The Australian Federal Court has recently upheld a ruling that two fly in-fly out (FIFO) employees who were made redundant were entitled to be paid accrued annual leave entitlements on termination despite being covered by an ‘all-in’ or “rolled-up” rate of pay.

The employer provided refrigeration and electrical maintenance services in a remote and relatively inhospitable location in the Northern Territory of Australia.  Like many others, the two employees would fly in to work on site for two or three weeks at a time for 12 hours a day before flying back out for an equivalent period of rest and recreation back “in civilisation” (hence FIFO). 

Under the relevant Industrial Award (agreement) the employees were entitled to accrued annual leave payments on the termination of employment.  The question before the Court was whether the employment agreements between the employer and employees provided for an ‘all-in’ rate of pay which included that entitlement. The Court held that the answer to that question was ‘no’. 

It decided that whilst the contract of employment made specific reference to ‘the flat hourly rate’ for FIFO employees and stated that rate to be inclusive of all allowances including overtime penalty rates, 20% loading in respect of annual leave, sick days, rostered days off and public holidays, there was nothing that referred specifically to the pro-rata payment of annual leave entitlements on termination in the ‘all-in’ hourly rate.

The Court commented that one could easily understand, given the remote location of its business, that the employer would not wish its employees to take unscheduled leave as it could interfere with the operational requirements of the business and availability of staff.  However, it would have been easy for the employer to ensure the FIFO employees were not entitled to pay in lieu of accrued annual leave entitlements by expressly including those entitlements in the ‘all-in’ contract rate.  The Court held that because the entitlement was not clearly stated to be excluded the employees were still entitled to be paid accrued annual leave entitlements on termination. 

The moral of the tale? – that precision and clarity of drafting, especially around excluding matters otherwise covered by Industrial Awards, is key.