High Court confirms paid personal/carer’s leave accrual should be ‘business as usual’

Limelight Articles

Limelight 08/20

High Court confirms paid personal/carer’s leave accrual should be ‘business as usual’

Authors, Joel Zyngier , Lily Connell

The High Court of Australia has allowed an appeal in the matter of Mondelez Australia Pty Ltd v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union; Minister for Jobs and Industrial Relations v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union [2020] HCA 29[1]

The case concerned the calculation of an employee’s paid personal/carer’s leave under section 96(1) of the Fair Work Act 2009 (Cth) (FW Act), The case has confirmed that employers should calculate paid personal/carer’s leave based on an employee’s ordinary hours of work over a two-week period.

Under section 96(1) of the FW Act, an employee is entitled to 10 days of paid personal/carer’s leave for each year of their employment. The case was about whether a ‘day’ of paid leave means a worker’s ordinary working day – their full hours of work – or a ‘notional’ day, that is, a standard working day. The outcome of the case was highly anticipated, as the interpretation of the word ‘day’ in this section of the FW Act would affect the amount of paid personal/carer’s leave employees would be entitled to and in some cases result in employers having to pay employees more.

The Australian Manufacturing Workers Union in Mondelez argued that under this section, a ‘day’ of paid leave means a ‘working day’ and therefore, two of Mondelez’s employees who worked an average of 3 x 12-hour shift per week (a total of 36 ordinary hours per week) were entitled to calculate their personal/carer’s leave based on the amount of hours they worked per day.

If this was accepted, the employees would have been entitled to 10 x 12-hour days of paid personal/carer’s leave per year or 120 hours, despite working 36 hours per week. By contrast, employees who also worked 36 hours per week but over a 5 day week of 7.2 hours per day would only be entitled to 10 x 7.2 hour days of paid personal/carer’s leave per year or 72 hours. This would mean that there would have been a disparity in employee’s paid leave despite working the same amount hours per week, further, some part-time employees would be entitled to the same or sometimes more paid leave than full-time employees.

The High Court disagreed with the AMWU’s argument and held that interpreting a ‘day’ under section 96(1) to mean a ‘working day’ would create unfairness and uncertainty due to employees having different work patterns.

The High Court instead held that a ‘notional day’ was the correct interpretation of a ‘day’ under section 96(1). It made a declaration that:

’10 days’ in the FW Act means an amount of paid personal/carer’s leave accruing for every year of service equivalent to an employee’s ordinary hours of work over a two-week period, or 1/26^th of the employee’s ordinary hours of work in a year; and
a ‘day’ refers to a ‘notional day’, which consists of 1/10^th of the equivalent of an employee’s ordinary hours of work over a two-week period.

Implications

Employers which reviewed their payroll systems and amended their calculation of paid personal/carer’s leave of their employees to comply with the Full Federal Courts decision should return to calculating paid personal/carer’s leave based on an employee’s ordinary hours of work over a two-week period. For all other employers, it’s business as usual.

[1] See our assessment of the Full Court of the Federal Court’s decision.

Joel Zyngier Principal , Melbourne Direct: +61 3 9611 8812 jzyngier@gclegal.com.au

This publication constitutes a summary of the information of the subject matter covered. This information is not intended to be nor should it be relied upon as legal or any other type of professional advice. For further information in relation to this subject matter please contact the author.