"Mum's the word – and so is Dad": The ABC's of Parental Leave

Scullin v Coffey Projects (Australia) [2015] FCCA 1514 & 1602

WHAT YOU NEED TO KNOW

• A period of unpaid parental leave is a right to which employees – not just mothers or primary carers – are entitled to under the Fair Work Act 2009 (Cth). If an employee meets the other eligibility criteria set out in the National Employment Standards, then the employer must allow the employee to take a period of unpaid parental leave associated with the birth or adoption of their child.
• Under the NES, an employee who takes unpaid parental leave is entitled to return to the same position they had before going on leave, or if that position no longer exists, to an available position for which the employee is qualified and suited which is nearest in status and pay to the former positon.
• A recent case has demonstrated that employers must be careful not to rely on internal policies which deny employees their statutory entitlements. The company in that case was found to have breached the NES and the employee's contract of employment. The Judge ordered the company to pay the employee a large amount of compensation for salary and redundancy payments which would have flowed to the employee had he been allowed to take unpaid parental leave under the NES and had his right to return to the same position been protected.
• The Fair Work Act 2009 (Cth) does not give employees a right to paid parental leave. Employers may choose to offer payment for some or all of a period of parental leave. Currently, eligible employees may access employer-funded paid parental leave at the same time as they access the Commonwealth Government's Parental Leave Pay.
• Parental Leave Pay is a benefit payable by the Commonwealth Government to eligible employees. It is not the source of a separate leave entitlement. It is available to a narrower group of people than the NES in that Parental Leave Pay is usually only available to a primary carer.
• A new Commonwealth Government policy, proposed as part of the 2015 Budget, would prevent employees from accessing the full benefit of Parental Leave Pay if any parental leave payment from their employer matches or exceeds that payable under the Government's scheme. It is unclear whether these proposed "anti-double dipping" changes will pass through the Senate but if they do, the changes are currently proposed to apply to any child born or adopted on or after 1 July 2016.

WHAT YOU NEED TO DO

• When considering a request for parental leave, an employer should check the source(s) of the employee's entitlement to take that leave: does the employee meet the eligibility criteria for unpaid parental leave under the NES, or under an internal policy if that is more generous?
• Employers should audit their policies for compliance with relevant legislation. This Alert suggests some of the "red flags" which might be found in an outdated and non-compliant parental leave policy (such as a policy making a distinction between maternity and paternity leave).
• Stay abreast of the status of the proposed changes to the Commonwealth Government's Parental Leave Pay, and consider your options in response if the proposal becomes law.

The ABC's of parental leave

The National Employment Standards entitle most Australian employees to 12 months' unpaid parental leave provided that:

• the leave is associated with the birth or adoption of a child of the employee;
• the employee meets the minimum service requirement (12 months service before the date or expected date of the child's birth or adoption); and
• the employee has, or will have, "a responsibility for care of the child".

Each eligible member of an employee couple may take a separate period of up to 12 months of unpaid parental leave. An ‘employee couple’ is where two employees (not necessarily of the same employer) are in a spousal or de facto relationship.

Employees also have the right to request a further 12 months of unpaid parental leave. However, an employer is not obliged to grant that request.

Casual employees may also access unpaid parental leave, so long as they have been working for their employer on a regular and systematic basis for at least 12 months, and would have had a reasonable expectation of continuing work with the employer on a regular and systematic basis, had it not been for the birth or adoption of a child.

The entitlement to take parental leave is a "workplace right" under the Act. Any adverse action taken by an employer against an employee because they have an entitlement to parental leave will be unlawful.

Return to work guarantee

The NES also contains an entitlement for an employee to return at the end of their unpaid parental leave to:

• their pre-parental leave position; or
• if that position no longer exists, to an available position for which the employee is qualified and suited nearest in status and pay to the preparental leave position.

The issue of what happens when an employee's position becomes redundant while they are on parental leave was considered in our Employment Alert dated 26 June 2014.

The pitfalls of policies

A recent decision in the Federal Circuit Court shows how employers can expose themselves to penalties and compensation orders by following their own policies if those policies are less generous than the NES.

Is a father entitled to unpaid parental leave?

In Scullin v Coffey Projects (Australia) [2015] FCCA 1514, the employee's wife gave birth to twins and the employee requested 12 months' parental leave to assist with their care. The company rejected that request, but allowed the employee to take a mixture of other paid and unpaid leave. When the employee returned to work after 12 months, the company offered him part time work only. A year later, the company dismissed the employee on the grounds of redundancy.

The employee brought proceedings alleging that the company:

• took adverse action against him because he had workplace rights and family responsibilities to care for his twins;
• recklessly made false or misleading statements about his workplace rights in contravention of the Act;
• contravened the NES; and
• breached his contract of employment.

NES, not policy, reflects minimum entitlements

Judge Turner did not accept that the employer had taken adverse action or had recklessly made false and misleading statements, but found that the employer had breached the NES by not allowing the employee to take unpaid parental leave.

The company's policy required an applicant for parental leave to be the "primary carer" of a child. The NES contains no such requirement.

