Last month, the High Court rejected a decision in the Full Court of the Federal Court in regard to calculating entitlements to paid personal leave. This case is significant in that it highlights exactly how this type of leave is acquired and what specifies a ‘day’, clarifying the difference between a ‘working’ day and a ‘notional’ day. If an employee is in a position where they need to take personal or carer’s leave and the employer is unsure what they are entitled to, this article explains how this case affects that calculation.
The background of the case
Mondelez Australia Pty Ltd (Mondelez) operates a Cadbury food manufacturing plant in Claremont, Tasmania. The company had employed Ms Triffitt and Mr McCormack in accordance with its enterprise agreement where the two individuals worked an average of three 12-hour shifts per week, totaling 36 hours a week.
As an employee of Mondelez, they are entitled to 96 hours of personal leave, which is actually 24 hours in excess of the minimum requirement under section 96 (1) of the Fair Work Act.
Back in August 2019, the Full Federal Court held in favour of the Australian Manufacturing Workers Union (AMWU) which argued that a ‘day’ can be interpreted as a ‘working day’, and that, as such, the employees deserved the equivalent twelve hour day in personal/carer's leave, rather than the notional average hours per day of 7.2 hours, which Mondelez considered appropriate. The court held that the employees were working three 12 hours shifts per week and would be entitled to 12 hours per day, and therefore entitled to 120 hours leave per year.
However, Cadbury owners Mondelez International appealed to the High Court. The company was primarily concerned that if time was calculated in hours worked, that employees who work longer shifts in fewer days can accrue more leave than employees working the same total hours spread over more days a week.
Mondelez won its case, with the High Court ruling that the workers’ entitlement centered around the calculation of two traditional weeks, reversing the previous decision of the Full Federal court. The Court found that calculation of notional days at the rate of 1/26 of an employee’s ordinary hours of work in a year proved to be the most fair and flexible, as the accrued leave was determined through the same number of ordinary hours irrespective of differences in patterns of work.
What does this mean for employers?
The High Court’s decision can be summarised into the two following points:
The ‘10 days’ of personal/carer’s leave in section 96(1) of the FWA is calculated on the basis of an employee’s ordinary hours of work, not working days.
In a year, the ’10 days’ of personal/carer’s leave is calculated as 1/26 of an employee’s ordinary hours of work in a year.
For example, an employee working a standard full-time 38-hour week, working 7.6 hours a day over the span of five days will accrue the same leave as an employee working 12.6 hours a day over the span of three days.
For those employing people who work outside the typical office hour structure, this may have a significant impact on their annual leave allocation. If employers changed their leave accrual practices after the matter in the Full Federal Court in August 2019, they would have to review again to ensure the policies are up to date.
This ruling means all accrued leave systems should be calculated on the basis of the number of ordinary hours worked. In many ways, this will make the policies far easier to develop and enforce, while they may not be welcomed by those employees who are working long shifts.
If you have any questions in regard to leave accrual, please contact our team at Voice Lawyers.
At Voice Lawyers we provide Employment Law advice and representation, so please feel free to contact us: