Thinking | 14 August 2020
What’s in a day? High Court clarifies calculation of personal leave entitlements
By Fay Calderone, Jessica Luker and Aerin Hines
The High Court, in its decision Mondelez Australia Pty Ltd v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union  HCA 29 on 13 August 2020, allowed an appeal from a judgment of the Full Federal Court regarding how the entitlement to paid personal/carer’s leave is to be calculated under the Fair Work Act 2009 (Cth) (the Act).
The majority of the High Court rejected the Australian Manufacturing Workers Union's (AMWU) argument that a 'day' under section 91(1) of the Act means a '24 hour period' when calculating employees' entitlement to paid personal/carer's leave for each year of service.
Section 96(1) of the Act provides that for each year of service with his or her employer, an employee is entitled to 10 days of paid personal/carer's leave.
Two employees of Mondelez Australia Pty Ltd (Mondelez) each work 36 ordinary hours per week, made up of three 12-hour shifts on average. The employees are covered by an enterprise agreement, which provides that employees working on 12-hour shifts will be entitled to 96 hours of paid personal/carer's leave per annum. Over the course of one year of service, the Mondelez employees covered by this clause only accrue paid personal leave sufficient to cover eight 12-hour shifts.
The employees, together with the AMWU, argued they are entitled to paid personal/carer's leave sufficient to cover ten absences from work per year, and therefore, claimed the enterprise agreement did not comply with s 96(1) of the Act.
Mondelez initially applied to the Federal Court seeking a declaration from the Court that 'day' in section 96(1) of the Act refers to a 'notional day', consisting of an employee's average daily ordinary hours based on an assumed five-day working week.
The majority of the Full Federal Court accepted the employees' argument and held that 'day' in section 96(1) refers to 'the portion of a 24 hour period that would otherwise be allotted to work' ('the "working day" construction').
Mondelez and the Federal Industrial Relations Minister appealed against the Full Federal Court's 'working day' construction.
Decision of the High Court
The majority of the High Court rejected the 'working day' construction and instead favoured Mondelez’s 'notional day' interpretation, stating that the latter was consistent with:
- the Act more broadly, noting the separate definition for 'working day' that recognises the concept of a five-day working week, thereby informing the context for the definition of 'day'; and
- the Explanatory Memorandum to the Fair Work Bill 2008 (Cth), which provides examples conforming with the 'notional day' construction and demonstrating continuity with an equivalent clause in the Workplace Relations Act 1996 (Cth).
The High Court determined the entitlement to '10 days' of paid personal/carer's leave is to be calculated according to an employee's ordinary hours of work in a week or over a two-week period, given that patterns of work do not always follow a regular cycle 1/26 of the employee's ordinary hours of work in a year.
Chief Justice Kiefel and Justices Nettle and Gordon held the 'working day' construction adopted by the majority in the Full Federal Court is not consistent with the purpose of section 96 or the stated objectives of the Act of fairness, flexibility, certainty and stability.
Impact of the decision
The decision comes as a relief to many employers and confirms the amount of leave accrued for each employee does not vary based on the pattern of hours worked. Employers no longer bear the burden of administering varying rates of accrual for employees who work different shift patterns.
Since the decision was handed down, there have however been calls by the ACTU for legislative changes to the Act to mandate 10 calendar days of paid personal leave each year for all employees, regardless of their ordinary hours worked. In the context of COVID-19, unions are claiming the decision will result in hardship for employees working longer hours and, if exposed to the virus, may result in them not taking sick leave if they are not paid amounts they would have earned.
Hall & Wilcox will continue to review and report on any legislative developments.
We would be pleased to help your business with any queries regarding the decision and how leave entitlements for employees are to be calculated.
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