Whether or not unpaid leave counts as service is an important question, particularly where employment ends close to the six‑ or twelve‑month threshold under the Fair Work Act 2009.

 

Probation vs minimum employment period

While probation periods are commonly included in employment contracts, it is important to understand that probation has no legal standing under the Fair Work Act when it comes to unfair dismissal. What matters is whether the employee has completed the statutory minimum employment period, which determines eligibility to bring an unfair dismissal claim:

  • 6 months for employers with 15 or more employees

  • 12 months for small business employers (fewer than 15 employees).

An employee can still be on ‘probation’ yet be eligible to claim unfair dismissal if they have completed the minimum employment period. Conversely, an employee who has not completed that period will not be eligible to bring an unfair dismissal claim, regardless of what the employment contract says.

For example, imagine a new employee was hired on the basis of a six-month probation period, and takes six weeks’ unpaid leave due to a non-work-related injury during that time. Due to poor performance (and despite warnings), the employee is then dismissed after returning to work seven months after being hired. Although it is less than six months into the probation period in terms of actual service provided.

Would this mean the employee was dismissed within the probation period, or had worked past their probation period and might therefore claim unfair dismissal?

 

Does unpaid leave count as service?

In the example above, the employee would not have completed the relevant six-month period of employment, therefore there is no jurisdiction for the Fair Work Commission to hear an application for unfair dismissal.

Under the Fair Work Act (s383), an employee (whose employer employs 15 employees or more) must have completed at least six months’ service at the time notice of dismissal is given, or the date of dismissal. 

The six months (or 12 months in the case of a small business employer) is based on an employee’s ‘service’ with the employer. The Act (s22) defines ‘service’ to mean the period an employee is employed by the employer except:

  • any period of unauthorised absence

  • any period of unpaid leave or authorised unpaid absence (other than community service leave or a period of stand down).

This means the six-week period the employee was absent on unpaid personal leave does not count as service with the employer: the employee has only completed five and a half months service with the employer.

 

The bottom line

A period of unpaid leave will not usually count as service for entitlements under the Fair Work Act. An exception applies when calculating qualification for flexible work arrangements, parental leave and notice of termination by the employer as well as exceptions with respect to community service leave and stand down.