Global Compliance Desk – Australia

Australia: Case Law on The Calculation of Personal/Carer Leave 

On 13 August 2020, the High Court gave clarity on the meaning of “10 days” personal leave and the accurate method for calculating that entitlement in Mondelez Australia Pty Ltd v Automotive, Food, Metals, Engineering, Printing, and Kindred Industries Union Known as the Australian Manufacturing Workers Union (AMWU) [2020] HCA 29, reversing the earlier decision by the Full Federal Court on the same matter.

The Legislation

Section 96 of the Fair Works Act (FW Act) is part of the National Employment Standards (NES) set out in Part 2-2 of the FW Act. It provides that:

• For each year of service with the employer, an employee is entitled to 10 days of paid personal/carer’s leave.
• An employee’s entitlement to paid 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.

The Case

It was argued by Mondelez, which was supported by the Commonwealth as an intervener, that the word ‘day’ in section 96(1) does not refer to a calendar day or working day but rather to its ‘industrial meaning’ of a ‘notional day’, calculated by reference to the individual employee’s average weekly ordinary hours divided by five.

For E.g.: An employee who operates 36 ordinary hours at an average of 7.2 hours per day over a 5-day working week has a ‘notional day’ of 7.2 hours. This means that the employee is entitled to 10 such days (or 72 hours) of paid personal leave for each year of service. 

If the employee took a day of personal leave, the employee is to be paid 7.2 hours’ wages, and 7.2 hours will be deducted from the employee’s accrued leave balance.

As per Mondelez, this necessitated that the employees’ entitlement to 96 hours of leave per year under their enterprise agreement was in excess of their minimum entitlement under the NES. 

The Full Federal Court in August 2019, determined that employees are entitled to 10 days of personal/carer’s leave was calculated in working days irrespective of their pattern of work hours.

The Decision

By a 4:1 majority, it reversed the earlier decision of the Full Court of the Federal Court and provided clarification as to what is meant by ‘a day’ in section 96 of the Fair Work Act 2009.

This High Court decision clarifies that full and part-time employees will progressively accrue personal leave on a pro-rata basis, wherein a day consists of 1/10th of an employee’s ordinary hours of work in a two-week (fortnightly) period or 1/26th of the employee’s ordinary hours of work in a year.

As a result, the amount of leave accrued does not vary according to their pattern of hours of work. For example, where an employee works 36 hours per week, the employee will be entitled to 72 hours personal/carer’s leave per annum, regardless of whether, for example, the 36 hours is worked across 3, 4, or 5 days. Hence If an employee has a varied pattern of work a “day” means 1/26th of the employee’s ordinary hours over the course of a whole year.

This preserves equality between employees on different rosters and also when leave is taken it is deducted from the employee’s accrued paid personal/carer’s leave on an hourly basis.

The previous Full Federal Court decision had substantial cost implications for employers of workers who completed longer shifts. This decision means that workers who complete longer shifts over fewer days per week are not entitled to more sick leave than workers on regular hours.

Note: The earlier Blog Post on the majority decision of the Full Court of the Federal – 2019 can be found here.