A question that many employers struggle with is how periods of leave interact with entitlements to overtime.
Most modern awards operate so that employees are entitled to overtime rates when an employee works over a certain number of ordinary hours per week (generally 38) or over a certain number of ordinary hours per day (eg 10).
But what happens when an employee is on leave for part of those hours? If an employee works 8 hours a day and takes a day off in a week, does this mean that they can work an extra 8 hours before hitting the weekly maximum hours of 38?
This question was dealt with in a recent decision of the Fair Work Commission concerning the Clerks – Private Sector Award 2020, see: EPI Capital Pty Ltd  FWC 841.
What happened in the case?
The case concerned an application to vary the Clerks Award to remove an (alleged) uncertainty or ambiguity about how overtime under the Award works.
In dismissing the application to vary the Award the Fair Work Commission made clear that periods of leave are to be included in the assessment of ordinary hours worked when calculating overtime under the Award.
If, therefore, an employee has a day of annual leave or personal leave during the week, this period of absence will count towards the total number of weekly ordinary hours that need to be worked before overtime is payable.
The implication is that, even where an employee has taken a significant amount of leave early in the week, the employee will still be entitled to overtime rates if the combined total of hours of leave they took and hours they work when they return exceeds the weekly or daily maximums. An employer cannot, therefore, roster an employee to work additional ordinary hours to “make up” the hours of work they missed, without incurring overtime rates.
“ ….. An employee’s ordinary hours are fixed in accordance with the provisions of the Award discussed above. These fixed ordinary hours (and maximum ordinary hours) are known and so the triggers for overtime are also known. Put simply, and by way of example, if an employee’s ordinary hours are fixed at 38 hours worked on Monday to Wednesday for 10 hours each day and on Thursday for 8 hours, and the employee works in a given week at the direction of the employer for 4 hours on the Friday, the 4 hours are plainly in excess of the employee’s weekly ordinary hours fixed in accordance with clauses 13 and 14 of the Award. What difference does it make that in the week the employee works on the Friday, that the employee was absent on annual leave on the Wednesday? The answer is of course none. The leave is part of the employees weekly ordinary hours fixed in accordance with clauses 13 and 14.
 The same result would pertain if on a given Wednesday the employee took 4 hours of personal leave to attend a medical appointment and then returned to work the remaining 6 hours of ordinary time on that day but worked an additional hour at the direction of the employer. The 4 hours of leave and the 6 hours worked together constitute 10 ordinary hours on that day. The additional hour is an hour worked in excess of the daily maximum and so the overtime payment obligation arises.”
Is the situation the same under all awards?
The Fair Work Commission was only concerned with the operation of the Clerks Award in the current case. It is possible that other awards, with different wording, would be treated differently and we encourage you to seek our advice if you want to understand your obligations under different awards.
There have been at least two different decisions (concerning enterprise agreements) where the Fair Work Commission came to a view that leave did not count towards ordinary hours for calculating overtime (although the wording of the agreements was different to the Clerks Award), see:
- Flight Attendants’ Association of Australia – International Division v Virgin Australia t/a Virgin Australia Airlines Pty Ltd  FWC 3017
- Transport Workers’ Union of Australia v Jetstar Services Pty Limited  FWC 2535
An example of a case concerning an enterprise agreement in which it was found that leave does count towards ordinary hours is:
- Officeworks Limited v Shop, Distributive and Allied Employees Association  FWCFB 6063 (21 December 2021)
If you require any assistance regarding this matter, please contact us.