AFEI Employers Adviser Article


Annual Leave Accrual and Workers Compensation -

Federal Court Decision Under Appeal

Published: 28 April 2015


In November 2014 the Federal Circuit Court of Australia handed down a significant decision which found that annual leave should be accrued while an employee is on workers compensation. The employer has appealed this decision.



Section 130(1) of the Fair Work Act says that:

  “An employee is not entitled to take or accrue any leave or absence (whether paid or unpaid) under [the National Employment Standards] when the employee is absent from work because of a personal illness, or a personal injury, for which the employee is receiving [workers] compensation payable under a law of the Commonwealth, a State or a Territory that is about workers compensation.”

However, s 130(2) goes on to say that the above rule does not apply “if the taking or accruing of the leave is permitted by a [State] compensation law”.

In the Workers Compensation Act in New South Wales there is no specific provision permitting the accrual of leave. At most there is s 49, which says:

   “Compensation is payable under this [part of the Workers Compensation Act] to a worker in respect of any period of incapacity for work even though the worker has received or is entitled to receive in respect of the period any payment, allowance or benefit for holidays, annual holidays or long service leave under any Act (Commonwealth or State), award or industrial agreement under any such Act or contract of employment.”

It is evident that the above clause relates to payment of compensation and not accrual of leave. Indeed, it explicitly refers to other sources of the entitlement to such leave, such as an award or enterprise agreement.


The Federal Court Decision

Although the court accepted the employer’s submission that s 49 of the Workers Compensation Act 1987 does not create a right to annual leave, it still found that the section does permit annual leave accruing during a period of workers compensation.

Judge Emmett reached this finding by first noting that s 130(2) of the Fair Work Act and s 49 of the Workers Compensation Act are both beneficial provisions. The judge said that because of this it was necessary to interpret them in a liberal manner.

Judge Emmett then said that because s 49 of the Workers Compensation Act expressly contemplates receipt of both workers compensation and accrued leave, a beneficial construction of the clause is that s 49 “allows” or “permits” both.

Judge Emmett then said that, “[a]ccordingly, the Workers Compensation Act, being a compensation law, “permits” receipt of the benefit of accruing annual leave whilst in receipt of compensation payments” in New South Wales.


Impact of the Decision

As the decision stands, employers in NSW would be required to accrue annual leave during the compensation period for employees in receipt of workers compensation payments, including any compensation period since the commencement of the National Employment Standard on 1 January 2010.


Appeal of Decision

The employer in this has appealed the decision. The appeal was heard by a full court of the Federal Court of Australia in early February.

The decision should be handed down shortly.


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