There is often confusion of how employers should calculate and pay employees' personal, carer's and sick leave, on the basis of hours and days. The decision of the Full Federal Court in Mondelez v AMWU  has raised some fundamental questions (and confusion and uncertainties) about the technicalities of how employers accrue hours or days for personal/carer's leave and how this leave is paid.
This may not be the final word on these issues because the Federal Government announced last week that it will be appealing to the High Court, seeking to overturn the decision. However, it is the law unless there is a different decision on appeal.
If an employee is unfit for work due to a personal illness, injury or unexpected emergency, or where they need to provide care and support to an immediate family or household member, they will be entitled to take personal/carer's leave for that period - only after they have notified their employer of their absence and provided it with evidence (if asked to do so), of course.
If an employee ordinarily works a 7.6 hours per day, and they are unfit to attend work on a particular day, 7.6 hours would be taken out of their accrued personal/carer's leave balance. Alternatively, if the employee presented for work, worked a couple of hours and went home sick, those hours would be taken from their leave balance.
What happens if an employee usually works 12 ordinary hours a day? Would personal leave be due for the whole 12 hours, or only 7.6 as the "usual" workday?
This precise question was answered by the Full Court of the Federal Court in Mondelez, and the answer was not as straight forward as you may think.
Mondelez is a food manufacturer operating out of four sites across Australia.
In 2017, Mondelez negotiated a new Enterprise Agreement with its employees and the union. The Enterprise Agreement contained an entitlement to 96 hours of personal/carer's leave per year for employees who worked 12-hour shifts and 80 hours for other employees. A dispute arose during the FWC approval process, in relation to how the entitlement to paid personal/carer's leave is to be calculated under the Fair Work Act.
Mondelez commenced proceedings seeking clarity on this issue, and given the public interest in the matter, Federal Minister for Small and Family Business, the Workplace and Deregulation was granted leave to intervene. The union represented two 12-hour shift employees who thought they were not getting the personal leave they were entitled to.
The arguments of the parties concerned the interpretation of what constituted a "day", as the Fair Work Act provides for "10 days of paid personal/carer's leave":
- Mondelez argued that a "day" did not refer to a "calendar day" but to its "industrial meaning" of a "notional day" which referred to average daily ordinary hours based on a five-day week – so personal/carer's leave over the year was 76 hours (10 days x 7.6 hours) under the National Employment Standards because the Enterprise Agreement was offering 96 or 80 hours, this was more generous than the NES entitlement and employees were better off overall under the Enterprise Agreement.
- The Minister supported Mondelez and argued that "10 days should be understood as a reference to an entitlement to take a particular number of hours of personal/carer's leave for every year of service".
- The union argued that a "day" had "its ordinary meaning of a calendar day, which is a 24-hour period" and therefore an employee should be paid personal/carer's leave for the time that he/she would have worked on that day, but for the personal illness or injury or caring responsibility. Therefore, employees working 12 ordinary hours should be entitled to 120 hours of personal/carer's leave, not 96 hours as contained in the Enterprise Agreement. On this basis, these employees were not better off under this agreement.
Two out of the three judges (Bromberg and Rangiah JJ) accepted the arguments put forward by the union, finding that an employee is entitled to paid personal/carer's leave for the ordinary hours he or she would have worked, had they not been on personal/carer's leave.
So, an employee working 12-hour shifts, would be entitled to 120 hours of personal/carer's leave per year. In coming to its decision, the majority was of the view that the purpose of personal/carer's leave is like income protection, being to "protect employees against loss of earnings when unable to work due to relevant illness, injury or unexpected emergency." So the employee should not be paid less than they would have earned for ordinary hours (not overtime) on that day.
Further, the majority held:
- "day" of leave is the portion of a 24-hour period that would otherwise be allotted to work (a "working day"). It is not capped at 7.6 hours per day (as an average of 38 hours divided by 5 days);
- "the amount of paid personal/carer's leave that may be taken in a year is limited to the amount that has been accrued, but is not otherwise limited"; and
- personal/carer's leave can be taken for a part-day or a couple of hours and accordingly, that time would be taken from the employee's leave accruals.
O'Callaghan J did not agree with the majority decision because of the inequity and "disparate results" it produced for employees working different ordinary hours. He commented that the effect of the majority decision would mean that employees who worked 12-hour shifts would be entitled to 120 hours of personal/carer's leave per year which was significantly more beneficial compared to other employees who would be entitled to 76 hours. His Honour, further stated that the outcome of the case, "created inequities between different classes of employees that Parliament did not intend".
Most of the judges did not accept that argument, because the accrual only set the amount of potential leave, not the right to take the leave, which would depend on whether circumstances arose entitling the employee to take the leave. If an employee works 12 ordinary hours, then it is only fair for that employee to be paid personal/carer's leave for the full day, rather than part of it.
So, what does this mean for your business (at the time this article was written)?
- where employees work ordinary hours longer than 7.6 hours a day, employers should double check that personal leave accrual rates are set up correctly in their payroll systems to capture the longer hours as the leave entitlement;
- if personal leave is currently accrued and deducted in hours, consider whether the number of hours each employee accrues is consistent with the number of days required under the Fair Work Act, and the actual length of those days; and
- if your personal leave balances are not accruing correctly, you could be exposed to employee underpayment claims and substantial fines for breaching the Fair Work Act. The accruals should be corrected either systemically, or perhaps case by case as personal leave claims arise, or if you prefer to wait, you can see what the High Court says on the appeal.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.