"A day is not a day - High Court confirms personal leave to be calculated on notional day"

The Full Federal Court has confirmed how the entitlement to 10 days of paid personal/carer’s leave is quantified under section 96(1) of the Fair Work Act 2009.

In a 2-1 decision, the Court in Mondelez v AMWU [2019] FCAFC 138 ruled that employees are entitled to 10 days of personal/carer’s leave per year, regardless of the pattern of hours worked by employees.

Mondelez represents an important shift in the way that personal/carer’s leave has previously been understood to accrue, and is likely to have significant ramifications for employers and for any of their employees working more than 7.6 “ordinary hours” per day (such as shift workers).

Background

Section 96(1) of the FW 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. Part time employees accrue the entitlement on a pro-rata basis. The statutory formula therefore references both “days” and “hours”.

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 FW Act.

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 only accrue an amount of paid personal/carer’s leave sufficient to cover their absence for eight 12-hour shifts.

The employees and union argued that because they worked 12-hour shifts, their 10 days of personal leave should be paid at 12 hours a day. This would mean they are entitled to 120 hours of paid personal/carer’s leave per year of service.

However, Mondelez argued the entitlement to “10 days of paid personal/carer’s leave” under section 96(1) of the FW Act is calculated by reference to the 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 FW Act. Therefore, the entitlement to 96 hours of leave provided to employees under the Enterprise Agreement was more generous than the National Employment Standard entitlement under the FW Act.

The Commonwealth Government intervened in the proceeding, making submissions that were consistent with Mondelez’s argument.

The Decision

The majority (Justices Bromberg and Rangiah) rejected Mondelez’s approach. Rather, they substantially accepted the arguments from the employees and union, finding in this case that Ms Triffitt and Mr McCormack were entitled to 10 days of paid personal/carer’s leave at 12 hours per day (totalling 120 hours of paid leave per year).

The key points from the majority decision in Mondelez include:

• A “day” of leave is not calculated on the basis of an employee’s “notional day” of 7.6 hours of work (capped at a maximum of 38 ordinary hours per week) as contended by Mondelez.
• Instead, personal/carer’s leave accrues in “working days” over a year of service, and a “working day” is the portion of a 24-hour period that a particular employee is allocated to work as their ordinary hours (i.e. not including overtime).
• Leave under section 96(1) of the FW Act “is a form of income protection for employees during the periods of illness, injury or unexpected emergency,” so if a worker loses 12 hours’ income (representing their ordinary hours they would have worked on their shift, but for illness) that is the “day’s” income they have lost.
• The effect of section 96(1) of the FW Act is to entitle each employee to be absent from work without loss of pay on ten calendar days per year, irrespective of what ordinary hours of work that “day” entails.
• The decision’s effect is largely upon employers who engage shift workers and other employees working more than 7.6 “ordinary hours” a day (for example, full time employees working 9 day fortnights).

What the Mondelez decision means for employers

Although the decision may be subject to a High Court appeal, the Full Federal Court’s decision reflects the current status of the law. In summary, the decision has the following implications:

• Employers should review their internal processes on how personal/carer’s leave is accrued and paid, and should review their employment contracts and any applicable awards or enterprise agreements.
• The method of calculating personal/carer’s leave used by Mondelez is a widely accepted industry practice. Subject to an appeal of the Mondelez decision to the High Court, there may now be an overhaul of how personal/carer’s leave is accrued, and employers must ensure all staff receive their correct entitlements going forward.
• Employers will need to consider the possible need to provide backpay for certain categories of employees.
• Where possible, employers may wish to analyse the business case for engaging employees on a “standard 7.6 hours plus overtime” model (rather than, for example, a shift work model).