A recent High Court decision has clarified how to calculate employee entitlements to paid personal/carer’s leave (‘paid personal leave’) under the National Employment Standards (‘NES’) contained in the Fair Work Act 2009 (Cth).
Relevant Fair Work Act 2009 (Cth) provisions
Under section 96(1) of the Fair Work Act 2009 (‘the Act’), “for each year of service with his or her employer, an employee is entitled to 10 days of paid personal/carer's leave”.
Under section 96(2) of the Act, an employee's entitlement “accrues progressively during a year of service according to the employee's ordinary hours of work, and accumulates from year to year”.
Under section 99 of the Act, payment for leave taken is calculated by reference to an employee's “ordinary hours of work”.
Relevant background facts
In 2017, Mondelez Australia Pty Ltd (‘Mondelez’) submitted the Mondelez Australia Pty Ltd, Claremont Operations (Confectioners & Stores) Enterprise Bargaining Agreement 2017 (“the Enterprise Agreement”) to the Fair Work Commission for approval.
The Enterprise Agreement, as approved, provided an entitlement to paid personal leave of 96 hours per year for employees working 12-hour shifts and 80 hours per year for other employees.
In the course of approval, a dispute arose about whether the leave entitlements met the minimum “10 day” requirement in section 96 of the Act, so in 2018, Mondelez commenced proceedings in the Federal Court seeking to clarify the paid personal leave entitlements of two of its full-time employees, Natasha Triffitt and Brendon McCormack (“the Employees”).
The Employees each worked 36 hours per week, averaged over a four-week cycle, in 12-hour shifts.
When the Employees took paid personal leave for a single 12-hour shift, Mondelez would deduct 12 hours from their accrued paid personal leave balance. Using this method, the Employees accrued enough paid personal leave to take leave for eight x 12-hour shifts per annum.
The question for the court therefore was how a “day” was to be construed under section 96 of the Act.
Mondelez’s position in the Federal Court proceeding
The term “day” in s96(1) of the Act refers not to a calendar day or working day, but the “industrial meaning” of a “notional day”. A day is to be calculated by examining the individual employee’s average weekly working hours and dividing them by five.
For an employee working 36 hours a week, that provides for a notional day of 7.2 hours duration (being 36 divided by five) and provides the employee with 10 days of 7.2 hours duration in paid personal leave per annum (72 hours in total).
All employees who work the same average weekly ordinary hours are entitled to receive the same number of hours of paid personal leave per annum.
The employees’ entitlement to 96 hours of paid personal leave per year under the Enterprise Agreement was in excess of their minimum entitlement under the NES.
The AMWU and the Employees’ position in the Federal Court proceeding
The word “day” in s 96(1) of the Act has its ordinary meaning of a “calendar day”, or a 24-hour period.
The term allows every employee to be absent from work without loss of pay on 10 calendar days per year.
The Employees were entitled to 10 x 12-hour days of paid personal leave per annum (120 hours in total).
The Full Federal Court accepted the argument of the Employees and held that “day” in s 96(1) refers to “the portion of a 24-hour period that would otherwise be allotted to work” (“the working day construction”).
High Court overturns the Full Federal Court decision
On 13 August 2020 the High Court of Australia set aside the decision of the Full Federal Court.
The High Court rejected “the working day construction” which had been accepted by the Full Federal Court, and instead held that what is meant by a “day” or “10 days” must be calculated by reference to an employee's ordinary hours of work.
The “10 days” in section 96(1) of the Act is two standard five-day working weeks. The High Court held that a “day” in the Act refers to a “notional day”, which consists of one-tenth of what an employee’s ordinary hours of work over a two-week period would be. The High Court acknowledged that patterns of work don’t always follow fortnightly cycles, and so the entitlement can be calculated as 1/26th of an employee’s ordinary hours of work in a year.
Lessons for employers
Under the NES, personal leave accrues as 1/26th of an employee’s ordinary hours of work in a year, for all full-time and part-time employees.
Whilst some employers may have adjusted their method for calculating paid personal leave entitlements in response to the decision of the Full Federal Court in August 2019, they can now readjust any such changes to bring personal leave entitlements in line with the methodology outlined by the High Court in this decision.
We also note that where an enterprise agreement provides for a more beneficial personal leave entitlement, employers must continue to provide that greater entitlement.
For further advice and assistance on this matter, please contact Workplace Legal on 03 9972 4950