Judge Turner found that:

• by denying the employee the leave to which he was entitled under the NES, the company had both contravened the NES and repudiated the employee's contract;
• by allocating only part-time work after the employee's return from leave (whereas had he been granted unpaid parental leave, his return to his full time position would have been protected), the company had caused the employee's loss of being denied the right to return to his full-time position when his leave finished; and
• when redundancies occurred, the employee lost the chance of receiving a redundancy package calculated at his full time, rather than part time, salary.

The company was ordered to pay to the employee:

• the difference between his part-time and full-time salary from the date he returned from leave until his employment was terminated;
• an amount on account of additional annual leave the employee should have received had he worked full time; and
• an additional amount on account of severance pay being the difference between what he would have received as a full time employee less what he was actually paid for severance pay as a part time employee.

This came to a total of $169,347.24 (less tax).

In a separate decision, the company was also ordered to pay a penalty of $8,250 (25% of the maximum penalty) to the employee for its contravention of the NES.

Implications for unpaid parental leave policies

The Coffey case shows how important it is that employers stay up to date about employees' legal entitlements. Policies which are inaccurate or out of date risk may cause an employer to breach their statutory obligations. In this case, while the company's reliance on policies approved by Human Resources shielded it from the reckless misrepresentation claim, it did not protect the company from a finding that it had breached the NES.

Importantly, in Coffey, Judge Turner rejected the company's argument that the company could not be in breach of the NES unless it denied an actual request from the employee.

Employers should regularly check their policies for compliance with legislation. In parental leave policies, "red flags" to watch out for include:

• A requirement that the person taking parental leave must be the "primary carer". The Coffey case makes clear that even if this requirement appears in a policy whether by mistake or negligence, it will still constitute a contravention of the NES;
• References to "maternity leave" and "paternity leave". The NES uses the term "parental leave" to describe maternity leave, paternity leave and adoption leave. While there are some differences between when and how mothers, fathers and partners of parents take their leave, their basic entitlements are the same;
• A policy which does not give any leave entitlements to adoptive parents. The rights in the NES apply equally to people who become parents by adoption;
• No requirement of a written response to a request for an extension of unpaid parental leave for a further period of up to 12 months. The Act requires that an employer provide a response to such a request in writing within 21 days, and, if the request is refused, provide details of the reasons for the refusal; and
• No guarantee that a person can return to their position, or if that position no longer exists, an available position for which the employee is qualified and suited nearest in status and pay to the pre-parental leave position, as required by the NES.

Paid parental leave

The NES does not contain an entitlement to paid parental leave. There are generally two sources of entitlement to paid parental leave; discretionary employer paid parental leave, and the Commonwealth Government's Parental Leave Pay.

The Commonwealth Government offers eligible parents financial support of up to 18 weeks through the Parental Leave Pay scheme. This scheme does not create an additional entitlement to leave. Rather, it entitles eligible employees to a total of $11,500 (being 18 weeks' of the minimum wage) to be taken during the time that a parent accesses paid or unpaid parental leave from their employer.

To be eligible for Parental Leave Pay a person must:

• earn less than $150,000;
• be the primary carer of a newborn or recently adopted child;
• meet the "work test", which requires the person to have worked at least one day per week for at least 10 of the 13 months before the child's birth; and
• be on leave or not working during the period they receive Parental Leave Pay.

Currently, a parent can receive the Government's Parental Leave Pay and any payment for parental leave offered by their employer. This may change in July 2016. In its May 2015 Budget, the Commonwealth Government announced plans to make changes to eligibility for Parental Leave Pay.

The Government proposes that instead of allowing employees to access the full value of both Parental Leave Pay and any paid leave offered by their employer, employees will only be able to claim Parental Leave Pay from the Government if their employer pays a total amount of pay for parental leave which is less than that paid under the Government's scheme. The Government will "top up" the pay given by an employer, but will not duplicate it.

If a person's employer pays more than the Government's rate, they will not receive any of the Government Parental Leave Pay. Conversely, if a person's employer does not offer paid parental leave, they will be able to receive the full rate of Parental Leave Pay, subject to meeting the other eligibility requirements.

Details of the Government's proposed changes are yet to be announced. In particular, it is not clear whether accessing any other employer benefits (such as a oneoff bonus) will prevent a person accessing the Government's Parental Leave Pay.

It is unclear whether these proposed "anti-double dipping" changes will pass through the Senate but if they do, the changes are currently proposed to apply to any child born or adopted on or after 1 July 2016. Employers will have to wait to see the details of the Government's proposed changes, and indeed whether the changes are passed into law, before preparing a response. If the changes become law, there will be a reduced incentive for some employers to offer paid parental leave to employees who would otherwise be eligible to receive the Government's Parental Leave Pay.

It may be that some employers may look to offer different benefits to different groups of employees based on eligibility for the Government's Parental Leave Pay. Depending on how the new law is drafted (if enacted), some employers may wish to provide a benefit in another form to some employees, such as a bonus or in kind payment.

Even if the changes become law, employer provided parental leave pay need not change for employees who are not eligible for any payment under the Government's Parental Leave Pay (such as those who earn over $150,000).