Labour hire company liable for withholding long service leave

The decision was a critical reminder that employers must heed their obligations to workers, casual and contract included, according to the:

• Civil Procedure Act 2005 (NSW)
• Fair Work Act 2009 (Cth)
• Interpretation Act 1987 (NSW)
• Long Service Leave Act 1995 (NSW)

Alexandra Shields, Partner at Norton Rose Fulbright, points out that NSW long service leave (LSL) entitlements – including coverage, qualifying thresholds, pro rata payment triggers, and “ordinary pay” averaging – are anchored in section 4 and the defined terms of the Long Service Leave Act 1955 (NSW) (Act). Relevant to labour hire, we must consider what constitutes “continuous service”, which is set out in section 4(11), and an employer’s obligations to pay accrued but unused long service leave on termination, as set out in section 4(5).

She says, “NSW case law confirms that casuals with requisite continuous service accrue LSL under the Act and that this cannot be contracted out of (contracting out is overridden by the Act).”

Importantly, record keeping and offence provisions (including potential liability for officers) support enforcement, highlighting the importance of robust LSL ledgers, especially when staff move between hosts or employers.

Shields says, “LSL under the Act should be distinguished from industry portable schemes (e.g., building and construction; contract cleaning) which operate alongside the general LSL Act with distinct coverage and credit mechanics, relevant for ‘contractor heavy’ sectors.”

As for any confusion on the behalf of national operations, Shields says, “LSL is a state-based entitlement and multi state employers should map jurisdiction specific statutes.”

In relation to the NSW IRC’s decision in United Workers’ Union v Allstaff Australia Sydney Pty Ltd [2026] NSWIC 39, it is the second case in two years in which the same company has been found guilty of denying casual staff their long service leave entitlements. The Victorian ruling in May 2024 followed an investigation by the Wage Inspectorate Victoria in November 2021, after reports were received from former employees alleging their long service leave entitlements had not been paid. Allstaff Australia RJE Pty Ltd pleaded guilty to failing to pay five casual employees more than $32,000 in outstanding long service leave entitlements on the day their employment ended.

Allstaff was fined $15,500 without conviction upon pleading guilty. In sentencing, his Honour Magistrate Sonnet noted that had it not been for the early guilty plea, he would have imposed a fine of $30,000.

Nonetheless, a similar contravention of its obligations to workers took place in NSW according to the most recent guilty finding of the Industrial Relations Commission of NSW. On 27 July this year, Justice Jane Paingakulam found Allstaff was liable for paying long service leave to 13 employees who were pick-packers at Woolworths, employed by Allstaff Australia. Allstaff ended their contracts when Woolworths switched to a new provider. When the workers accepted jobs with the new labour provider Woolworths switched its contract to a new labour hire agency, Allstaff denied the workers their long service leave entitlements, which Justice Paingakulam held Allstaff liable to pay.

Shields says, “In the decision, the NSW IRC found Allstaff liable to pay LSL (or its monetary value on termination) to 13 workers it had deployed to Woolworths and held that neither casual status nor a subsequent transfer to another labour hire provider extinguished those rights.”

This decision turned on the question of “continuous service” and under the Act, that expressly includes casual service under one or more contracts, and provides for payment on termination where leave has been accrued but not taken.

Shields explains, “Given the reading of the NSW Act, the decision is not surprising. It aligns wholly with the Act. However, LSL is a state-based entitlement, and each state has its own LSL legislation with different mechanics and definitions in respect of what constitutes service and when untaken leave is paid on termination. Therefore, any comparison to the specific Victorian Allstaff decisions would turn on the facts of those cases and the interpretation of the Victorian Long Service Leave Act 2018.”

Establishing leave and other entitlements for workers differs around the nation

Whilst the Fair Work Act 2009 (Cth) refers to long service leave as one of the National Employment Standards, long service leave is one of the very few private sector employee entitlements governed by state-based legislation.

Shields says, “Each state and territory has its own long service leave legislation and core features differ materially from state to state. This includes qualifying periods, pro‑rata conditions, how casual service is treated, and calculation methods vary—which creates complexity for national employers operating across Australian borders.”

Shields explains that NSW recognises LSL based on “continuous service … whether on a permanent, casual, part‑time or any other basis,” with detailed deeming rules that preserve continuity despite certain breaks and with records/penalties provisions for compliance. Queensland, South Australia, and Tasmania each legislate their own schemes (and some jurisdictions also run industry portable schemes), so multi‑state labour hire arrangements must map entitlements by jurisdiction rather than assume uniform treatment. 

She says, “In NSW, casuals can qualify for LSL if they satisfy the statutory “continuous service” tests. This means that they may be eligible to take LSL or to have it paid in lieu on termination, subject to the criteria prescribed by the Act.”

