Personal leave accrual – High Court re-instates status quo

18/08/2020 - 12:41

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Mondelez Australia Pty Ltd v AMWU & Ors [2020] HCA 29

Mondelez Australia Pty Ltd v AMWU & Ors [2020] HCA 29

On 13 August 2020, the High Court of Australia overturned a ruling of the Full Federal Court of Australia (FFC) which found that paid personal leave should be calculated in “days” rather than “hours”.  The decision represents a return to the status quo method of calculating personal leave against employee’s ordinary hours of work and provides clarity for employers.

Background

The matter was initially brought to the Federal Court by Mondelez Australia Pty Ltd (Mondelez’) which was seeking declarations in regards to the correct calculation of paid personal/carer’s leave (‘Paid Leave’) under the  Fair Work Act 2009 (Cth) (the Act).

Section 96(1) of the Act states that "[f]or each year of service with his or her employer, an employee is entitled to 10 days of paid personal/carer's leave".[1] This entitlement  "accrues progressively during a year of service according to the employee's ordinary hours of work,” [2]  and thus is calculated in reference to the employee’s “ordinary hours of work.” [3]

Mondelez was the employer of the second and third Respondents (‘the Employees’). On average, the Employees worked 36 hours per week, which was performed in three 12-hour shifts. It was the position of the Employees that “day” in s 96 of the Act had its ordinary meaning of ‘working day’, being a 24-hour period that would otherwise be allotted to work (‘Working Day Construction’). Accordingly, the Employees would be entitled to 120 hours Paid Leave, being ten 12-hour shifts. Conversely, Mondelez submitted that “day” should be given its “industrial meaning”, being the average ordinary hours worked per day, based on an assumed five-day work week. Under this construction, employees working a 38-hour week would be entitled to 76 hours paid leave, calculated as ten 7.6-hour shifts.

Full Federal Court Decision

The Majority of the Full Court held in favour of the Employees and adopted the Working Day Construction. Mondelez appealed to the High Court.

High Court of Australia Decision

The majority of the High Court overturned the Federal Court’s decision, and in doing so, rejected the Working Day Construction. Instead, the High Court found that a “day” pursuant to s 96(1) of the Act refers to a “notional day” which must be calculated by reference to an employee’s ordinary hours of work. The majority recognised that s 96(1) of the Act presupposes a standard five-day working week, but not all employment arrangements follow this cycle. Accordingly, as 1 “day” amounts to one-tenth of an employee’s ordinary hours of work in a two-week period, the entitlement to “10 days” of Paid Leave can be calculated as 1/26 of an employee's ordinary hours of work in a year.

What this means for you

Employers can return to the commonly practiced method of calculating personal leave accruals, which is based on an employee’s ordinary hours of work. This means that employees who work part time will accrue personal leave on a pro-rata basis.

Personal leave no longer needs to be calculated as 10 full “days” but rather 1/26 of an employee’s ordinary hours of work in a year.

If you have any questions regarding the article please contact us on (08) 6188 3340 or reach out to our employment law specialist hello@pragma.law.

You can read the full decision here.

[1] Fair Work Act 229 (Cth) s 92(1).

[2] Fair Work Act 229 (Cth) s 92(2).

[3] Fair Work Act 229 (Cth) s 99.

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