For some time it appeared that NSW employees on workers’ compensation did not accrue paid annual leave. Now a court has now held that they do. So all employers in NSW will have to ensure that they accrue paid annual leave for staff while they are absent from work on workers compensation – including retrospectively for past accruals.

Annual Leave Accrual During Workers Compensation

The default position under the Fair Work Act is that employees are prohibited from accruing annual leave while they are off on workers’ compensation. However, if the applicable state-based workers’ compensation legislation allows leave to be accrued, it overrides the Fair Work Act’s default position.


In NSW, the wording of the workers’ compensation legislation is unclear about whether it provides for such an override. Many employers (and legal experts) felt it did not. As a result, many employees in NSW have not been receiving these entitlements.

NSW employers will have to ensure that paid annual leave is accrued for staff while they are absent from work on workers compensation.

In NSW Nurses and Midwives’ Association v Anglican Care [2014] FCCA 2580 however, the Federal Circuit Court of Australia determined that while there was some ambiguity in the NSW legislation, it did not expressly prohibit the accrual of annual leave by an employee on workers’ compensation either. Applying a positive interpretation of the legislation’s objectives, the court therefore held that the NSW legislation does in fact override the Fair Work Act’s default position.

So now, unless the position is ever revisited by a higher court, the uncertainty in the NSW legislation has been removed. NSW employers will need to ensure they accrue leave for their staff on workers’ compensation moving forward – and restore the balances of employees to whom this applied in the past.

Other States & Territories

As workers compensation legislation is state-based, the position will differ in other states so you should seek specific workplace advice.