Mondelez - and common sense - prevail in High Court's decision on personal/carer's leave

After some years of uncertainty, in a landmark decision¹, the High Court has clarified that:

• paid personal/carer's leave under the National Employment Standards (NES) is calculated based on an employee's ordinary hours of work; and
• '10 days' of paid personal/carer's leave is to be calculated as 1/26 of an employee's ordinary hours of work in a year.

Background

For the last few decades it has been the case in Australia that employees have been entitled to the equivalent of '10 days' of paid personal/carer's leave per year. That entitlement has been stipulated in various ways in legislation, awards and enterprise agreements.

Despite the different ways in which this entitlement has been stipulated, employers have ordinarily structured their payroll systems so that full-time non-casual employees accrue 76 hours of personal leave per year (accrued progressively throughout the year), while part-time employees accrue leave based on the proportion of the hours that they work (i.e. on a pro-rata basis).

Section 96 of the Fair Work Act 2009 (Cth) (FW Act) sets out the NES entitlement to paid personal/carer's leave. It stipulates that employees are entitled to '10 days' of paid personal/carer's leave each year. While it seemed that this was a re-statement of the existing standard, the Full Court of the Federal Court of Australia held in 2019 that the reference to 'day' in s 96(1) means 'the portion of a 24 hour period that would otherwise be allotted to work'.²

In doing so, the Federal Court opened the possibility that:

• all non-casual employees, regardless of whether they work full-time or part-time, would be entitled to 10 days of personal/carer’s leave per year of service; and
• a full-time worker who works five 7.2-hour days per week (36 hours in total) would be entitled to 72 hours of paid personal/carer's leave per year; while a full-time worker who works three 12-hour days per week (also 36 hours in total) would be entitled to 120 hours of paid personal/carer's leave per year.

This outcome represented a massive shift in the traditional thinking on paid personal/carer's leave accrual, and carried with it the potential for significant financial and other consequences for many employers.

The High Court's decision in Mondelez

The case concerned the leave entitlements of two full-time shift workers employed by Mondelez at its Cadbury chocolate plant at Claremont, Tasmania. These employees, like many others at the plant, worked a non-standard number of hours comprising (on average) three shifts of 12 ordinary hours per week, amounting to a total of 36 ordinary hours per week.

The High Court was asked to clarify whether the reference to '10 days' in s 96(1) of the FW Act entitled non-casual employees to:

• 10 'standard days' of paid personal/carer’s leave per year (10 days of 7.2 hours, based on a standard 36-hour week) (Notional Day Construction); or
• 10 ‘working days’ (i.e. 12-hour days) of paid personal/carer’s leave per year (Working Day Construction).

In support of the Notional Day Construction, Mondelez argued that a ‘day’ is a notional 7.2 hours, and that '10 days' equates to 72 hours (or two weeks) of paid personal/carer's leave per year for full-time employees.

In support of the Working Day Construction, the AMWU argued that a ‘day’ is a ‘day’, and that employees working three 12-hour shifts a week are entitled to leave on 10 of those days per year – that is, 120 hours of personal/carer's leave per year (10 shifts of 12 hours in length).

High Court decision

The majority of the High Court (Kiefel CJ and Nettle and Gordon JJ, with Edelman J agreeing) overturned the Federal Court judgment, clarifying that the Notional Day Construction applies as follows:

The expression '10 days' in s96(1) of the Fair Work Act 2009 (Cth) means an amount of paid personal/carer's leave accruing for every year of service equivalent to an employee's ordinary hours of work in a week over a two-week (fortnightly) period, or 1/26 of the employee's ordinary hours of work in a year. A 'day' for the purposes of s 96(1) refers to a 'notional day', consisting of one-tenth of the equivalent of an employee's ordinary hours of work in a two-week (fortnightly) period.

In accepting the Notional Day Construction, the High Court commented:

• the Notional Day Construction is consistent with the legislative purposes of the FW Act, the extrinsic materials and the legislative history;
• the purpose of section 96 is to protect employees against loss of earnings. It does that by reference to an employee's ordinary hours of work. As a result, the amount of leave accrued does not vary according to the pattern in which those hours are worked; and
• a shift worker with compressed hours of work and fewer days of work would be less likely to fall ill and/or need to provide care on a day of work. However, when a shift worker does need to do so, then they will need to take more hours of leave on that day of work. Accordingly a shift worker with the same ordinary hours of work will need fewer days of leave, but the same number of hours of leave, to ensure the same 'safety net' protection of income as a day worker.

Implications

The High Court decision restores the traditional approach, as found in earlier laws and awards, to the calculation of personal/carer's leave accruals.

The decision also restores fairness between workers on different rosters by confirming that non-casual employees accrue paid personal/carer's leave in accordance with their ordinary hours of work.

The High Court's decision is also a significant reminder to other courts, employers and employees, and their representatives that, in applying the FW Act, it is important to apply a common sense approach that avoids impractical, unfair and clearly unintended consequences.

¹ Mondelez Australia Pty Ltd v AMWU & Ors [2020] HCA 29

² Mondelez v AMWU [2019] FCAFC 138

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