Q. Following an internal investigation, our company summarily dismissed a long-serving employee for sexually harassing a co-worker. The employee had approximately eight years' service and worked primarily in our New South Wales office.

We paid all accrued annual leave on termination but did not pay notice or pro rata long service leave. The employee claims they are entitled to both payments regardless of the reason for dismissal. Our Head Office in Victoria believes there may still be a long service leave entitlement. 

Is the employee entitled to notice and pro rata long service leave despite being dismissed for serious misconduct?

 

A. An entitlement to pro rata long service leave on termination is subject to the relevant Commonwealth, state or territory long service leave legislation, or award-derived long service leave terms preserved under the National Employment Standards. The relevant jurisdiction is determined by the location where the employee performs work, not the location of the employer’s Head Office. 

Whether a period of notice is required to be given to the employee in this circumstance is regulated by the National Employment Standards, the applicable modern award or enterprise agreement. 

 

Pro Rata Long Service Leave in NSW 

The Long Service Leave Act 1955 (NSW) provides for a pro rata entitlement after five years and between ten years’ service where the worker’s service is terminated by the employer for any cause other than “serious and wilful misconduct”. This means the misconduct needs to be both serious and wilful. Certainly, sexual harassment of a work colleague would be considered serious misconduct. The word “wilful” means the employee exercised a freedom of choice in relation to the behaviour. 
In this case, the nature of the misconduct would appear to be both serious and wilful consequently the employee would forfeit an entitlement to pro rata long service leave on termination under the New South Wales statute. 

 

Other states and territories 

Generally, state and territory long service leave legislation provides that an employee will forfeit pro rata long service leave on termination where the reason for dismissal is due to serious misconduct. This is also usually the case for employees subject to award-derived long service leave terms preserved under the National Employment Standards.  

The exception is long service leave legislation in Victoria where an employee ceasing employment after at least seven years continuous employment with the employer is entitled to be paid long service leave at the standard accrual rate, regardless of the reason for the termination of employment. 

Once the qualifying period of continuous service which entitles the employee to take long service leave has been completed, normally 10 years, long service leave is usually payable on termination, regardless of the reason for dismissal. Reference should be made to the relevant long service leave legislation to determine an employee’s entitlement in that circumstance. 

 

Payment in lieu of notice 

The Fair Work Act (s.123) excludes the following categories of employees from the minimum notice period requirements: 

  • an employee engaged under a contract of employment for a specified period of time, a specified task, or a specified season; 

  • an employee whose employment was terminated because of serious misconduct; 

  • a casual employee; 

  • an employee (other than an apprentice) to whom a training arrangement applies and whose employment is for a specified period of time or is, for any reason, limited to the duration of the training arrangement; 

  • a daily hire employee working in the building and construction industry; or 

  • a daily hire employee working in the meat industry in connection with the slaughter of livestock; or 

  • a weekly hire employee working in connection with the meat industry and whose termination is determined solely by seasonal factors. 

 
This means an employee summarily dismissed is only paid up till the time of dismissal. However, the employer should also check the applicable modern award or enterprise agreement to determine whether a period of notice is required to be given by the employer to the employee when terminating the employment as the terms of the award or agreement are still enforceable. 

 

Bottom line 

For an employee who primarily works in New South Wales and has between five and ten years' service, a dismissal for serious and wilful misconduct will generally prevent entitlement to a pro rata long service leave payment. Similarly, an employee dismissed for serious misconduct is not entitled to notice under the National Employment Standards. Employers should, however, review the applicable long service leave legislation, modern award and enterprise agreement before finalising termination payments.