Federal Court Rules in Major Personal/Carer's Leave Dispute
In Mondelez v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union known as the Australian Manufacturing Workers Union (AMWU)  FCAFC 138 the Full Court of the Federal Court clarified how paid personal/carer's leave (also commonly known as sick leave and carer's leave) entitlements should be paid and accrued.
WHAT WAS THE ISSUE
Section 96(1) of the Fair Work Act 2009 (Cth) (Act) provides that for each year of service, an employee is entitled to 10 days of paid personal/carer's leave. Paid personal/carer's leave can be used by an employee who is unfit for work due to a personal illness or injury or is caring for member of their immediate family or household, or to deal with an unexpected emergency involving the member.
In the Mondelez decision, Mondelez, the employer, argued that employees accrue and take paid personal/carer's leave on the basis of their average daily ordinary hours of work based on a 5 day working week. On this interpretation, all employees working the same average weekly ordinary hours would be entitled to receive the same number of hours of paid personal/carer's leave.
The union argued that the entitlement to paid personal/carer's leave is an entitlement to be absent from work for '10 calendar days' without loss of pay, with the emphasis on days rather than hours of paid personal/carer's leave.
The difference between the two interpretations can be explained in the following example:
- Mr Smith works 38 ordinary hours each week, consisting of 7.6 hours Monday to Friday.
- Ms White works 38 ordinary hours each week, consisting of:
- 12 hour shifts on Monday and Tuesday; and
- 7 hour shifts on Wednesday and Thursday.
Assume that in the last year, Mr Smith and Ms White only took paid personal/carer's leave on Monday or Tuesday. For each occasion, Mr Smith took 7.6 hours of paid personal/carer's leave to cover his 7.6 hour shift. However, Ms White took 12 hours of paid personal/carer's leave each time to cover her 12 hour shift.
On Mondelez's construction both Mr Smith and Ms White would be entitled to 76 hours of paid personal/carer's leave (10 days of an average 7.6 hours per day). Ms White's 76 hours of paid personal/carer's leave would provide for approximately six days paid personal/carer's leave on Mondays or Tuesdays. However, Mr Smith's 76 hours of paid personal/carer's leave would provide for 10 days of paid personal/carer's leave.
On the union's construction, Ms White's entitlement to paid personal/carer's leave could be up to 120 hours (10 days of her 12 hour shifts) if she only ever took paid personal/carer's leave on Monday and Tuesday. Mr Smith's entitlement to paid personal/carer's leave could only ever be 76 hours (10 days of his 7.6 hour shifts).
WHAT DID THE COURT DECIDE?
The Court clarified that paid personal/carer's leave under section 96(1) of the Act is an entitlement to be absent from work for 10 working days without loss of earnings, regardless of an employee's pattern of hours. It said a day is not based on the employee's average daily ordinary hours of work based on a working week, therefore it is not capped at 7.6 hours.
In summary, the majority of the Full Court found that the entitlement to paid personal/carer's leave is:
- an entitlement to be absent due to illness, injury or carer's responsibilities without loss of pay for 10 working days regardless of the employee's pattern of work;
- calculated in days not hours, being that for every day of personal/carer's leave taken, a day is deducted from the employee's accrued leave balance; and
- a 'statutory form of income protection for all national system employees, other than casual employees' to 'protect employees against loss of earnings when unable to work due to relevant illness, injury or unexpected emergency' whatever their pattern of shifts.
WHAT THIS MEANS FOR EMPLOYERS
As shown in the example above, the Full Court's decision means that if Ms White only took paid personal/carer's leave on a Monday or Tuesday, she would be entitled to be absent for 10 Monday or Tuesday shifts—or a total of 120 hours of paid personal/carer's leave.
In light of this decision, employers who employ staff on non-standard patterns of work should:
- review their payroll systems (including the accrual of paid personal/carer's leave on payslips), policies and procedures to determine whether they are consistent with paid personal/carer's leave being an entitlement to 10 working days;
- consider whether there are any potential underpayments and or contraventions of the Act; and
- take steps to explain the effect of this decision to staff, especially where varying patterns of work may give an appearance of inequality amongst employees.
Both Mondelez and the government, which intervened in this case, have announced that they will be seeking special leave to appeal this decision in the High Court.
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.