On this page
- Understand what penalty units are
- what constitutes a breach
- Who is liable
- Understand what happens if payments are not made
PenaltiesA penalty unit is used instead of a dollar amount in most modern legislation. Not abiding by the Long Service Leave Act (LSL Act) may subject employers to penalties. Offences under the LSL Act attract a penalty of 20 penalty units. The sole exception to this is the penalty for an offence relating to an employee working while on long service leave. This offence attracts a penalty of five penalty units for breach by an employee and/or an employer. Where an employer or employee is found guilty of an offence, a criminal conviction may also be recorded. See the current value of a penalty unit.
Penalties may apply where an employer:
- fails to pay an employee while the employee is on long service leave
- fails to pass on a pay increase that occurred while the employee was on long service leave
- fails to pay an accrued entitlement on termination of employment
- fails to pay an accrued entitlement on the employee's death
- pays an employee in lieu of allowing the employee to take long service leave as a paid break from work
- knowingly employs a person while that employee is on long service leave from employment with that employer or another employer
- fails to maintain correct records
- makes a false or misleading statement in a record,
or where an employee:
- accepts payment in lieu of taking long service leave as a paid break from work
- works elsewhere while on long service leave from another employer.
Who else is liable?
Under the LSL Act, a director of a corporation, or a person who takes part in the management of a corporation, may also be liable for the conduct of the corporation where the director knew about the conduct, or was reckless as to whether the conduct engaged in was in breach of the LSL Act.
If found guilty, the director or manager would then be liable for penalties and/or criminal conviction, in the same way as the corporation.
Conduct of a director, employee or agent acting with apparent authority, or of a person authorised by a director, employee or agent, is also conduct engaged by the corporation itself.
What if an employer doesn't pay long service leave?
An employee is able to seek recovery of money owed under the Long Service Act (LSL) Act as an application for arrears in pay. The application is heard in the Magistrates' Court and, if an order is made in the employee's favour, it may include an order that the payment be made with interest. The proceeding must commence within six years of the employee's entitlement arising.
Employees may ask an organisation registered under the federal Workplace Relations Act 1996 (for example, a union) to take an action to recover money on their behalf. They may make such a request if they are a member of the organisation or eligible to be a member.
If an employer fails to pay an employee his or her long service leave entitlement, the employer may also be prosecuted in the Magistrates' Court. Small Business Victoria is able to investigate claims of unpaid or underpaid long service leave entitlements, and with the authorisation of the Minister for Industrial Relations, to pursue a prosecution in the Magistrates' Court for an offence under the LSL Act.
If an employer is found guilty of failing to pay a long service leave entitlement, the employer may be fined the appropriate penalty and may also have a criminal conviction recorded against them. There is also the possibility of an order being made that the employer be responsible for the legal costs of the prosecuting agency.
If the employer is found guilty, the Court may also order that the employer pay his or her employee the money due to the employee, possibly with interest. The penalty for this offense is 20 penalty units for the employer.
Prohibition on dismissals (or other prejudicial action) to avoid LSL Act obligations
The LSL Act prohibits an employer from sacking or demoting an employee in order to avoid their obligations under the Act. As it is difficult for an employee to prove that the employer’s reason for the dismissal was to avoid their long service leave obligations, the Act provides a reverse onus of proof. So, where the employee can provide evidence that they were dismissed after they applied for leave or the dismissal took place whilst they were on leave, the employer must prove that the sacking was for some other lawful reason.
It will not be a criminal offence to terminate employment to avoid LSL Act obligations. Instead a civil penalty of up to $10,000 will apply.
The Court will be able to award the penalty to the individual, to the Consolidated Fund, or to an organisation (usually only so ordered where the organisation has incurred the costs of the proceeding). The Court can also order reinstatement and reimbursement of lost wages. Where reinstatement is not appropriate the Court may order compensation.