The understanding of these three commonly used, yet easily misunderstood constructs was recently tackled by the High Court in Modelez Australia v AMWU  HCA 29.
Why they are often misunderstood and poorly applied is because the Australian workplace is no longer restricted to a 38 hour, five day working week. Rather, the modern workplace is now more accurately populated by a combination of your 9 to 5 full-time employee and casual, part-time and FIFO employees, who by contrast, work to a variety of flexible rosters.
This decision is of particular importance to those employers whose employees are either part-time, or whose ordinary hours of work are compressed over less than the traditional five day week.
What is the entitlement?
The entitlement to personal leave arises out of section 96 of the Fair Work Act. In short s 96(1) stipulates that all full-time or part-time employees are entitled to ten days of paid personal/carer's leave' for each year of employment. Using the old adage, this is the employee's entitlement to 'sick and carer's leave that is paid leave, which accrues annually and is uncapped.
Historically, across a range of industries, employers have had some difficulty in understanding how to apply this section of the Act. We expect that this decision will go a considerable distance in settling the interpretation of what constitutes a 'day'.
Modelez operates a number of food manufacturing plants including a Cadbury plant in Tasmania. It is party to an enterprise agreement which also applies to the AMWU. Plant employees work 36 hours a week on either eight or 12 hours shifts.
The question exercising the Court was whether those employees were entitled to:
- 76 hours of personal/carer's leave a year, which is the 'notional day' approach that is in line with the traditional view that leave accrues and is paid based on ordinary hours of work, (7.6 hrs) or;
- 120 hours of personal/carer's leave, which was the position of the union, that translates to the number of calendar days worked, which would result in the affected employees being entitled to 120 hours of personal/carer's leave.
In upholding the appeal and finding for Modelez, the plurality of the Court (4-1) overturned the earlier Federal Court decision and in doing so, endorsed the 'notional day' approach. In doing so, it rejected the 'working or calendar day' approach endorsed by the Federal Court noting that if adopted, this approach would "give rise to absurd results and inequitable outcomes".
The Court's reasoning for the adoption of the notional day ought to be of interest, in that it found that this interpretation:
- is consistent with the objects of the Act to provide fairness, flexibility and certainty to for employers and employees;
- accords with the Act in its interpretation of what a 'day' is;
- accords with the way the entitlement is described in the Explanatory Memorandum to the Bill; and
- complies with the understanding first set out in the previous Workplace Relations Act 1996.
Impact for Employers
In short, huge relief. Whilst it is desperately disappointing that a widely applied and understood interpretation of calculating the entitlement needed to be reinforced by the High Court, it is nonetheless an enormous victory for orthodoxy and common sense. In difficult times this decision provides welcome certainty for employers, when calculating the payment of employee leave entitlements.
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.
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