REVIEW OF THE LONG SERVICE LEAVE ACT 1992 (VIC) Submissions to the Department of Economic Development, Jobs Transport and Resources

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1 REVIEW OF THE LONG SERVICE LEAVE ACT 1992 (VIC) Submissions to the Department of Economic Development, Jobs Transport and Resources 1 April 2016

2 CONTENTS About the Submitter... 3 Submissions Removing limitations on agreements to take t any period of Long Service Leave ( LSL ) Cashing out LSL When can LSL be taken? Calculating payment whilst on LSL Changes to hours worked Treatment of family leave What counts as service for casual and seasonal employees? Recognising prior service where a business is sold Right to seek an exemption Quantum of penalties, enforcement and record keeping Further matters Conclusion... 13

3 About the Submitter The National Retail Association (NRA) is a not-for-profit industry organisation providing professional services and critical information and advice to the retail, fast food and broader service industry throughout Australia. NRA is Australia s largest and most representative retail industry organisation, representing more than 26,000 stores and outlets. This membership base includes the majority of national retail chains, as well as independent retailers, franchisees and other service sector employers. Members are drawn from all subcategories of retail including fashion, groceries, department stores, home wares, hardware, fast food, cafes and personal services like hairdressing and beauty. The NRA has represented the interests of retailers and the broader service sector for almost 100 years. Its aim is to help Australian retail businesses grow.

4 Submissions The NRA welcomes the opportunity to make submissions to the Department of Economic Development, Jobs, Transport and Resources in relation to the review that it is currently conducting into various aspects of the Long Service Leave Act 1992 (Vic) ( LSL Act ). Our submissions are made in the context of the primary industries that we represent and relate to the following key issues which have been adapted from Appendix 1 of the Victorian Government Long Service Leave Discussion Paper Removing limitations on agreements to take any period of Long Service Leave ( LSL ) Section 67 of the LSL Act says that LSL should be taken in one period. However, if an employer and employee agree, an employee may take the first 13 weeks of LSL in two or three separate periods and may take any further LSL to which he or she becomes entitled in two separate periods. 1.1 Should employers and employees be allowed to agree that LSL be taken in smaller increments? Subject to the matters set out below, we support this proposal. 1.2 If the answer to Question 1.1 is Yes, should there be any minimum periods to these increments (e.g. no less than 1 week)? Given that the purpose of LSL is to enable long serving employees to be given a respite from work and to return to work with a renewed commitment it would be impractical for LSL to achieve this if it is taken for periods less than one week. We therefore propose that the smallest increment of any LSL that should be permitted to be taken should be no less than one week. 1.3 If the answer to Question 1.1 is Yes, should there be any safeguards to protect employees from the risk of being pressured by employers to take LSL in smaller increments? Although we do not consider this risk does to be likely in relation to members of our association, as a general concept, we support the introduction of reasonable safeguards to protect employees from this risk, provided that this does not impose any additional cost or administrative burden on employers.

5 1.4 Would allowing employees to take shorter periods of LSL put undue pressure on businesses? We consider that the ability to reach agreement with employees to take LSL in smaller increments of no less than one week would be beneficial to both businesses and employees. However, any amendments to the LSL Act relating to this issue should not impose any additional administrative obligations on businesses as this would unnecessarily increase the administrative costs and may act as a disincentive for employers to accommodate shorter periods of LSL. 2. Cashing out LSL Section 74 of the LSL Act makes it an offence for an employer to pay, or receive payment, in lieu of LSL. LSL must be taken as leave unless the employment has been terminated. 2.1 Should employers and employees be allowed to agree to cash out accrued LSL? In practical terms, many employees take regular breaks during the course of their employment by way of paid annual leave, alternatively choose to accrue those leave entitlements to take longer paid rest breaks when it suits them. For these reasons, it is often the case that employees would prefer to cash out their accrued LSL rather than be obliged to take it as they do not feel the need to take further rest breaks. In some instances, where employees have accrued an entitlement to pro-rata LSL (i.e. between 7 and 10 years of continuous service during which they are not permitted to take LSL) they choose to resign from their employment in order to receive payment of this entitlement. From a business perspective, cashing out would assist with reducing the cost and disruption to business of having to find replacement staff to cover for an employee who takes LSL or to replace an employee who has elected to resign because they would prefer to receive payment of their accrued LSL entitlements. For these reasons, subject to the matters below, we support amendments to the LSL Act in order to enable employers and employees to agree to cash out accrued LSL. 2.2 If the answer to Question 2.1 is Yes, should there be any safeguard to protect employees from the risk of employers pressuring them to accept money instead of LSL? Although we do not consider this risk does to be likely in relation to members of our association, as a general concept, we support the introduction of reasonable safeguards to protect employees from this risk provided that this does not impose any additional cost or administrative burden on employers.

