The cream rises to the top: Federal Court clarifies interaction of leave entitlements and public holidays - Employee Rights/ Labour Relations

In Construction, Forestry, Mining and Energy Union v Glendell Mining Pty Limited [2017] FCAFC 35 (28 February 2017) (CFMEU v Glendell), the Federal Court of Australia has confirmed that provisions contained in the National Employment Standards (NES) regarding the taking of annual and personal/carer's leave on public holidays are concerned only with employees' entitlements to such leave arising under the NES.

Those provisions do not have application to any leave employees may be granted over and above the statutory minima.

CFMEU v Glendell: The background of the case

Glendell operates a black coal mine in the Hunter Valley, and its mineworkers are covered by industrial instruments that provide an entitlement to annual leave and personal/carer's leave above the minimum entitlements contained in the NES, as follows:

an entitlement to five or six weeks' annual leave, as compared with the NES entitlement to four weeks' paid annual leave; and
an entitlement to three weeks' personal/carer's leave, as compared with the NES entitlement to 10 days' paid personal/carer's leave.

The mine operated continuously during relevant periods, meaning that Glendell's mineworkers were regularly rostered to work on public holidays. They were remunerated by way of an annualised salary which incorporated a triple time payment for working on all rostered public holidays. Accordingly, when these employees were rostered to work a public holiday and sought to be absent from work on that public holiday, a day's leave was deducted from the relevant leave balance and the employees continued to be paid as normal.

The CFMEU challenged Glendell's practice of deducting annual and personal/carer's leave on rostered public holidays on the basis that this was contrary to sections 89 and 98 of the NES contained in the Fair Work Act 2009 (Cth) (FW Act). Those sections relevantly provide as follows:

Employee not taken to be on paid annual leave at certain times
Public holidays

If the period during which an employee takes paid annual leave includes a day or part-day that is a public holiday in the place where the employee is based for work purposes, the employee is taken not to be on paid annual leave on that public holiday.
Employee taken not to be on paid personal/carer's leave on public holiday
If the period during which an employee takes paid personal/carer's leave includes a day or part-day that is a public holiday in the place where the employee is based for work purposes, the employee is taken not to be on paid personal/carer's leave on that public holiday.

At first instance, the Federal Circuit Court of Australia dismissed the CFMEU's challenge.¹ The CFMEU then appealed to the Federal Court of Australia.

THE MAJORITY JUDGMENT

Before the Full Federal Court, as was accepted in the Federal Circuit Court, Glendell argued that the limitations contained in sections 89 and 98 of the FW Act regarding leave on public holidays apply only to the leave entitlements provided under the NES (NES leave), but not to any more generous leave entitlements an employee may otherwise have (non-NES leave).

This argument reflected that the NES is intended to operate as a minimum set of employment standards, and the FW Act leaves it open to an employer to supplement them in a relatively unconstrained manner.

A majority of the Full Federal Court (Justice White and Justice Bromwich) agreed with this argument, concluding that the limitations in sections 89 and 98 of the FW Act are only concerned with an employee's entitlement to NES leave. In doing so, they accepted the following two 'limbs' of Glendell's argument before them.

The 'section 12 definition' limb

The majority accepted that the statutory definitions of leave contained in the FW Act had a role to play, and the broader construction contended for by the CFMEU – which would extend the section 89 and 98 limitations to non-NES leave – should not be accepted.

Specifically, section 12 of the FW Act expressly defines 'paid annual leave' and 'paid personal/carer's leave' to be the leave to which an employee is entitled under the relevant section of the NES. The majority accepted that incorporating these defined terms into sections 89 and 98 has the effect that the limitations in those sections only apply to NES leave, and not to any more generous non-NES leave (e.g under an award or enterprise agreement).

The 'section 55 supplementary terms' limb

The majority also accepted that section 55 of the FW Act – which deals with the interrelationship between provisions of the NES and industrial instruments – makes it clear that the section 89 and 98 limitations do not apply to any supplementary entitlements contained in an award or agreement (such as the non-NES leave provided by Glendell's industrial instruments).

Regard was had to subsection 55(6) in particular, which provides that where an enterprise agreement gives an employee an entitlement that is the same as an NES entitlement, the provisions of the NES apply to that (same) entitlement. A note to subsection 55(6) supports this conclusion, giving the example that where an industrial instrument provides an entitlement to six weeks of paid annual leave, the provisions of the NES relating to accrual and taking of leave apply as a minimum standard to four weeks of that leave (i.e. the NES leave only).

The dissenting judgment

The dissenting judgment of Justice Siopis focussed on the perceived complexity in relation to the taking and accrual of leave if the leave is split between 'NES' and 'non-NES' leave, noting this would not have been Parliament's intention. His Honour also considered that 'paid annual leave' had an ordinary meaning that was not informed by a narrow reading of the definition.

The dissenting judgement also suggested that section 114 of the FW Act provided an independent right to be absent on a public holiday that ought not be eroded, and considered that the effect of Glendell approving the leave was to release the employee from the agreement to work on public holidays which was a matter within Glendell's control.

What are the implications for employers?

The Federal Court's decision in CFMEU v Glendell means that any additional paid annual or personal/carer's leave provided by an employer under an award or agreement can be treated as 'cream' that is not subject to the NES restrictions on making leave deductions on public holidays (subject of course to the terms on which the entitlement is granted).

The decision is a sensible one, and is consistent with common practices adopted by employers such as providing additional leave on a 'use it or lose it' basis. Arguably, it could extend to other requirements relating to the taking of leave additional to the NES – such as when leave can be taken.

The Federal Court's decision touches on a number of other practical implications relating to the taking of leave which will also be of interest to employers:

During the proceedings, the CFMEU argued that one week of leave equates to five days of leave, however the majority decision confirmed that this premise was unsound.² These comments helpfully reiterate the true position in respect of leave entitlements for employees who do not work a standard Monday to Friday working week.
The majority decision lends support to the approach of deducting leave in ordinary hours when taken, which is a common deduction method applied in respect of shift workers in particular.³
The decision suggests that employers who adopt the practice of deducting leave on public holidays should be able to identify whether a particular public holiday falls during a period of NES leave or non-NES leave at the time the leave is taken.⁴ It would therefore be prudent for employers to consider how this could be best managed within their organisation, including by reviewing any leave policies and record keeping practices.

Footnotes

¹ CFMEU v Glendell Mining Pty Ltd [2015] FCCA 3152.

² [2017] FCAFC 35, para [129].

³ Ibid, para [134].

⁴ Ibid, para [102].

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