • 7.6 hours paid personal leave for 19 September 2022 • Annual Leave Account: 38.31 hours 4 December 2022 • 7.6 hours paid personal leave for 1 December 2022 • Annual Leave Account: 61.63 hours 21 December 2022 • 4 hours leave without pay on 8 December 2022 • 6 days annual leave between 9 December and 16 December 2022 • Annual Leave Account: 21.44 hours 4 January 2023 • 3 days unpaid leave between 21 and 23 December 2022 • 3 days unpaid leave between 28 and 30 December 2022 • 2 days annual leave on 19 and 20 December 2022 • Annual Leave Account: 9.57 hours [18] Ms Corrie submits that annual leave accrued during the course of her employment would allow the unpaid leave taken to be retrospectively re-characterised as annual leave. The submission is counterfactual for two reasons. [19] First, the leave in question as taken, approved, and identified in the payslips was at all times unpaid. There is no evidence that at any time after the leave was taken and processed through the payslips that Ms Corrie requested a retrospective change to the characterisation of the leave. [20] Second Ms Corrie’s leave balances are recorded on her payslips, with the last one, dated 4 January 2023,showing an “annual leave account” balance of 9.57 hours. Annual leave accrues progressively during the period of a person’s employment and the balance appears to be broadly consistent with what could be expected of having been accrued in the circumstances of total employment being marginally longer than 6 months, and with deductions then being made for the 8 days paid annual leave since employment commenced in July 2022. [21] The remaining accrual balance of 9.57 hours would obviously be insufficient to cover the 15.53 days of unpaid leave she had taken since commencing employment on 5 July 2022. [2023] FWC 858 7 [22] In the alternative, if the whole of the annual leave balance at the end of 4 January 2023 were directed to re-characterising some of the unpaid leave taken by Ms Corrie it would have the effect of bringing the minimum employment period closer to the termination date only by a little over 1 day. [23] Ms Corrie’s third argument is that the leave taken by her is not to be treated as an excluded period for the purposes of calculation of continuous service. As identified above the submission depends on her noting that “that LMHS are claiming I took ‘unpaid leave’” as well as the contentions that the four days of Family and Domestic Violence Leave is a National Employment Standard and “is ‘a period of leave or absence prescribed by the regulations’ under Section 22 of the Fair Work Act 2009 2(b)(iii) and is accordingly, included as a period included in service”.5 [24] Answering Ms Corrie’s references to the National Employment Standards and the Regulations needs the development of some context. [25] The first part of Ms Corrie’s submission on the subject that “LMHS are claiming I took “unpaid leave”” is addressed by noting that irrespective of whether the leave taken was for Family and Domestic Violence Leave or unpaid leave it was not the subject of payment by LMHS. [26] Section 22(2)(b) of the FW Act provides that “service” does not include “any period of unpaid leave or absence”. The term “unpaid leave or absence” is not the subject of a definition either in that section or elsewhere, although variants of the term are defined (such as “unpaid carer’s leave” and before the 2022 amendments to the FW Act, “unpaid family and domestic violence leave”). [27] The second part of the submission makes reference to the National Employment Standards. Of course, Family and Domestic Violence Leave is part of the National Employment Standards having been legislated now for some years. The National Employment Standards are within the FW Act’s Part 2 – 2, with Division 7 dealing with personal/carer’s leave, compassionate leave and family and domestic violence leave. Subdivision CA is relevant to this case. Importantly for Ms Corrie’s case there have been recent legislative changes to the provisions. [28] As applicable to Ms Corrie, the provisions of Part 2 – 2, Division 7, Subdivision CA commenced on 12 December 2018 with ss.106A (1) and (2) providing the following entitlements (with underlining added by me): “Subdivision CA—Unpaid family and domestic violence leave 106A Entitlement to unpaid family and domestic violence leave (1) An employee is entitled to 5 days of unpaid family and domestic violence leave in a 12 month period. (2) Unpaid family and domestic violence leave: [2023] FWC 858 8 (a) is available in full at the start of each 12 month period of the employee’s employment; and (b) does not accumulate from year to year; and (c) is available in full to