For an employer who is terminating an employee, leave considerations can become critical. Paying out annual leave or long service leave can be quite expensive for your business. For example, an employee might have taken sick leave when really, they should have taken annual leave. Employers must pay out annual leave when they terminate an employee. So, can you reclassify leave after an employee has already taken it?

What is the Law?

The Fair Work Act says that an employee who takes sick leave must give evidence that would satisfy a reasonable person that they are entitled to take sick leave because they are suffering from a personal illness or injury, or caring for an ill family member. For example, this would usually be a medical certificate provided by a doctor. But what if your employee never supplied you with one? Or their employment contract or award doesn’t require them to provide you with one?

Foulsham v JJ Corbett Plumbing & Gasfitting Pty Ltd [2015]

This case provides an example of when an employer has tried to reclassify leave. In this case, the employee, Foulsham, was claiming 100 hours of unpaid annual leave on termination of employment. He claimed his employer had mistakenly classified some of his time off as annual leave instead of sick leave.

Foulsham claimed complications from his surgery left him unfit for work from 14 December 2009 until 5 February 2010. He admitted to the court that he went on a family camping trip on 26 December 2010. His employer called him on 18 January 2010, and Foulsham said that he was still unfit for work, and not ready for modified duties.

The employer asked Foulsham to provide him with a medical certificate. He provided a medical certificate to his employer on 5 February 2010. When Foulsham returned to work 5 February 2010, the employer re-credited 38 hours that had been changed from sick leave to annual leave back to sick leave.

The Court’s Decision

The court held that Foulsham’s attendance on a family camping trip, and claiming he was not yet ready to go back to work due to surgery complications were inconsistent. This is despite Foulsham eventually supplying a medical certificate. He provided insufficient evidence to satisfy a reasonable person that he took leave because his personal illness rendered him unfit to return to work.

The court also decided that while his employer did overpay his sick leave, the excess payment shouldn’t off-set Foulsham’s claim for accrued annual leave. His annual leave payments were due under an Award, and the purpose or obligation for paying annual and sick leave are separate and distinct. They should not be off-set against one another.

Although the court will consider whether an employee is entitled to sick leave, generally they will not allow reclassification of leave. Anual and sick leave are granted for two different reasons. However, Foulsham was covered by an Award, suggesting that this determination could have a different effect on employees who aren’t.

How to Protect Your Business

As an employer, it is important that you require your employees to comply with the procedures you set out for when they take sick and annual leave. You can protect your business in the long run by requiring employees to provide medical certificates soon after they return from sick leave. You may also consider requiring your employees to use their annual leave within a certain period, or after a certain amount of accrual. This means that you will be allocating sick leave or annual leave when it is appropriate, and you will avoid having to pay out a considerable amount of annual leave on termination.

LegalVision’s employment team can assist you in preparing your employment contracts to include sick leave and annual leave provisions that work best for your business, while still complying with the National Employment Standards.

Questions? Get in touch on 1300 544 755.

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