6 3. When can LSL be taken? Section 58 of the LSL Act provides that a pro rata LSL entitlement is available after 7 years service, but only on the termination of employment. Therefore, if the employment ends, the LSL is paid out. Otherwise, the employee has accrued the leave pro rata but can only take the LSL once they have ten years continuous service. 3.1 Should pro-rata LSL be allowed to be taken after 7 years service (i.e. between 7 years and 10 years continuous service)? For the same reasons set out in point 2.1 above relating to employees who elect to resign when they accrue this entitlement, we support this proposal. The option for employees to be able to either agree with their employer to cash out pro-rata LSL or to take that leave will, in our view, assist businesses to retain the services of valued, long serving employees. 4. Calculating payment whilst on LSL Section 64 of the LSL Act uses the concept of ordinary pay to determine the amount an employee is entitled to receive at the time they take LSL. Ordinary pay is the pay an employee is entitled to receive at the time they take LSL. If no ordinary time rate of pay is fixed the employee s ordinary time rate of pay is taken to be the greater of either the average weekly rate earned in the 12 months immediately before they take LSL or the average weekly rate earned in the five years immediately before they take LSL. 4.1 Should LSL be calculated based on the employee s actual rate of pay for their usual hours of work at the time leave is taken (i.e. including penalties and any non-monetary benefits)? We support this proposal subject to the following qualifications: this should be limited to an employee s usual hours of work and should not include overtime; and LSL should be calculated at the base rate of pay for those employees whose earnings at the time that they take LSL exceed the high income threshold set out in section 333 of the Fair Work Act 2009 ( FW Act ) - which currently stands at $136, We would also recommend that the definition of ordinary pay in sections 64(1) and 64(2) of the LSL Act be expanded to make it clear that it includes nondiscretionary bonuses (if they have accrued at the time that LSL is taken, or while the employee is on LSL).

7 5. Changes to hours worked Many workers, particularly women, change their hours of work. Currently, if this happens, their hours of work for calculating LSL are averaged over the previous 12 months, or five years (whichever is the greater). 5.1 Should the hours of work for employees who change their hours of work during the course of their employment be averaged over the full period of those employees employment? Given that employers are not required to keep employee records for longer than seven years, where an employee has been working for longer than this period, disputes may arise as to the period of an employee s hours of work prior to that seven year period if the employer has not retained those records. For this reason, we support this proposal but propose that the averaging calculation is limited to the last seven years of an employee s continuous period of employment. 5.2 If this calculation is based on the length of the employee s employment, is this likely to create administrative complexity for businesses? Given that the current obligation extends to calculating the average hours over a period of 12 months or five years (whichever is the greatest) we consider that if this calculation is limited to a maximum period of seven years that while this will impose some further administrative complexity for businesses that this would not be overly onerous. If, however, they were required to do so in relation to any period beyond seven years this would be likely to increase their administrative burden and costs and could also give rise to disputes, particularly where an employer has not retained its records beyond that seven year period. 6. Treatment of family leave Section 62 the LSL Act describes which types of absences do not break continuity of service, but do not count as service. Section 63 of the LSL Act describes absences that do not break continuity of service, and also count as service. A period of up to 12 months of family leave, whether paid or unpaid, will not break continuous service. However, this period will not count as service if it is unpaid. The 12 month restriction does not apply to other forms of leave (e.g. annual leave). The FW Act provides that employees may take up to two years unpaid family leave. Generally, a period of unpaid leave is not counted as service.

