All in a day's work-Landmark High Court decision bittersweet for some on the accrual of personal/carer's leave

Today the High Court handed down its landmark decision in Mondelez Australia Pty Ltd v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union [2020] HCA 29 (link) (High Court’s Decision). In a nutshell, it’s business as usual for employers.

The High Court’s Decision:

1. Provides clarity for employers about what a “day” means in the context of the right to 10 “days” paid personal/carer’s leave for the purposes of the National Employment Standards (NES) in the Fair Work Act 2009 (Cth) (FW Act), and
    
2. Overturns the Full Court of the Federal Court’s decision in Mondelez v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union Known as the Australian Manufacturing Workers Union (AMWU) [2019] FCAFC 138 (Full Court’s Decision).

The meaning of the word “day” is important because it affects how employees accrue and access their entitlements to paid personal/carer’s leave.

Summary of the High Court’s Decision

The High Court’s Decision has the effect that:

1. Personal/carer’s leave is to be accrued progressively according to an “employee’s ordinary hours of work in a two-week period, for each year of service”.
    
2. In the context of the right to 10 “days” paid personal/carer’s leave for each year of service as provided for in the NES, “one ‘day’ refers to a notional day”. This “day” will be equal to one-tenth of an employee’s ordinary hours of work in a two-week period, or, if the employee has fluctuating hours of work, 1/26 of their ordinary hours of work in a year.

Background to the High Court’s Decision

The High Court’s Decision resulted from Mondelez’s (the Employer) and the Industrial Relations Minister’s (Minister) appeal from the Full Court’s Decision.

The Full Court’s Decision arose from a dispute about the accrual of paid personal/carer’s leave under the Mondelez Australia Pty Ltd, Claremont Operations (Confectioners & Stores) Enterprise Bargaining Agreement 2017 (Agreement).

1. Under the Agreement, “employees working on 12-hour shifts (were) entitled to 96 hours of paid personal leave per annum”. The key issue was whether the Agreement was inconsistent with an employee’s entitlement to 10 “days” paid personal/carer’s leave under the NES.
    
2.  In other words, if an employee’s ordinary hours of work were 36 hours a fortnight, but they worked 4 x 12 hour days, would their accrual of paid personal/carer’s leave be based on their actual “work day” (i.e. 12 hours a day), or a “notional day” (i.e. 7.2 hours) given their actual work hours over a relevant period (e.g. a fortnight) would remain the same as an employee that worked an ordinary pattern (e.g. five days a week x 7.2 hrs a day).

Arguments in the Full Court

Employer’s submissions

The Employer and the Minister submitted that 10 “days” was to be read as meaning 10 periods of 7.2 hours each. That is, a “notional day”, consisting of an employee’s average daily ordinary hours based on an assumed five-day working week (which in the Employer’s case was a 36-hour working week).

Union’s submissions

The Union submitted that the meaning of the word “day” was a “calendar day” or a 24-hour period that allowed every employee to be absent from work without loss of pay on 10 calendar days per year, regardless of their shift pattern or hours of work.

Full Court’s Decision

The Full Court’s Decision was that the right to 10 “days” paid personal/carer’s leave for the purposes of the NES was the right to a “working day”, as opposed to a “notional”, 24 hour “day” away from work. For a shift worker working 12 hours a day, this would be the right to access 10 x 12 hour personal/carer’s leave days per year (that is, 120 hours). For a worker working 7.2 hours a day, this would be the right to access 10 x 7.2 hour personal/carer's leave days per year (only 72 hours a year).

The High Court’s Decision

The issues on appeal were whether the reference to the term "day" in the context of the right to 10 “days” paid personal/carer’s leave in the NES was:

1. A "notional day", consisting of one-tenth of the equivalent of an employee's ordinary hours of work in a two-week period (the Employer’s and Minister’s contention), or
    
2. A "working day", consisting of the portion of a 24-hour period that would otherwise be allotted to working and thereby authorising an employee to be absent without loss of pay on 10 working days per year (the Union’s contention).

The High Court accepted the Employer’s contention that a “day” for the purposes of the entitlement to paid personal/carer’s leave in the NES refers to a “notional day” consisting of one-tenth of the equivalent of an employee's ordinary hours of work in a two-week period.

Consequences for employers

The impact of the High Court’s Decision are as follows:

1. Accrual: Paid personal/carer’s leave accrues progressively according to an employee's ordinary hours of work in a two-week period, at the rate of one-tenth of their ordinary hours of work in a two-week period, or 1/26 of their ordinary hours of work in a year.
    
2. Fluctuations in hours of work: Accrual and payment of paid personal/carer’s leave will “not (be) affected by differences in the actual spread of an employee's ordinary hours of work in a week”.
    
3. Part-time employees: As a result of accruing paid personal/carer’s leave according to their ordinary hours of work, part-time employees will naturally accrue proportionately less leave than full time employees.
    
4. Shift workers: Shift workers’ entitlement to paid personal/carer’s leave is according to their ordinary hours of work, even if the effect of this is that shift workers “have a leave entitlement of the same number of hours as day workers”.

 Next steps

Employers should consider:

1. Verifying that the practices in place for the accrual and accessing of leave entitlements is consistent with this decision
    
2. Reviewing your current employment documentation, including employment contracts, enterprise agreements and/or policies, to assess whether personal/carer’s leave has been (and continues to be) accurately accrued, and
    
3. Training your HR, payroll and accounting teams to ensure they are aware of the implications of this decision when calculating employee entitlements.

Further information

Our Workplace team at Sparke Helmore Lawyers can assist your company or organisation with reviewing your internal arrangements, assisting with associated training and developing a strategy to successfully navigate the risks of non-compliance.