Federal Court resolves long-running uncertainty over annual leave payments on termination

In Centennial Northern Mining Services Pty Ltd v Construction, Forestry, Mining & Energy Union (No. 2) [2015] FCA 136 (27 February 2015), the Federal Court determined that annual leave payable on termination of employment must be paid at the rate equivalent to the amount the employee would have been paid if they had taken annual leave during their employment. This means that, where applicable, payments such as annual leave loading should be included in termination pay calculations.

BACKGROUND

This decision resolves a number of years of uncertainty about the operation of the provision in the National Employment Standards (NES) concerning annual leave payments on termination. Since at least December 2010, the Fair Work Ombudsman (FWO) has publicly taken the view that accrued but untaken annual leave needed to be paid out at the higher rate. A legislative amendment to deal with this issue, in order to allow annual leave to be paid at an employee's base rate of pay,