Bitter taste for chocolate-maker in sick leave decision
The Full Federal Court has handed down a decision that will have a significant impact on how employers calculate accruals and apply personal/carer’s leave for employees working non-standard or variable hours.
In Mondelez v AMWU  FCAFC 138, the Court ruled that all full-time and part-time employees are entitled to 10 working days of personal/carer’s leave for each year of service, regardless of how many hours per day or days per week the employee works.
This is a landmark decision that is inconsistent with accepted industry practice on how paid personal/carer’s leave operates and how employers should calculate sick and carer’s leave entitlements. On 17 September 2019, the Government and Mondelez announced it will challenge the Court’s decision, seeking leave to appeal to the High Court.
However, in the meantime CCER members need to be aware of the Court’s approach to paid personal/carer’s leave, as you may be affected if you employ shift workers or employees working variable hours or rosters.
The Court had to determine the meaning of a “day” in s 96 (1) of the Fair Work Act 2009 (the Act) to establish the proper construction of the entitlement to 10 days of paid personal/carer’s leave per year under the National Employment Standards (NES). The entitlement accrues progressively according to an employee’s ordinary hours of work.
Mondelez, makers of Cadbury chocolate, argued that its shiftworkers were only entitled to paid personal/carer’s leave based on an average 38 ordinary hours per 5 day week, (i.e. 7.6 ordinary hours leave per day or 76 hours per year) despite the fact those employees work 12-hour days.
The union argued that this meant employees would not receive their full daily pay for any personal/carer’s leave days they took off and would, therefore, be out of pocket.
The Government also intervened in the case in support of the employer, relying on the Act’s Explanatory Memorandum and the approach taken in the predecessor Workplace Relations Act 1996.
The 2:1 majority of the Court ruled that for the purpose of the NES a “day” means a working day, not a calendar day, and is the portion of a 24-hour period that an employee is “allotted” to work. In doing so, the Court confirmed that the entitlement to 10 paid working days of personal/carer’s leave per annum exists for all full-time and part-time employees.
The dissenting Judge supported Mondelez’s position, taking the view that because the NES entitlement was based on ordinary hours of work, the annual entitlement to 10 days of paid leave must be consistent with ordinary weekly hours of work (and should not vary based on the employee’s spread of hours on any particular day).
What does this mean for members accruing and deducting personal/carer’s leave?
The Court’s decision means that the NES enables full-time and part-time employees to be absent from work due to illness or carer’s responsibilities without loss of pay on 10 days per year.
Under this approach, varying outcomes could occur depending upon an employee’s pattern of hours, for example:
- a shift worker who performs three 12-hour shifts per week will be entitled to 10 days off per annum with payment for 12 hours (i.e. 120 hours per year) and will have 12 hours deducted from their accrued personal/carer’s leave balance for a day off sick (as opposed to the previously accepted interpretation of a ‘notional’ day of 7.6 hours).
- an employee who works varied hours on different days of the week will be entitled to 10 days off per annum with payment only for the hours they would have worked on that day. If they work six hours Monday – Thursday but only three hours on a Friday and fall ill on that day, they will only be paid for three hours and will have three hours deducted from their accrued leave balance. Over a year, if they only fell ill on Fridays their paid leave may only total 30 hours, however if the absences only occurred on the other work days, their paid leave would total 60 hours.
Either way every employee’s entitlement is to 10 working days leave.
The Court also established that:
- Paid personal/carer’s leave is a form of income protection against loss due to personal or family illness
- Personal/carer’s leave is to be calculated in working days, not hours
- For every day of personal/carer’s leave taken, an employer deducts a day from the employee’s accrued leave balance and pays the employee for the normal hours they would have worked that day
- Part-time employees accrue 10 full days per year (rather than a pro-rated amount based on a shorter working week as is usual practice)
- An employee may take a part-day of paid personal/carer’s leave, and an equivalent part-day is deducted from the employee’s leave balance.
What should members do?
The High Court challenge will take some time to occur. In the meantime CCER members need to be aware of the Federal Court’s approach to paid personal/carer’s leave, particularly if you employ shift workers or employees who work variable hours or rosters.
The decision may significantly impact the way personal/carer’s leave is managed at your workplace, depending on your employees’ patterns of work and how your payroll system operates. Many payroll systems accrue leave on an hourly basis (often with 7.6 hours reflecting one day’s accrual or 76 hours per year for full-time employees, pro-rated for part-timers). However, personal/carer’s leave is to now be calculated in working days, not hours.
Two immediate issues CCER identifies for members with employees who work varied or non-standard hours are how to properly accrue leave and how to properly determine leave liabilities at any point in time (as these may vary depending on when an employee takes leave). However, given the uncertainty about this decision, we do not suggest you need to communicate information about any changes to staff at this time.
CCER will keep you up to date with any further developments and recommends that you seek specialist advice from your payroll provider to ensure your systems are correctly calculating and processing personal/carer’s leave.