Redefining Long Service Leave in NSW: “substantial connection” test changed
On 14 December 2022, the New South Wales Court of Appeal in Wipro Ltd v New South Wales  NSWCA 265 changed the NSW position on how statutory long service leave operates. This decision narrows who has an entitlement to statutory long service leave, by redefining how “substantial connection” to the state is assessed, impacting employers whose employees have completed part of their service outside of the state including overseas.
What does this mean in practical terms? Employees who have worked interstate or overseas, who cannot demonstrate a continuous connection with New South Wales, will not have that part of their service recognised under the Long Service Leave Act 1955 (NSW) (LSL Act). This represents a significant change to the longstanding position to the contrary.
What happened in the Wipro case?
The employer, Wipro Limited, is a company headquartered in India and registered in Australia as a foreign corporation. As you would expect, it has an international workforce with employees working at its headquarters and deployed globally including in Australia.
One employee worked for Wipro Limited for almost 6 years in India, before transferring to New South Wales for a further 5 years. Ordinarily, 10 years of service in New South Wales entitles an employee to long service leave.
Once the employee left the employment, he demanded payment of his long service leave and approached the state regulator for assistance. Proceedings were subsequently commenced in the Supreme Court, with Wipro Limited seeking declarations that the employee was not entitled to long service leave under the LSL Act.
The question at the heart of this case was whether the employee’s service in India counted towards his continuous service with Wipro Limited in NSW. If the answer was ‘yes’, then long service leave was payable. If the answer was ‘no’, no payment was owing. The parties agreed to remove the proceedings to the Court of Appeal given the need to provide a conclusive and final determination of the question before the Court.
An inquiry into an employee’s connection with New South Wales
The LSL Act provides employees with an entitlement to long service leave where they have completed ten years of continuous service with the same employer or related corporation. Traditionally, the test for “continuous service” under the LSL Act was described as an assessment of whether the employee’s service, as a whole, was substantially connected with New South Wales.
In the Wipro case, the NSW government (who defended these proceedings), relied on past authorities dealing with interstate and overseas service where employees were entitled to long service leave under the LSL Act, including International Computers (Aust) Pty Ltd v Weaving  2 NSWLR 64. That case involved an employee who worked in Victoria, South Africa, the United Kingdom and finally in New South Wales. Even so, he was found to be entitled to long service leave under the LSL Act. In applying the “substantial connection” test, the Court found that the “substantial connection” to New South Wales was satisfied because at the point his employment ended, he was in NSW.
Departing from longstanding authority, the Court of Appeal emphasised that the employee’s service must be continuous service with a connection to the state when the service is performed (i.e. at all times throughout the employment). The Court of Appeal disregarded an overall assessment of service when an employee is provided with long service leave such as at the point of termination, when the employee requests long service leave, or resigns.
Connection with New South Wales will be obvious when an employee is working within the physical boundaries of the state. There may be other factors connecting the employee’s service with the state – these include where the contract was formed in New South Wales, where a New South Wales-based employee has been directed to work outside the state, and where an employee based outside New South Wales is subject to direct control from the state. There may be others in different cases.
The Court of Appeal said this was a practical approach, consistent with the LSL Act’s requirements to make and keep records, and was easier for employers to avoid inadvertently breaching the law by not paying long service leave because of the failure to account for discrete and unconnected periods of service outside New South Wales.
The rules of the game under the LSL Act in NSW have now changed!
Even though there are differences in the language under the legislation, this now brings the NSW position into line with Victoria following the Victorian Court of Appeal decision in Infosys Technologies Ltd v State of Victoria (2021) 64 VR 61;  VSCA.
Employers in New South Wales with a footprint in other parts of Australia, or overseas, will need to audit their long service leave practices to ensure those practices are consistent with this decision. For any help with understanding these recent changes and your obligations, please contact Amber Sharp, Kerry O’Brien, or a member of our expert team.
This publication covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. It is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.