End of “days”: Mondelez succeeds on the accrual, deduction and payment of personal leave under the Fair Work Act 2009
admin@hlslegal.com.au | October 14, 2020
The High Court has closed the book on the contentious issue of the proper approach to the accrual, deduction and payment of personal leave under the Fair Work Act 2009 (Cth) (the Act).
In the decision handed down on 13 August 2020,[1] the majority of the High Court held that:
- the “10 days” of personal leave entitlement referred to in s 96 of the Act means two standard five-day working weeks;
- a “day” is a notional day; and
- a notional day is one‑tenth of the equivalent of an employee’s ordinary hours over a two week period or 1/26 of an employee’s ordinary hours of work per year where patterns of work or distribution of ordinary hours do not follow two-week cycles in a two-week period.
In doing so, the majority sided with the employer, Mondelez, and the Minister for Jobs and Industrial Relations, and overturned an earlier decision of the Full Court of the Federal Court.
Relevantly, the Full Court of the Federal Court had held in favour of the union’s argument that 10 days meant 10 separate days, or periods of 24 hours.
Mondelez’s position
In essence, Mondelez’s position was that it was entitled to compress the 10 day entitlement in s 96 of the Act into a period of less than 10 days where an employee worked an average of 36 ordinary hours over 12 hours shifts. Mondelez’s position was contingent on Mondelez being entitled to treat the 10 day entitlement in s 96 of the Act as an entitlement which accrues and can be deducted on the basis of predetermined ordinary hours, namely 96 ordinary hours.
The union’s position
The union contended that the accrual of the 10 day entitlement was not quantified by the employee’s ordinary hours of work and was 10 separate but distinct days of leave. This was regardless of whether the employee was full time, part time or worked in accordance with a roster.
The majority’s findings
Relevantly, the majority found that the legislative intention of s 96 of the Act was that the 10 day entitlement meant two weeks of the employee’s ordinary hours of work.
Kiefel CJ, Nettle and Gordon JJ held that “…[I]n s 96(1), read in its statutory context, what is meant by a “day” or “10 days” must be calculated by reference to an employee’s ordinary hours of work… Construing the expression “10 days” as referring to the equivalent of an employee’s ordinary hours of work in a two-week period, or 1/26 of their ordinary hours of work in a year, is consistent with the purpose of the paid personal/carer’s leave scheme and, in particular, that of s 96, which is aimed at protecting employees against loss of earnings when they are unable to work for one of the reasons set out in s 97. And it is for those reasons that the scheme confers leave entitlements by reference to an employee’s ordinary hours of work, rather than the number of days worked by an employee.”
On this basis, the majority held that Mondelez was entitled to accrue personal leave for its shift workers based on 36 ordinary hours per week and compress the entitlement into eight 12 hour shifts.
What next?
Employers who have followed the majority’s approach to the accrual, deduction and payment of personal leave will be comforted by the decision.
In particular, those who compress ordinary hours into a roster arrangement.
The decision also has implications for the accrual, deduction and payment of annual leave.
The language which the majority found that the accrual, deduction and payment of personal leave was linked to ordinary hours is the same for the annual leave provisions of the Act.
Accordingly, it is arguable that annual leave can also be quantified in terms of ordinary hours and can be compressed into a shift roster. However, this is an issue that the High Court is yet to consider directly.
In light of the employer friendly outcome of the decision, employers may want to reassess how they accrue, deduct and pay personal leave in their business.
However, any changes should be made cautiously in order to avoid breaching any contractual agreement or other enforceable arrangement which exceeds the Act.
If you have any questions about how this decision may affect your business, please contact HLS Legal on (08) 9322 5202.
This article is intended to be informative only and does not constitute legal advice. If you are concerned about your individual circumstances, please contact a lawyer.
