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Your overseas service counts – the little-known long service leave entitlement for international employees

29/10/2020

Long service leave is an established entitlement in Australia and while it is accepted that moving between states doesn’t break an employee’s service it is not widely known that time overseas can often count towards an employee’s service.

The law

The key provision is section 11 of the Long Service Leave Act 2018 (Vic) which is entitled ‘meaning of one employer’. Section 11(2) states that:

If an employee is employed by a corporation, the employee is taken to have been employed by the corporation during any period that the employee was employed by—

  • a related body corporate of the corporation (within the meaning of the Corporations Act); or
  • another corporation and—
  • he directors of that other corporation and the employee‘s present employer were substantially the same; or
  • that other corporation and the employee‘s present employer were under substantially the same management.

The general rule that service with related entity counts as service with the one employer makes sense – it would be unfair that an employee could be moved within a corporate group with the effect that service would be broken and entitlement to long service leave lost. However, importantly, the provision does not require the related corporation to be in Victoria.

The lack of jurisdiction makes sense when considering moves within Australia. If an employee was transferred from a Queensland corporation to a Victorian corporation within the same group it wouldn’t make sense for that to be considered new employment with a different employer. However, from the perspective of Victoria, Australian states are a foreign jurisdiction as much as another country such as the UK or USA.

Accordingly, if an employee works for several years in another county and transfers to an Australian subsidiary in the same corporate group, section 11(2) deems the employment to be continuing with the same employer. This means employees can often commence employment in Victoria with a long service leave entitlement and can end their employment with a larger balance than shown on their final pay, or with an entitlement not recognized by their employer.

Application in Victoria

Only Keenan v Cummins South Pacific Pty Ltd [2018] FCCA 2600 has considered section 11(2) (or its predecessor) in the context of international service being. The issue arose as part of a larger dispute and accordingly was determined by the Federal Circuit Court of Australia rather than the state Courts, where long service disputes are generally heard.

The Court construed the above provision on first principles and in rejecting an argument that the outcome would result in ‘patent unfairness’ Ordered that the employee’s service with related overseas entities counted as service and he was therefore entitled to long service leave for the entirety of his employment.

What it means

There are two obvious consequences to this decision.

The first is that employees with overseas services may be entitled to additional long service leave and should immediately seek legal advice given limitation periods that apply.

The second is that employers need to account for previous overseas service when employees are transferred to a Victorian or Australian entity and it may be that employees commence their local service with an entitlement to long service.

While some employers will argue this amounts to ‘patent unfairness’ it is clear that in Victoria we value long service and just because that service is served overseas does not mean it is not valued. Further, the corporations this will effect are those with overseas entities which would tend to indicate a large enterprise which is well-equipped to bear the additional burden (which amounts to less than 1 week per year of service), and the employees who ‘benefit’ are those that are those particular loyal employees willing to move overseas in service of their employer.