Long service leave: What counts as ‘continuous employment’?

In previous weeks the Chamber explored portable LSL and entitlements for casual employees.

Understanding what ‘continuous service’ means is essential to correctly determining LSL entitlements under the Long Service Leave Act 2018 (Vic). LSL accrues based on time served with the same employer (unless LSL portability applies), but not all periods of service count towards LSL accrual, and not all breaks in employment break continuity.

It can be tricky to work out.

Key principles of continuous employment

The LSL Act defines continuous employment as ongoing service with the same employer, even if the nature of that employment changes over time. It applies to full-time, part-time, fixed-term, casual and seasonal employees. Breaks in service don’t always interrupt continuity if they fall within certain conditions.

Breaks that do not break service continuity

According to the LSL Act, service continues uninterrupted where:

• The break is less than 12 weeks, unless the employer can show both parties intended to end the employment permanently
• The absence is authorised (e.g. personal, parental, or annual leave or employer-approved unpaid leave)
• The absence is due to illness or injury (including WorkCover)
• The break is customary or inherent to the nature of the job – such as for school holiday camp staff who break over winter
• The employee is re-employed within 12 weeks of resignation or termination, unless there is evidence that the role was never intended to resume.

Example: An employee resigns and returns after nine weeks. Unless the employer can prove the resignation marked a permanent end, service is considered continuous.

When service may be broken

Continuity may be broken if:

• A break exceeds 12 weeks with no expectation of re-employment
• There is objective evidence that the role has ended permanently.

The threshold to prove discontinuity is high. Under section 12(3) of the Long Service Leave Act 2018 (Vic), continuity is presumed unless the employer can demonstrate otherwise with strong, contemporaneous evidence.

Note: Even long unpaid absences for personal illness or injury may preserve service if authorised, but employers should also assess whether the person can perform the inherent requirements of the role under the Fair Work Act 2009 (Cth).

Role or work type changes

Service continuity is preserved even where the employee:

• Switches between full-time, part-time or casual status
• Moves between roles or locations under the same employer.

Transfers between employers

Under the Long Service Leave Act 2018 (Vic), where an employee’s employment transfers from one employer to another, such as in a business sale, the new employer is required to recognise the transferring employee’s prior service for the purposes of long service leave entitlements. If the employee’s employment continues with the new employer without a significant break and the work performed remains substantially the same, the employee’s service is deemed continuous, and the new employer assumes responsibility for accrued LSL.

Employers should ensure this obligation is addressed clearly in sale agreements and employment contracts to prevent disputes or unintended liability.

Compliance tips for employers

• Keep accurate records of service, including breaks, approvals, and re-engagements
• Clarify the nature of any employment gaps
• Be especially careful when hiring someone back within 12 weeks – continuity is presumed.

Under the Long Service Leave Act 2018 (Vic), LSL accrues at a rate of 1/60th of the employee’s period of continuous employment, so it’s important to properly understand which service is included.

How the Victorian Chamber can help

Long service leave in Victoria is governed by state law for most employees. In some cases, employees may have access to other LSL systems or entitlements. This area of leave is often misunderstood, and it is very easy to make costly errors. The Victorian Chamber recommends seeking advice if you have any doubts.

Victorian Chamber members can contact the Workplace Relations Advice Line on 03 8662 5222 for practical advice and compliance support.

The Victorian Chamber also has a collection of more than 100 expertly designed tools and templates, including leave policies, to help inform and keep businesses compliant with obligations.