part-time and casual employees.” (underlining added) (3) – (5) omitted [29] Amendments to the FW Act which commenced on 1 February 2023 changed the substantive entitlement from 5 days unpaid leave to 10 days paid leave as follows: 6 “Subdivision CA—Paid family and domestic violence leave 106A Entitlement to paid family and domestic violence leave (1) An employee is entitled to 10 days of paid family and domestic violence leave in a 12 month period. (2) Paid family and domestic violence leave: (a) is available in full at the start of each 12 month period of the employee’s employment; and (b) does not accumulate from year to year; and (c) is available in full to part-time and casual employees.” (underlining added) (3) – (5) omitted [30] The legislation does not have retrospective effect. [31] Ms Corrie took four days of Family and Domestic Violence Leave and was not paid for the leave. Such is not inconsistent with the National Employment Standards applicable at the time the leave was taken. LMHS could have allowed the leave to be taken as paid leave in which case it would count towards minimum employment. However it did not do so: instead it approved and recorded the leave taken by Ms Corrie in the manner required by the legislation in operation at the time the leave was applied for, taken and identified in her payslips. [32] Ms Corrie also asserts that “Family and Domestic Violence leave is ‘a period of leave or absence prescribed by the regulations’ under Section 22 of the Fair Work Act 2009 2(b)(iii)”. In this submission she appears to connect the reference in s.22(2)(c) to a non-excluded period of leave or absence being “a period of leave or absence of a kind prescribed by the regulations” with the other matters dealt with in s.22. [33] If that is her submission she is incorrect in her construction of the FW Act, since the reference to “a kind prescribed by the regulations” is a reference to regulations made under the [2023] FWC 858 9 FW Act.7 No regulations dealing with the provisions of s.22(2)(c) have been made, either in the Fair Work Regulations 2009 or elsewhere. [34] Ms Corrie took several types of leave during her employment. [35] The payslips submitted to the Commission by LMHS show two periods of annual leave and two periods of personal leave, each of which type of leave was paid leave. Neither of those types of leave are excluded in calculation of continuous service. [36] Ms Corrie also took the periods of unpaid leave summarised above; being several periods of leave without pay and four separate days of Family and Domestic Violence Leave, which at the time was a legislated entitlement to unpaid leave. None of those periods of leave are counted as service for the purposes of s.22 of the FW Act. Each was a period of unpaid leave and was not “a period of leave of a kind prescribed by the regulations” (s.22(2)(b)(iii)) or required for other reasons to be included in assessment of continuous service. [37] The leave that must be regarded as not counting as service is the following: • Unpaid leave – a total of 11 days and 4 hours as follows: o 5 days between 18 July 2022 and 22 July 2022 o 4 hours on 8 December 2022 o 6 days in the periods 21 December to 23 December 2022 and 28 December to 30 December 2022 • Unpaid Family and Domestic Violence Leave o 4 days on 2, 9, 16 and 30 September 2022 [38] These absences total 15 days and 4 hours (or 15.53 days). [39] The consequence of this finding is that the minimum employment period for Ms Corrie to be a person protected from unfair dismissal is the period of 6 calendar months added to which is the 15.53 days determined as above; that is to Friday 20 January 2023. Given that Ms Corrie was dismissed by LMHS with effect on 16 January 2023, she had not completed a period of employment of at least the minimum employment period. [40] LMHS assert in its initial response document, the Form F3 and its written submissions that the effect of the unpaid leave is to extend the minimum employment period to 26 January 2023, but does not provide details of how that extension date is calculated. It may well be that LMHS has added working days to 5 January, rather than adding all days. Irrespective, I disagree with the submission that the qualifying period is extended to 26 January 2023. Plainly, the period is a period comprising all days, and not just working days, and an extension to the period must also be on the basis of all days. [41] As a result of the foregoing, I must dismiss Ms Corrie’s application for an unfair dismissal remedy and an order doing so is issued at the same time as this decision.”

Corrie v Loddon Mallee Housing Services Ltd (2023) FWC 858 delivered 12 April 2023 per Wilson C