Annual leave loading on untaken leave?

There is a live issue about whether or not annual leave loadings are payable on top of a payment for untaken annual leave when an employee’s termination pay is calculated. The question was indirectly raised in proceedings before the Fair Work Commission (or FWA as it was then known) in 2012 ((2012) FWA 2408) when a Commissioner decided that the inclusion of a provision in an enterprise agreement to the express effect that annual leave loading was not payable upon termination pay for unused leave did not breach s.55 of the Fair Work Act as a contravention of the National Employment Standards.

However the Fair Work Ombudsman’s website contains the following statement;

“If an employee is entitled to annual leave and annual leave loading, then they must be paid out for both entitlements if their employment is terminated. This applies even if a clause in a modern award, agreement or contract expressly states that either entitlement is not payable.

“This entitlement is based on the annual leave on termination provision in s.90(2) of the Fair Work Act 2009 which provides that a terminated employee (sic) with a period of untaken annual leave must be paid what they would have been paid if they had taken that period of leave. This section is part of the National Employment Standards so it cannot be excluded by any term in a modern award, agreement or other instrument that may provide for a lesser benefit.”

Who is right in the debate remains to be resolved.