Thinking | 28 October 2019

Landmark decision on leave entitlements to be appealed to the High Court

The Full Federal Court in Mondelez v AMWU [2019] FCAFC 138 determined that employees are entitled to 10 days of personal/carer’s leave irrespective of their pattern of work hours. This decision is expected to have ramifications for the way in which employers calculate personal/carer’s leave, particularly in respect to shift workers, subject to the outcome of any High Court appeal.

The case

Mondelez sought a declaration from the Court concerning the interpretation of the phrase ‘10 days of paid personal/carer’s leave’ in section 96(1) of the Fair Work Act 2009 (Cth) (FW Act) and in particular how a ‘day’ is determined.

Mondelez contended that the phrase must be construed according to the ‘industrial meaning’ of the word ‘day’, being a ‘notional day’, consisting of an employee’s average daily ordinary hours based on an assumed five-day working week (an employee’s average weekly ordinary hours divided by five).

This meant that for those Mondelez employees that work 36 ordinary hours per week, a ‘notional day’ would equate to 7.2 hours. The employees would therefore be entitled to ten such days (or 72 hours) of paid personal/carer’s leave for each year of service.

The upshot of Mondelez’s interpretation was that those employees who worked 12 hour shifts would have to take more than a ‘notional day’ (having 12 hours deducted from their 72 hours entitlement to accrued personal/carer’s leave entitlement) in order to take a full day off work. They would therefore exhaust their entitlement in less than 10 days.

The Minister for Small and Family Business, the Workplace and Deregulation was granted leave to intervene in the proceeding and did so in support of this construction put forward by Mondelez.

The respondents, the AMWU and two employees of Mondelez’s Cadbury plant in Claremont, Tasmania, opposed the declaration.

They submitted that ‘day’ should be interpreted as a ‘calendar day’, or a 24 hour period. This would allow every employee to be absent from work on personal or carer’s leave for ten calendar days per year.

The decision

In a joint judgment, Bromberg and Rangiah JJ rejected the arguments put forward by Mondelez. Their Honours held that the correct interpretation of ‘day’ for the purposes of the section is ‘the portion of a 24 hour period that would otherwise be allotted to working’. This could be described as a ‘working day’, and accordingly, under s 96(1), employees are authorised to be absent from work for 10 such ‘working days’. The employees in this case were held to be entitled to ten 12-hour shifts of personal leave.

Their Honours also held that for every day of personal/carer's leave taken, a day is deducted from the employee's accrued leave balance. Therefore, if an employee only takes part of a day for personal/carer’s leave, then the number of days in the employee's leave balance is reduced proportionally.

In his dissenting judgment, Justice O’Callaghan substantially agreed with the approach put forward by Mondelez. His Honour held that the National Employment Standards in the FW Act only require a maximum of up to 76 hours of personal leave to be provided per year (based on 38 ordinary hours per week).

What does this mean for your business?

The Attorney-General and Minister for Industrial Relations, Christian Porter, has indicated that the decision needs to be appealed because ‘it had created significant inequities between employees, while also exposing employers to cost increases that they estimate could reach up to $2 billion per year’. As such, there have been indications that both the Morrison Government and Mondelez intend to seek leave to lodge an appeal to the High Court against the decision. Regardless of this, as the decision currently stands, it will have significant implications for employers, including in relation to how annual leave is calculated under the FW Act.

To reduce the risks associated with misclassification of leave entitlements, employers may implement the following:

Identify employees affected by this decision, ie shift workers or employees who have different ordinary hours on different days.
Review payroll and leave calculator systems to ensure the systems calculate leave in a way that is reflective of this decision, ie based on days rather than hours.
Consider whether payroll and leave calculator systems should be changed/updated to reflect that entitlements are to be accrued and deducted by reference to days in respect of ordinary hours of work.
Be aware of the risks of claims for backpay from employees if accrual and calculation of leave is not in accordance with this decision.

Our Employment team would be pleased to assist your business to navigate the complexities arising from this decision and any High Court appeal.