High Court Delivers Landmark Judgment

On 13th August 2020, the High Court handed down the landmark decision of Mondelez Australia Pty Ltd v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union [2020] HCA 29 (‘Mondelez v AMWU’). The matter clarifies the interpretation of the ‘10 day’ entitlement of personal/carer’s leave under section 96(1) of the Fair Work Act 2009 (Cth), by determining what is meant by a ‘day’ of personal/carer’s leave.

Background

The matter was originally heard in the Full Court of the Federal Court in Mondelez v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union Known as the Australian Manufacturing Workers Union [2019] FCAFC 138.

The dispute related to the following provision of the Fair Work Act 2009 (Cth) (‘Act’):

SECT 96: Entitlement to paid personal/carer’s leave

(1)  For each year of service with his or her employer, an employee is entitled to 10 days of paid personal/carer’s leave.

(2)  An employee’s entitlement to paid personal/carer’s leave accrues progressively during a year of service according to the employee’s ordinary hours of work, and accumulates from year to year.

The matter concerned the issue of the accrual of paid personal/carer’s leave under the Mondelez Australia Pty Ltd, Claremont Operations (Confectioners & Stores) Enterprise Bargaining Agreement 2017 (‘EBA’).  Under the EBA, the employees who brought the dispute worked regular 12-hour shifts and were entitled to 96 hours of paid personal leave per year, equating to 8 days of leave. The AMWU argued that such entitlement under the EBA is inconsistent with section 96(1) of the Act, as it denies employees who regularly work shifts longer than 7.6 hours their full entitlement of 10 days paid leave.

Issue in dispute

The issue in this matter relates to the interpretation of the word ‘day’ in the context of an employee’s right to 10 ‘days’ paid personal/carer’s leave under the Act.

It was the AMWU’s submission that the ‘working day’ should be interpreted as being consistent with a ‘calendar day’ or a 24 hour period. The ‘working day’ interpretation allows all employees to take their 10 day leave entitlement per year, regardless of their shift patterns or hours of work. The Mondelez employees of this dispute regularly worked 12 hour days, which equated to eight 12 hour days according to their EBA rather than 10 days of personal/carer’s leave prescribed under the Act.

On the other hand, Mondelez and the Minister submitted that the word ‘day’ was to be interpreted as a ‘notional day’ consisting of an employee’s average daily ordinary hours based on an assumed five-day working week. This means that paid personal/carer’s leave would be proportionally calculated based on an employee’s ordinary hours of work.

Decision of the Full Court of the Federal Court (2019)

The Federal Court decision preferred the AMWU’s ‘working day’ approach. This decision was significant in that it would have the effect of changing the way personal leave accrued into the future, as Australia historically applied a ‘notional day’ approach.

The High Court’s decision

On appeal, the High Court reached a decision which overturned the Federal Court’s decision. The High Court favoured the ‘notional day’ approach, which considers one ‘day’ of work as one tenth of an employee’s ordinary working hours in a two week period.

The High Court found that the adoption of a ‘working day’ approach would have adverse consequences for irregular or flexible work patterns. Under this approach, employees with hours spread across fewer days with longer shifts could accrue more leave, making entitlements unfair and reducing the desirability for employers in adopting more flexible work arrangements. The ‘notional day’ approach was found to avoid these adverse consequences, and better protect against loss of earnings and support flexible work arrangements.

Consequences of the decision

The effect of the High Court’s decision is as follows:

• Employees are paid personal/carer’s leave equivalent to their ordinary hours of work in a two-week period and is calculated proportionally depending on an employee’s ordinary hours of work at the rate payable for those ordinary hours.
• For employees who do not follow a two-week work pattern, the entitlement will be accrued at a rate of 1/26 of their ordinary hours in a year, at the rate payable for those ordinary hours.
• The accrual and payment of personal/carer’s leave will not be affected by differences in the spread of an employee’s ordinary hours of work in a week.
• Any personal/carer’s leave taken will be deducted based on ordinary hours taken as leave.

Boylan Lawyers are available to provide legal advice on any of your employee entitlement questions.

Please phone us on 8632 2777 for a free initial consultation.