How do FIFO workers accrue annual leave and personal leave? CEPU v Simpec Pty Ltd [2025] FCA 470

By Stephen Kemp Nicholas Parkinson

9 June 2025

In its recent decision in Communications Electrical Electronic Energy Information Postal Plumbing and Allied Services Union of Australia v Simpec Pty Ltd (Liability) [2025] FCA 470 (Simpec) the Federal Court of Australia has ruled that fly-in, fly-out employees employed on a full-time basis may not accrue annual leave and personal leave at the usual rate.

The decision clarifies how leave accrues for workers employed on FIFO arrangements and gives (a degree of) certainty to employers and contractors in the resource sector. However, it also highlights how employment arrangements that may reduce employees’ entitlements may be scrutinised by courts and tribunals.

Facts

SIMPEC was contracted to perform work on the Iron Bridge Project and employed communications technicians and electricians on a full-time basis. Those employees were covered by an enterprise agreement – the SIMPEC Pty Ltd Enterprise Agreement 2019 – and worked a roster of 21 days on, 7 days off, with each employee working 152 hours across the swing. Of those total hours, 114 hours (being 38 hours per week) were paid as ordinary hours and all hours above 114 hours were paid as overtime. During the off-swing, employees were required to take unpaid authorised leave as rest and recreation leave (R&R leave). This rostering arrangement was expressly authorised by the Enterprise Agreement.

During the project an issue arose as to SIMPEC’s calculations of employees’ leave entitlements. SIMPEC calculated employees’ annual leave and personal leave entitlements on the basis that they worked 114 ordinary hours each swing and did not include hours taken as R&R leave as counting towards the accrual of leave. That meant full-time employees working this roster did not accrue a year’s leave entitlements (4 weeks of annual leave and 10 days of personal leave) over a 12-month period because every fourth week did not count towards their leave accruals.

The CEPU (the Union) disputed this position and brought proceedings against SIMPEC in the Federal Court of Australia alleging that SIMPEC had not provided employees with their full leave entitlements. The CEPU argued that on the proper interpretation of the Enterprise Agreement, employees accrued annual leave and personal leave based on working 152 ordinary hours for each swing- that is, that the roster compressed 4 weeks of ordinary hours into 3 weeks on the on-swing and a full-time employee working the roster would accrue a year’s leave entitlements every 12 months. SIMPEC defended its position as being compliant with the Enterprise Agreement and the Fair Work Act 2009 and the matter went to a final hearing.

Decision

In the Federal Court, Justice Colvin’s decision turned on the proper interpretation of specific terms of the Enterprise Agreement. The Enterprise Agreement provided, in summary¹ :

• a ‘full-time employee’ was an employee who worked an average of 38 hours per week: cl 5.2;
• ordinary hours would not exceed an average of 38 hours per week: cl 8.1,
• no more than 8 ordinary hours would be worked in any one day: cl 8.2;
• ordinary hours would be worked between 6.00am and 6.00pm, Monday to Friday: cl 8.3;
• work done outside of ordinary hours would be paid at ordinary rates: cl 8.4;
• employees could be required to work a reasonable amount of overtime: cl 9.1;
• employees “may be required to work a system of works that includes Rest and Recreation Leave (R&R)” consisting of unpaid authorised leave, RDOs and paid leave: cl 12;
• annual leave and personal leave were provided for in the National Employment Standards in the FW Act: cl 15, 16.

Justice Colvin noted, and it was common ground between SIMPEC and the Union, that under the FW Act annual leave and personal leave accrue progressively during a year of service according to the employee’s ordinary hours of work. Justice Colvin reasoned that as unpaid authorised absences do not count as ‘service’ under the FW Act, ordinary hours that would have otherwise been worked in unpaid unauthorised absences do not count towards the accrual of annual leave or personal leave under the FW Act.²

The Court considered that the real dispute between SIMPEC and the Union was how to interpret the Enterprise Agreement and assess the ordinary hours worked by full-time employees in the roster cycle of 21 days on, 7 days off.³

Justice Colvin described SIMPEC’s argument as allowing it to use cl 12 as a roster flexibility clause to specify a roster pattern or ‘system of works’ that would reduce the annual and personal leave entitlements of full-time employees to that of a part-time employee working 75% full-time hours.⁴

His Honour found SIMPEC’s interpretation of cl 12 was ‘legally correct’ and supported by the broader context of the Enterprise Agreement.⁵ In particular, Justice Colvin noted that cl 12 did not “provide for any consequential adjustment to entitlements” if an employee was required to work R&R leave and cl 12 did not contain any language to suggest that it could be used to adjust or alter the provisions of the Enterprise Agreement regarding ordinary hours.⁶