LSL is calculated at “ordinary pay,” which has a statutory definition under the Act and averaging rules (which can look at 12‑month, five year, or entire period bases and address how bonuses/allowances are treated). Shields explains that this assessment is further supported by NSW case law, particularly in respect of bonuses and/or allowances that are counted in the assessment of ordinary pay.

She says, “Independent contractors are generally outside the NSW LSL Act as it applies to employees, though certain industries have separate portable schemes with coverage definitions that can include subcontract workers, such as those working in building and construction or contract cleaning.”

Conditions where LSL may not be paid

Shields says, “Reasons why employees would not be paid LSL on termination of employment in NSW include failing to have been employed for more than 10 years, and, for pro‑rata payments where an employee has completed more than five years but less than 10 years, employees are only entitled to the payment if they are terminated.”

As she explains, in NSW, individuals are only entitled to a payment in lieu of accrued but unused long service leave when they have completed more than five, but less than 10, years of service in the following circumstances:

• Employment is terminated by the employer for any reason except serious misconduct;
• Resignation from employment because of illness, injury, incapacity or “domestic or pressing necessity”.

Shields says, “It is this last phrase which has been debated the most – what constitutes a ‘domestic or pressing necessity’ such that even though you resigned, you are still entitled to your LSL.”

This stems from a lack of definition for “domestic or pressing necessity” in the Act.

But, Shields says, “it is commonly understood that if you resign because of personal, childcare, parental care, family reasons – for example, you are moving cities to be closer to aging parents even if you are not looking after them – then you would be entitled to a pro-rata payment for your accrued but unused long service leave.”

If an individual resigned to commence working with a competitor, they would not.

“Transmission” argument did not excuse Allstaff’s liability

Shields says, “The NSW decision against Allstaff confirms that the labour hire employer of record remains liable to pay any accrued LSL on termination with that employer, and that a ‘transmission’ argument did not displace the obligation to pay out the accrued entitlement at the end of Allstaff’s employment relationship.”

Shields explains that continuity concepts in transmission protect service records prospectively but do not cancel the outgoing employer’s duty to pay untaken LSL on cessation with it.

She says, “That approach coheres with the LSL Act’s structure: s 4 sets entitlements and s 4(5) requires the employer to pay ordinary pay for untaken LSL on termination, while related continuity provisions deal with service recognition rather than extinguishment of the outgoing employer’s liability.”

Under NSW law, “service” means “continuous service,” expressly covering permanent, part‑time and casual arrangements under one or more contracts; certain interruptions do not break continuity (e.g., illness, employer‑initiated standing down, certain absences by leave), though interrupted periods often don’t count as time served for accrual calculations unless specifically included, according to Shields.

She says, “The statutory evolution in NSW, notably the 1985 amendments, was designed to overcome the old rule that casuals lacked an unbroken contract and thus recognise long‑term, regular casual engagement for LSL purposes, and NSW case law has reiterated that casuals who meet the continuity tests accrue LSL under the Act.”

Shift patterns and variable hours feed into the “ordinary pay” averaging framework when leave is taken or paid out on termination, as reflected in NSW decisions applying the Act’s averaging rules.

A claims timeframe

According to Shields, claims to recover unpaid LSL can be brought in the NSW Industrial Relations Commission (or Industrial Court) under provisions used in the Allstaff case (declaration of contravention and orders for compensation under the LSL Act, with further hearing on quantum and costs. Monetary recovery claims are subject to the same limitation period as entitlements under the Fair Work Act, being six years from the date on which the entitlement was payable (not when it accrued). This is set out in section 12 of the LSL Act.

“A claim under the NSW LSL Act is not a ‘cost free’ jurisdiction and therefore costs can be awarded in the ordinary course,” she adds.

Labour hire firms must comply with relevant legislation

The Allstaff judgment reflects practical compliance risks for labour hire firms around LSL—particularly casual recognition, the effect of service continuity deeming provisions, and the inability to contract out of statutory entitlements—while the Court also noted record‑keeping issues are relevant in related contexts under the LSL Act.

Shields says, “Labour hire in industries which have portable long service leave schemes are not bound by the same obligations in respect of their workers, but for industries where there is no portable LSL available they need to be mindful that they are the ultimate employer.”

She tells LSJ Online that separate NSW Industrial Court matters show broader underpayment/records‑keeping problems with leave and wage entitlements being litigated, which reinforces that enforcement risk is real for employers who misapply statutory obligations.

“Overall, the NSW framework is clear on LSL continuity and payout; the recurring issue is compliance discipline, particularly for multi‑site, variable‑hours labour hire workforces.” 

In the Allstaff decision, the Court emphasised compensation, with pecuniary aspects and costs listed for further hearing rather than fixed in the judgment itself.

Shields reflects, “We are seeing larger penalties in the Federal Court where there are breaches of the Fair Work Act and it may be that the NSW Industrial Relations Commission (or Court) follows suit, but at this stage there is a greater focus on compensating the employees for any underpayment rather than penalising the employer.”