After many months of waiting, employers can breathe a sigh of relief after the High Court re-establishes the rules about calculating personal/ carer’s leave.

Background

In 2019, the Full Bench of the Federal Court (FCA) handed down its decision in Mondelēz v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union Known as the Australian Manufacturing Workers Union (AMWU) [2019] FCAFC 138.

 

The case was brought against Mondelēz (the owner of Cadbury) by the AMWU on behalf of two Cadbury shift workers in relation to personal/carer’s leave entitlements. Specifically, the dispute between the parties related to the interpretation of section 96(1) of the Fair Work Act 2009 (Cth) (“FW Act“) and whether the two 12-hour shift workers were entitled to ten 12-hour shifts of paid personal/carer’s leave per year of service. See our associated blog here for more details.

 

In the first instance, the FCA rejected Mondelēz’s argument of the ‘notional day’ (i.e. a day consisting of one-tenth of the equivalent of an employee’s ordinary hours of work in a two‑week period) and ruled in favour of the AMWU’s ‘working day’ construction in which a day refers to a portion of a 24-hour period that would otherwise be allotted to working.

 

This was a controversial decision, which was a radical departure for the status quo. This decision meant some employees would receive a greater entitlement to personal/carer’s leave than others, despite working the same hours, because the shift patterns and distribution of hours were different.

 

The Appeal

On appeal, the High Court had to consider whether the Full Bench if the Federal Court erred in their decision to accept the AMWU’s ‘working day’ construction.

Notably, in their judgement, Chief Justice Kiefel and Justices Nettle and Gordon agreed with the submissions presented by Mondelez’s and the Minister for Jobs and Industrial Relations, determining that there were significant issues with the AMWU’s construction. These issues included that the ‘working day’ construction would:

• give rise to absurd results and inequitable outcomes, and would be contrary to the legislative history;
• “lead to inequalities between employees with different work patterns, and so would be unfair“;
• give rise to scenarios where part-time employees would be entitled to up to five times more leave than full-time employees (depending on how many shifts they work per week and how many hours they work per shift);
• give rise to scenarios which would be directly contrary to a stated object in s 3 of the FW Act – “providing workplace relations laws that are fair to working Australians, are flexible for businesses, [and] promote productivity and economic growth…”;
• “not be consistent with assisting employees to balance their work and family responsibilities if the only working arrangement on offer was a five-day working week“; and
• create unfairness and uncertainty – especially when an employee needed to take a part day of leave.

The AMWU argued that the use of the notional day construction would mean that employees who work rostered overtime could be required to attend work on a day when they have provided notice they are utilising their personal/carer’s leave entitlements. This High Court rejected this claim, stating:

“it cannot be lawful and reasonable for an employer to require an employee to attend work for rostered overtime during a period where an employee has given notice of leave for that period”. 

Ultimately, the High Court has affirmed that the expression ’10 days’ in s 96(1) of 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 in a week over a two-week (fortnightly) period, or 1/26 of the employee’s ordinary hours of work in a year. A ‘day’ for the purposes of s 96(1) refers to a ‘notional day’, consisting of one‑tenth of the equivalent of an employee’s ordinary hours of work in a two-week (fortnightly) period.”

WHAT DOES THIS MEAN FOR EMPLOYERS?

This decision ensures that all employees who work the same weekly ordinary hours are entitled to receive the same number of hours of paid personal/carer’s leave each year. A standard full-time worker who works 38 ordinary hours per week, will be entitled to 76 hours of personal/carer’s leave per year.

This is an interpretation which most employers should be familiar with as it is was the interpretation predominantly applied before the FCA’s original decision.

Notwithstanding the above, employers with enterprise agreements or employment contracts which confer personal leave entitlements which are more beneficial than the National Employment Standards must ensure that they continue to comply with those standards.

While this will likely come as a welcome relief to employers, many who had employees with flexible working arrangements or variable roster patterns will now need to:

 

• ensure its payroll system moving forward calculates personal / carer’s leave on the ‘notional day’ construction; and
• perform a reconciliation of their employees’ personal/carer’s leave balances to ensure the existing balances are consistent with the ‘notional day’ construction – where an employee’s leave balances change, employers might consider notifying the employee of this change.

 

For more information on managing leave entitlements see our free guide here, or leave policy template here.

NEED SPECIALIST HELP?

Managing a business and employees can be difficult enough without having to keep track of various changes to employees’ entitlements. The best way to manage all these competing priorities is to understand how each of them can impact your business and to take proactive measures to ensure you are compliant! We can assist you in gaining this understanding and taking a proactive approach to your HR obligations through tailored advice, training programs, and providing comprehensive information packs.

For specialist assistance, please contact our team on 03 9087 6949 or support@workplacewizards.com.au.