8 6.1 Should the LSL Act be amended to provide that a period of family leave of up to 12 months, regardless of whether it is paid or unpaid, will be counted as service? The effect of this proposal is to deem an employee who is absent from work for up to 12 months as a result of parental leave to be in continuous service with an employer. It is one thing for this period not to break the employee s continuous period of service (as is currently the case) but it is an entirely different matter for this to be considered to be actual service. This is not only contrary to the intent of LSL but also renders actual service on a continuous basis by other hard-working employees meaningless from a LSL perspective. It could also be said to discriminate against those employees who do not have children. Where an employee has multiple children consecutively, if that employee took parental leave for periods of up to 12 months in each separate instance it is conceivable that such a provision would entitle an employee to take LSL (or cash out LSL - if this change takes place) in circumstances where that employee has rendered minimal service for an employer. For these reasons we do not support this proposal. 6.2 Should the LSL Act be amended to provide that a period of family leave greater than 12 months, regardless of whether it is paid or unpaid, will not break continuity of service (but will not count as service)? Considering the historical context of LSL, this form of leave was limited to employees who rendered continuous service with one employer. The current grace period of up to 12 months given to employees who take family leave is, in our view, more than adequate to limit employees to balance their family commitments against the requirement of continuous service to their employer without breaking that period. Recognising periods greater than 12 months as not breaking continuity of service would, in our view, be inconsistent with not only the historical principles underpinning this form of leave but also the current justification for the continuation of LSL and should not be imposed on employers. 7. What counts as service for casual and seasonal employees? Section 62 of the LSL Act refers to continuous employment for determining an entitlement to LSL, but does not define the term, other than to specify that interruptions to work will not break continuity. Section 62A says that casual and seasonal employees are regarded as having continuous employment in defined circumstances. In 2005 amendments were made to the LSL Act to clarify that casual and seasonal employees are entitled to LSL even though the Act does not expressly provide that

9 interruptions to employment inherent in a casual/seasonal employment relationship count towards the period of continuous employment. 7.1 Should the LSL be amended to make it clear that certain interruptions to employment of a casual or seasonal employee still count towards the period of continuous employment? We support this proposal and the inclusion in the LSL Act of a definition of the term continuous employment which will minimise confusion about these matters for both employees and employers. 8. Recognising prior service where a business is sold Section 60 of the LSL Act defines the term one employer and sets out several situations in which an employee is to be regarded as having been employed by the one employer, even though the employee may have worked over the relevant period of time for more than one employer in a strict legal sense. Where there has been a transfer of a business, and assets, physical or intangible, have also transferred, the LSL Act is clear that employment with the original employer will count as service. However, it appears that where no physical assets have transferred, on the transfer of the business, employment with the first employer may not count as service, depending on the circumstances. 8.1 Should the LSL Act be amended to provide more comprehensive definitions of the terms transfer of business and assets? Further clarity regarding the terms transfer of business and assets would be welcome. The inclusion of practical examples in the LSL Act would further assist employers in better understanding these provisions. 9. Right to seek an exemption Sections 65(2) (5) of the LSL Act allow an employer to apply to the Industrial Division of the Magistrates Court to be exempted from complying with the LSL Act in respect of some, or all of its employees. It is believed that the last time this provision was used was sometime in the 1960s. 9.1 Should this exemption be abolished? Given that this provision does not appear to be used by employers, we support the abolition of this exemption.

