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UPDATE ON 17 SEPTEMBER 2019: THIS CASE IS NOW BEING APPEALED. SEE OUR ARTICLE HERE.

The Full Court of the Federal Court in Mondelez Australia Pty Ltd v AMWU [2019] FCAFC 138 has handed down a landmark judgment clarifying how personal/carer’s leave entitlements are accrued.

The Full Court ruled that shiftworkers working twelve hour shifts in a Cadbury chocolate factory were entitled to 10 days of personal/carer’s leave each year, and (importantly) that “a day” in this context meant the number of hours the employee would have worked on the day they were absent. This meant that over a year the employees were entitled to 120 hours of personal/carer’s leave (i.e. 10 x 12 hours a day).

Traditional thinking is that a day’s personal/carer’s leave means one fifth of a 38-hour week, (i.e. 7.6 hours) and the maximum number of hours of personal/carer’s leave any employee can accrue over a year is 76 hours.

This decision may potentially have significant implications for employers who accrue personal leave on an hourly basis particularly in respect of part-time employees and shiftworkers.

The facts

The case considers how paid personal/carer’s leave is accrued under section 96 of the Fair Work Act 2009 (Cth) (‘the FW Act’). Section 96(1) of the FW Act states that for each year of service with an employer, an employee is entitled to 10 days of personal/carer’s leave. Section 96(2) then goes on to state that personal/carer’s leave accrues progressively during a year of service according to the employee’s ordinary hours of work and accumulates from year to year.

Mondelez operated a Cadbury chocolate factory where employees worked a 36-hour week. Some employees worked 7.2 hours per day, five days per week whilst others worked three 12-hour shifts per week. In the matter, Mondelez argued that the reference to “day” in section 96 of the FW Act was a “notional day” consisting of an employee’s average daily ordinary hours based on a 5-day working week. Mondelez argued that a “notional day” was 7.2 hours and each employee was entitled to 10 days of paid personal/carer’s leave each year totaling to 72 hours. This interpretation meant that for a five-day per week employee, this would cover 10 paid absences per year however for a three-day per week shiftworker employee, this would only cover 6 paid absences per year.

On the other hand, the union argued that the word “day” in section 96 of the FW Act should be given its ordinary meaning of a “calendar day” and accordingly, each employee would be entitled to be absent from work for 10 calendar days per year without any loss of pay (i.e. for an employee who worked 12 hour shifts, 10 days of 12 hours).

The decision

The Full Court rejected Mondelez’s interpretation of the word “day” and held that section 96 of the FW Act provides employees with access to 10 working days of personal/carer’s leave without loss of pay. Importantly, the Full Court held that the word “day” meant “the portion of a 24-hour period that would otherwise be allotted to working” i.e. a “working day”. The Court clarified that regardless of whether an employee worked 7.2 hours for five days a week or 12 hours for three days a week, both would be paid their base rate for the ordinary hours they would have worked if not for the absence.

This meant that Mondelez’s shiftworkers who worked three 12-hour shifts would be entitled to be absent from work for 10 days without loss of pay. In other words, the shiftworkers would be entitled to a total of 120 hours of personal/carer’s leave in a year.

In the decision, the majority clarified that the entitlement to personal leave should be viewed as a statutory form of income protection whereby employees are entitled to 10 days of personal/carer’s leave without loss of income.

The decision suggests that this differs to annual leave as employees are not entitled to be paid out their personal/carer’s leave entitlements but are entitled to take personal/carer’s leave only if they are not fit for work or need to provide care or support to an immediate family member in accordance with section 97 of the FW Act. The Full Court held that the primary purpose of the provision was to protect the loss of earnings.

Possible wider application of the decision

Although the case concerned shiftworkers working 12-hour shifts, it is possible the decision will have wider applications, particularly in respect of part-time employees.

It is standard practice for employers and payroll platforms to accrue and deduct personal/carer’s leave in hours. Many employers and payroll platforms accrue 76 hours of personal/carer’s leave each year based on a 7.6 hour working day for full-time employees and pro-rata for part-time employees.

For example, part-time employees who only work one day of 7.6 hours per week traditionally accrue less than 76 hours of personal/carer’s leave per year.

The decision may be read to suggest that part-time employees are entitled to be absent from work for 10 days and be paid for the ordinary hours of work that they would have performed on the day. This could mean a part-time employee working one day of 7.6 hours a week is entitled to the same amount of personal/carer’s leave as a full-time employee working five days of 7.6 hours a week: i.e. 10 days of 7.6 hours per year.

The decision did not shed any light on how annual leave is accrued which is expressed under the FW Act to accrue in weeks as opposed to days. It is therefore unclear what impact the decision will have on how annual leave should be accrued moving forward.

It is also unclear whether Mondelez will appeal this decision in the High Court. However, as it currently stands, the decision reflects the current state of the law.

What you should do

If you employ shiftworkers in the same or similar patterns to the employees in this case it would be prudent to review your system for accruing personal/carer’s leave and if appropriate to seek legal advice.

It is not yet certain what the wider implications of the case will be (particularly in respect of part-time employees). We will be monitoring closely what happens next in the case, in particular whether it is appealed. If the decision is not appealed, it is possible that the government could legislate to avoid the implications of the case.

If you require assistance with undertaking an audit of your current leave accrual practises, or if you require any advice concerning this matter, get in touch with EI Legal.

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