High Court confirms how the entitlement to personal leave is calculated
On 21 August 2019, the Full Court of the Federal Court of Australia (Full Court) handed down its decision of Mondelez Australia Pty Ltd v AMWU [2019] FCAFC 138 and held that all employees, both full-time and part-time, are entitled to accrue 10 days of paid personal/carer’s leave (Personal Leave) for each year of employment pursuant to section 96(1) of the Fair Work Act 2009 (Cth) (the FW Act). The Full Court also held that Personal Leave must be calculated in working days, not hours. A ‘working day’ was defined by the Full Court as the portion of a 24-hour period that an employee works. A summary of the Full Court’s decision is available here.
Mondelez Australia Pty Ltd (Mondelez) appealed the Full Court’s decision to the High Court of Australia (High Court). On 13 August 2020, the High Court allowed the appeal, overturned the Full Court’s decision and provided clarity as to how the entitlement to paid personal/carer’s leave is calculated under section 96(1) of the FW Act.
Decision of the High Court
The proceedings concerned two Mondelez employees (the Employees) who worked 36 hours per week averaged over a four-week cycle. Their 36 ordinary hours of work per week were worked in three, 12-hour shifts.
The major issue on appeal was how the entitlement to Personal Leave is calculated under section 96(1) of the FW Act. In particular, the issue was whether ‘day’ in ‘10 days’ in section 96(1) of the FW Act 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; or
- 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 ten working days per year.
The majority of the High Court held that the ‘notional day’ construction (as submitted by Mondelez) is the answer to the above question. The High Court determined this is consistent with the legislative purposes of the FW Act and common sense. The Australian Manufacturing Workers’ Union’s ‘working day’ construction of section 96(1) of the FW Act was rejected by the High Court on the basis that “it would give rise to absurd results and inequitable outcomes”.
An employee is entitled to 10 ‘notional’ days of Personal Leave for each year of service with their employer, not necessarily actual days. That entitlement “accrues progressively during a year of service according to the employee’s ordinary hours of work…” pursuant to section 96(2) of the FW Act. The entitlement to Personal Leave is paid at the employee’s base rate of pay for the employee’s ordinary hours of work in the period. It is therefore necessary, as the High Court noted, to ascertain an employee’s ‘ordinary hours of work’ and the rate of pay payable for that work in order for the employee to be paid for that leave.
The High Court held that ‘10 days’ in the context of Personal Leave refers to the equivalent of an employee’s ordinary hours of work in a two-week (fortnightly) period, or put another way, 1/26th of their ordinary hours of work in a year. It was confirmed that a ‘day’ for the purposes of section 96(1) of the FW Act refers to a ‘notional day’ consisting of one-tenth of the equivalent of an employee’s ordinary hours of work in a two-week (fortnightly) period.
In applying the High Court’s construction of section 96(1) of the FW Act to the Employees of Mondelez, as their ordinary hours of work per fortnight equate to 72 hours (3 x 12 hours per shift), if one of the Employees was sick on one of their working days, they would be entitled to receive 12 hours’ pay. Over a 12-month period, the Employees would be effectively entitled to six ‘days’ (12 hours) of Personal Leave.
Take Home Messages
Personal Leave accrues by reference to ordinary hours worked and not by reference to days or working patterns. The ‘10 days’ referred to in section 96(1) of the FW Act refers to ‘notional days’ rather than ‘working days’.
Employers may therefore need to determine the ordinary hours of work for each of their employees over the preceding 12 month period to calculate the correct entitlement to Personal Leave if those ordinary hours vary – for example, for part-time employees. Don’t forget – overtime is not included in ordinary hours.
For more specific information on any of the material contained in this article please contact Sathish Dasan on +61 8 8210 1253 or sdasan@normans.com.au, Lincoln Smith on +61 8 8210 1203 or lsmith@normans.com.au or Michael Foley on +61 8 8217 1355 or mfoley@normans.com.au.
