In March 2023, a 60-year-old woman who had worked for a Darwin real estate business for more than seven years decided to retire. Her resignation letter asked her employer to pay her for (among other items) seven years’ long service including the additional superannuation benefit attached to this payment plus interest.

In the Northern Territory, her entitlement to pro rata long service leave depends on the interpretation of the Territory’s Long Service Leave Act 1981 (LSL).

While long service leave generally becomes available after 10 years’ continuous employment with an employer, the LSL provides that a person whose period of employment is less than 10 but more than seven years is entitled to pro rata payment of long service leave if they have ‘attain[ed] the age at which he or she may retire’.

When her employer did not pay the pro rata long service leave claim, she provided the employer with a letter from an industrial relations consultancy which submitted that, because the woman had reached the ‘preservation age’ whereby she could access her superannuation, she had ‘retired’ and had, therefore, achieved the prerequisite for the payment of pro rata long service leave entitlements.

The employer said it had advice from the Northern Territory public service that the age at which a person can retire is when they qualify for the age pension.

This contradicted the advice the woman had received from the IR consultancy and meant she was not entitled to the $19,707.36 payment for long service leave. She filed an application in the Federal Court in May 2023 seeking that her employer pays her a pro-rata sum for long service leave.

Retirement age

The task of the Federal Court was to decide on the correct interpretation of the NT LSL Act.

The woman submitted that two ‘ages’ were relevant to the question as to whether she had reached ‘the age at which she may retire’, the first being ‘preservation age’ – the age at which she is able to access her superannuation – and the second being ‘age pension age’ – when she’d be entitled to receive Australia’s age pension.

In her case, as a person born between 1 July 1962 and 30 June 1963, the preservation age (determined by the Australian Taxation Office) is 58, and she could access the age pension at the age of 67.

She submitted that she’d turned 60 in August 2022, had worked for more than seven years with the business and as of 17 March 2023 she had retired. She said that she’d reached the preservation age, was living off her superannuation, and was no longer in the workforce.

In deciding how to interpret legislation, a court considers the ‘rules’ of statutory interpretation, including the intended meaning of the provisions.

In this case, it was clear that, when the Parliament enacted the LSL Act in 1981, there was no such thing as superannuation. Retirement age was the age at which one was eligible for the pension. In 1981, people generally remained in employment until that age. Most businesses did not employ anyone once they reached the age at which they were eligible for the aged pension.

With the advent of compulsory superannuation and compulsory employer contributions to superannuation, this changed. Compulsory retirement was largely a thing of the past.

The woman argued that, in the current industrial landscape, with a generation having now lived with compulsory superannuation, it was recognised that someone living off their superannuation entitlement was now ‘retired’. For this reason, she submitted, a person may retire when they have reached the ‘preservation age’.

Judge Vasta, however, formed a different opinion, because the woman’s preferred interpretation did not take into account that attaining the preservation age did not mean the end of a person’s working life.

‘It is possible to access superannuation and yet still continue some form of paid employment,’ he wrote.

‘Realistically, any person at any time can declare that they are “retired”. However, that does not mean that a person can, subjectively, decide when they have “attained the age at which they may retire”.’

Exceptions

The woman belatedly claimed that her case came within the ‘exceptions’ referred to in s10(2)(c) of the NT LSL Act, which provides that persons who need to retire ‘on account of illness, incapacity or domestic or other pressing necessity of such a nature as to justify so ceasing to be an employee’ should also be entitled to a pro-rata payment of long service leave.

In the outline of her submissions provided to the court, but not in her initial application, the woman listed a number of personal circumstances including her mother’s death and her wish to help her daughter cope with the consequences of a difficult birth of her second child. She claimed these circumstances had interfered with her dedication to her work, and motivated her to retire when she did.

Judge Vasta said that while he had great sympathy for her, he could not accept that these new submissions justified her entitlement under s10(2)(c), because she had never claimed that these circumstances ‘necessitated’ her ceasing employment, nor had they been referred to in her resignation letter to her employer or in the advice from the industrial relations consultancy.

He said that many working people have to deal with the death of a parent or difficulties in the raising of children, and without wishing to belittle the impact of these events on the woman, her situation was ‘not so exceptional as to necessitate her ceasing employment’.

If it had been, she would presumably have discussed the problems with her employer and attempted to negotiate a position where her employment allowed her to work around those matters.

Consequently, the court found that the woman had not attained the age of 67 – the age at which she may retire – and was therefore not entitled to a pro-rata payment of long service leave. He dismissed the case.

What it means for employers

Entitlements to pro rata long service leave payments for employees who have worked for less than 10 years must be made according to the correct interpretation of the relevant legislation.

Read the decision

Georges v Elders Rural Services Australia Limited [2023] FedCFamC2G 988 (1 November 2023)