Further, it was fatal to the Union’s argument if employees were deemed to work 152 ordinary hours in a 21 day on-swing, as the Union argued, those ordinary hours would include hours in excess of 8 hours in a day (contrary to cl 8.2 of the Enterprise Agreement) and outside the span of hours of 6.00am to 6.00pm, Monday to Friday (contrary to cl 8.3 of the Enterprise Agreement).⁷ Given the Union maintained that employees had been paid overtime correctly⁸, the Union was effectively seeking to have the same hours counted as ordinary hours for the purposes of leave accruals and as overtime hours for the purposes of pay.⁹

His Honour was plainly concerned by this conclusion, noting that employees accrued 75% of the leave that it was contemplated that a full-time employee would accrue¹⁰ and that this outcome was possible without the Enterprise Agreement expressly warning employees of this result.¹¹ However, his Honour did acknowledge that employees were paid many more hours at overtime rates under this roster system, which was an “off-setting benefit” to the loss of leave entitlements.¹²

Takeaways

Simpec is a timely reminder that employees only accrue hours on their ‘ordinary’ hours of work and do not usually accrue leave based on the overtime they work, even if they are regularly rostered to work overtime. Simpec also illustrates how this rule applies in the context of FIFO employment and demonstrates that employers can effectively (and lawfully) minimise the leave accruals of employees employed on a FIFO basis. However, implicit in the decision is a warning that employers should be careful to ensure that their enterprise agreements, employment contracts and other policy documents are carefully drafted.

The Court in Simpec, while finding the employer’s position was “legally correct”, was plainly uncomfortable in upholding an interpretation that reduced full-time employees’ leave entitlements. Where claims are brought by affected employees or unions in these circumstances, employers can reasonably expect that courts and tribunals will closely scrutinise the terms of their enterprise agreements and employment contracts to test how those arrangements interact with the FW Act. If that occurs, the precise drafting of enterprise agreements and employment contracts will be critical. Poorly or loosely drafted clauses may result in the Court or tribunal concluding that employees’ accrued leave has not been calculated correctly and result in findings that employers have contravened the FW Act, with pecuniary penalties being imposed.

While the Court in Simpec only considered the accrual of annual and personal leave, the decision potentially has implications for all other employment entitlements for FIFO employees based on their length of service, including notices of termination¹³, redundancy pay¹⁴, long service leave¹⁵ and eligibility to bring an unfair dismissal claim.¹⁶

By way of example, an employee of a business with 15 or more employees is protected from unfair dismissal if, amongst other things, they have 6 months’ “service”.¹⁷ However, the R&R leave taken by an employee subject to the rostering arrangements and Enterprise Agreement in Simpec does not count towards that employee’s period of service. If such an employee took 1 week of R&R leave for every 4 weeks of their employment, that employee would need to be employed for 8 months to have 6 months’ service and therefore be protected from unfair dismissal.

It remains to be seen whether the decision in Simpec will be appealed to the Full Court of the Federal Court and result in the Fair Work Commission more closely scrutinising proposed enterprise agreements that may result in employees accruing lesser amounts of annual leave and personal leave. It also remains to be seen whether the decision may prompt legislative amendments in light of the Albanese Government’s recent re-election and the Government’s track record of delivering pro-union/pro-employee industrial relations policies.

Our Employment team is able to provide advice on all aspects of employment law and industrial relations, including the negotiation and drafting of enterprise agreements, advice on compliance with the FW Act and disputes with employees and unions.

If you would like any further information regarding FIFO employment arrangements or industrial relations issues, please contact Stephen Kemp, Head of Employment Law, and Nicholas Parkinson, Senior Associate.

 

1. Simpec [2025] FCA 470 [18]-[40].
2. Ibid [46]-[60].
3. Ibid [69]-[71].
4. Ibid [78].
5. Ibid [79].
6. Ibid [79](8), [80]-[84].
7. Ibid [83].
8. Ibid [5].
9. Ibid [85].
10. Ibid [87].
11. Ibid [78].
12. Ibid [88].
13. s 117(3) FW Act.
14. s 119(2) FW Act
15. ss 6(1), 6A(1)(a), 6A(2)(a), 8(1) Long Service Leave Act 1958 WA).
16. ss 380-382 FW Act.
17. ss 380-382 FW Act.

Disclaimer: The information published in this article is of a general nature and should not be construed as legal advice. Whilst we aim to provide timely, relevant and accurate information, the law may change and circumstances may differ. You should not therefore act in reliance on it without first obtaining specific legal advice.