10 10. Quantum of penalties, enforcement and record keeping The LSL Act imposes penalties (both criminal and civil) for a range of offences. Penalties in the LSL Act range from five penalty units to 20 penalty units. A penalty unit is about $150. The criminal penalties were last reviewed in 2005, when they were increased. They are, however, still comparatively low, particularly when compared to penalties applying under the Commonwealth Fair Work Act For example, the penalty for contravening a modern award under the Fair Work Act 2009 is up to 60 penalty units ($10,800). The LSL Act does not provide Departmental officers with the power to require employers to produce documents, such as time sheets or pay records. This hampers the officers ability to properly investigate claims, and prepare a case for recovery of unpaid entitlements. Whilst most employers do the right thing, unfortunately there are some employers who not only refuse to pay LSL to their employees, but actively obstruct attempts by the Victorian Government compliance officers Should the penalties in the LSL Act be increased to bring them more into line with comparable legislation such as the Fair Work Act 2009? In the limited instances that we are aware of relating to breaches of the LSL Act, it appears that those breaches are inadvertent and do not arise as a result of any intentional acts by an employer. The fact that there are a number of areas in this legislation that require review and clarification supports this position. We do not therefore support this proposal and instead propose the introduction of measures to educate employers about the provisions of this legislation in the first instance and a system of compliance notices being issued in circumstances where it appears that there has been an inadvertent breach. Where it is clear that a breach was intentional, or that an employer has not followed a compliance notice, we consider the current penalties to be adequate. If, however, any decision is made to increase these penalties, for the reasons set out in point 11.2 below, we submit that either the provisions in Part 9 of the LSL Act should be removed, failing which employers who fall foul of those provisions are not penalised twice (under the LSL Act and under the FW Act should General Protections proceedings also be issued against ab employer relating to that breach) Should departmental officers have the ability to require the production of documents and materials for investigating complaints? We support this proposal provided that the exercise of the proposed powers by departmental offices is reasonable and does not result in unnecessary inconvenience or cost to a business.

11 10.3 Should penalties be imposed on businesses which do not produce documents when requested to do so by departmental officers for the purposes of investigating complaints? We support this proposal subject to the following qualifications: the penalties should reasonable and consistent with the matters set out in point 10.1 above; employers should first be issued with clear notices in advance regarding the requirement to produce these documents and the potential implications of any failure to comply with those notices within a reasonable period of time; and penalties should not be imposed in circumstances where failure to produce documents or any part of a document was as a result of inadvertent conduct Should departmental officers be allowed to enter a business premises to inspect documents in order to check compliance? We support this proposal subject to the following qualifications: this should only occur where relevant documents are, in fact, at the business premises; at least 24 hours written notice should be provided to the owner and occupier of a business of their intention to access those premises for this purpose; access to these premises should be exercised during ordinary working hours in a reasonable manner which causes the least disruption to the employer s business and is confined to the area where the relevant documents are kept; and the employer should be permitted to have a representative present at all times while departmental officers inspect its documents. 11. Further matters We consider that the following further matters should also be taken into account by the Department for the purposes of its review: 11.1 Whether employers should have the ability to request employees to defer the taking of LSL Section 64(5) of the LSL Act permits employees to defer the taking of their long service leave under a written agreement with their employer if this is made at the request of the employee.

12 Provided that such an agreement is genuinely entered into, we do not think that it should make any difference whether the employee has made the request or the employer has done so. We therefore suggest an amendment to the provisions of section 64(5) of the LSL Act to make it clear that such a request can be made by either the employee or the employer Whether the provisions of Part 9 of the LSL Act are still relevant Sections 89 to 93 of the LSL Act prohibit employers from terminating or threatening to terminate the employment of an employee or altering the position of an employee to the employee s prejudice because the employee is entitled to or seeks to exercise any entitlement or other right under the LSL Act. Given the existence of the General Protections provisions in the FW Act, we do not consider the provisions in part 9 of the LSL Act to be necessary and note that in effect they expose an employer to breaches of both the FW Act and the LSL Act. For this reason, we submit that this part should be removed from the LSL Act. At the very least, an employer should not be penalised twice where proceedings are brought under both of these Acts.

13 Conclusion We consider that there is merit to certain reasonable changes being made to the LSL Act as set out in these submissions provided that they do not place unnecessary costs or administrative burdens on employers. We also note that the Economic, Education, Jobs and Skills Committee is in the process of considering submissions and evidence relating to its inquiry into the portability of LSL entitlements for Victorian workers and that its report is due to be presented by no later than 1 May Insofar as the Victorian Government is inclined to enact legislation relating to the portability of LSL in Victoria (which we are opposed to), this should be a further factor that the Department should also take into account in the course of its review given that portability of LSL will further impact on matters such as those set out in items 6, 7 and 8 above which in turn will have additional negative consequences for employers. Trevor Evans CEO National Retail Association Limited ABN Overend Street East Brisbane Q 4169 PO Box 1544 Coorparoo DC Qld 4151 Telephone: (07) Facsimile: (07) t.evans@nra.net.au

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