19 August 2020
In a win for employers, the High Court of Australia has allowed an appeal from the Full Federal Court judgment in Mondelez Australia Pty Ltd v AMWU & Ors  HCA 29 (Mondelez decision) concerning how the entitlement to paid personal/carer's leave is calculated under section 96(1) of the Fair Work Act 2009 (Cth) (Act).
Full Federal Court decision
The Full Federal Court assessed the National Employment Standard of ten paid personal/carer’s days as “working days”, meaning the hours allotted to work in a 24-hour period.
As a result, Mondelez Australia Pty Ltd (Mondelez) shift workers were found to be entitled to ten 12-hour days of paid personal/carer's leave, rather than ten shifts of 7.6 hours. The decision was a significant departure from the general understanding of leave entitlement accruals, resulting in potentially substantial repercussions for employers including underpayments and uncertainty around calculating other leave.
High Court decision
Mondelez, with the support of Attorney-General of Australia and Minister for Industrial Relations, the Hon Christian Porter MP, brought the appeal against the Full Court decision.
The majority of the High Court (Chief Justice Kiefel and Justices Nettle and Gordon) rejected the "working day" construction and held that what is meant by a "day" or "10 days" must be calculated by reference to an employee's ordinary hours of work. "10 days" in section 96(1) of the Act was found to be two standard five-day working weeks. One "day" refers to a "notional day" that consists of one-tenth of the equivalent of an employee's ordinary hours of work in a two-week period. Because patterns of work do not always follow two-week cycles, the entitlement to "10 days" of paid personal/carer's leave is to be calculated as 1/26th of an employee's ordinary hours of work in a year.
The majority noted the "working day" construction adopted by the Full Court "is not consistent with the purpose of section 96 or the stated objectives of the Act of fairness, flexibility, certainty and stability". The High Court decision is welcomed by employers, particularly those with shift workers and employees with irregular patterns of work.
As a consequence of the decision, the Fair Work Ombudsman has updated its advice and will address the need to update the Fair Work Information Statement.
What this means for calculating personal/carer’s leave entitlements
The Mondelez decision is concerned with the minimum paid personal/carer’s leave entitlements provided in the Act. Employers will still need to manage leave accrual and taking of leave in accordance with relevant terms in applicable awards, employment contracts and enterprise agreements. However, if those terms afford employees less beneficial entitlements than the Act’s provisions, the employer will need to comply with the latter to avoid civil liability.
So what does this case say about the key aspects of paid personal/carer’s leave entitlements?
Over a year of service, an employee accrues a number of hours of paid personal/carer's leave equal to the number of ordinary hours the employee works in a two-week period. This is the case, regardless of whether their ordinary hours over this two-week period are worked across ten, six, or five days. If the employee’s ordinary hours in a two-week period vary because of their working patterns, the entitlement is 1/26th of the number of ordinary hours the employee works in a year.
When a day of personal/carer’s leave is taken, the employee is paid the amount they would have been paid if they worked a number of ordinary hours equal to 1/10th of the ordinary hours the employee would have worked in a two‑week period (or if the employee’s ordinary hours in a two-week period vary because of their working patterns, 1/260th of the ordinary hours the employee would have worked in a year).
The timing and number of hours or days of leave taken do not affect this payment. All employees working the same number of ordinary hours in a year are to be paid the same for a day of leave, regardless of whether their ordinary hours over a two-week period are worked across ten, six, or five days in that period.
Paid personal/carer’s leave must not be cashed out except in accordance with cashing out terms included in a modern award or enterprise agreement (or section 94 of the Act for award and agreement-free employees) where it will be based on ordinary hours as calculated above.
Deduction of leave when taken
When a day of personal/carer’s leave is taken, the employee’s accrued entitlement is reduced by the actual number of ordinary hours the employee would have worked on that day. This means in some cases, because of the employee’s pattern of work or distribution of hours, the paid personal/carer's leave entitlement will not entitle the employee to be absent without loss of pay on ten working days per year.
The same principles apply to the entitlement to paid annual leave under s 87(1) of the Act. However, the Act’s provisions dealing with unpaid pre-adoption leave, unpaid carer's leave, compassionate leave, and unpaid family and domestic violence leave are different. In respect of these entitlements, a "day" is not calculated according to an employee's ordinary hours of work. Rather, they authorise an absence for the portion of the 24-hour period that would otherwise be allocated to working.
The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this newsletter is accurate at the date it is received or that it will continue to be accurate in the future.