A majority of the High Court has found that the entitlement to “10 days paid personal/carer’s leave” under section 96(1) of the Fair Work Act 2009 should be calculated on the basis of a ‘notional day’, being one-tenth of an employee’s ordinary hours in a 2 week period, or 1/26^th of an employee’s ordinary hours in a year, irrespective of the pattern or spread of actual hours and days over which those hours might be worked. The majority adopted this interpretation to ensure consistency and fairness for employers and employees.

Background

Section 96(1) of the Fair Work Act provides that full time employees are entitled to 10 days of paid personal/carer’s leave for each year of service, accrued progressively during the year according to the employee’s ordinary hours of work.

In 2018, the Australian Manufacturing Workers Union and two Cadbury shift workers (Ms Triffitt and Mr McCormack) commenced proceedings against their employer, Mondelez, seeking to clarify their entitlement to paid personal/carer’s leave under the relevant enterprise agreement and section 96(1) of the Act.

The employees’ ordinary hours of work were 36 per week, but worked in 12 hour shifts rather than across a 5 day working week.

Under clause 24.2 of the enterprise agreement, Mondelez provides 12-hour shift workers with 96 hours of paid personal/carer’s leave per year of service. When Ms Triffitt or Mr McCormack were to take paid personal/carer’s leave for a single 12-hour shift, Mondelez would deduct 12 hours from their accrued paid leave balance. On this approach, over the course of one year of service, Ms Triffitt and Mr McCormack would accrue an amount of paid personal/carer’s leave sufficient to cover their absence for eight 12-hour shifts.

The employees and union argued this approach was wrong and because they worked 12-hour shifts, their 10 days of personal leave (derived from the Act) would mean they would be entitled to 120 hours of paid personal/carer’s leave per year of service.

Mondelez argued the entitlement to 10 days of paid personal/carer’s leave under section 96(1) was to be calculated by reference to an employee’s ordinary working day (which Mondelez referred to as the “notional day”). It contended the “notional day” is 7.6 hours, and based on the entitlement to 10 days leave, employees are only entitled to 76 hours of paid leave per year under the Fair Work Act, irrespective of whether they worked their ordinary hours in blocks or shifts of 12 hours at a time, or more conventionally.

In 2019, the Full Federal Court disagreed with Mondelez (and the Commonwealth Government, which intervened in the proceedings) and ruled in a 2-1 decision that employees are entitled to 10 days of personal/carer’s leave per year, and that this entitlement would translate into the hours that employee would work in that day. That is, the majority essentially found that a day means a day – the 24 hour period allotted to a working day. As a result of the Full Federal Court’s finding, Ms Triffitt and Mr McCormack (and other employees with similar arrangements) were entitled to 10 days of paid personal/carer’s leave at 12 hours per day (totalling 120 hours of paid leave per year). This would give them a substantially greater entitlement (in terms of hours of available paid personal leave) than 10 “days” worth of personal leave for an employee who worked their ordinary hours in a pattern of 7.6 hours a day. The decision also meant that part time employees were entitled to 10 days personal carer’s leave regardless of how many hours per week the employee worked.

The decision was appealed to the High Court.

Decision

A majority of the High Court overturned the Full Federal Court’s decision, rejecting the “working day” construction.

The working day argument was found to be inconsistent with the legislative purposes of the Fair Work Act to provide “fairness, flexibility, certainty and stability” for employers and their employees. Under the working day construction, employees who work the same number of hours over a week, but in different patterns, would be entitled to different amounts of leave in a way that the majority said would lead to “absurd” and “inequitable” outcomes.

The majority used an example of a part-time employee working 12 ordinary hours per week as a single-shift. That employee would accrue 120 hours of personal leave (10 absences of 12 hours) – almost double the 72 hours of personal leave a full-time employee working 36 ordinary hours per week. This was inconsistent, the majority said, with workplace laws that are fair, flexible for businesses, and that promote productivity and economic growth – stated objects of the Fair Work Act.

Referring to the context of the personal leave provisions, and the Fair Work Act more broadly, the Act’s legislative history and its explanatory memorandum, it was ultimately found that the use of the term “day” in section 96(1) of the Fair Work Act refers to a “notional day”. This notional day is one-tenth of the equivalent of an employee’s ordinary hours of work in a two-week period, or 1/26^th of the employee’s ordinary hours of work in a year.

What the Mondelez decision means for employers

The High Court’s decision confirms the historical approach and understanding of personal/carer’s leave entitlements. In fact, the majority referred to the equivalent provisions that existed in the previous Workplace Relations Act to demonstrate the continuity between the historical approach under that Act, and how section 96(1) under the Fair Work Act is to be interpreted.

The decision should also make it easier for employers to administer personal/carer’s leave – particularly for part-time employees or employees working shift work. For each hour of accrued personal leave which is taken, the employee’s accrued entitlement is reduced by the actual number of hours taken – regardless of the employee’s pattern of work. This is how payroll systems typically calculate, and apply the taking of, personal leave.

The decision provides much needed clarity and certainty for employers given the significant shift brought about by the Full Federal Court’s decision.