The High Court has granted an appeal by Mondelez Australia concerning the method of accruing and calculating paid personal/carer’s leave under section 96(1) of the Fair Work Act 2009 (Cth) (Act). Section 96(1) of the Act provides that “For each year of service with his or her employer, an employee is entitled to 10 days of paid personal/carer’s leave”.
Employees are entitled to access their accrued personal/carer’s leave in the following circumstances:
1. because the employee is not fit to work because of a personal illness, or personal injury, affecting the employee; or
2. to provide care or support to a member of the employee’s immediate family, or a member of the employee’s household, who requires care or support because of:
a. a personal illness, or personal injury, affecting the member; or
b. an unexpected emergency affecting the member.
The calculation of personal/carer’s leave is quite simple where an employee works a set 7.6 hours per day, 5 days a week, but what happens if an employee’s ordinary hours incorporate 12-hour days?
Federal Court’s decision
In the case of Mondelez Australia Pty Ltd v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union (AMWU) (Mondelez Case)  FCAFC 138 it was argued that section 96(1) of the Act entitled employees to paid personal/carer’s leave sufficient to cover 10 absences from work per year.
On 21 August 2019, the Full Court of the Federal Court of Australia (Full Federal Court) determined that personal/carer’s leave was to be calculated based on a “working day” construction and that the term, “day”, meant the amount of a 24-hour period that would otherwise be assigned to work; known as the “working day” construction.
In other words, if an employee’s ordinary hours were 12 hours on any given day, and that employee were to take personal/carer’s leave, they would be entitled to personal/carer’s leave equating to 12 hours.
This decision went against the standard accrual and payment processes for personal/carer’s leave.
The rejection of the “working day” construction
An appeal of the Full Federal Court’s decision in the Mondelez case was made to the High Court of Australia in August 2020 whereby the High Court needed to consider whether “day” in “10 days” referred to:
1. a “notional day” consisting of one-tenth of the equivalent of an employee’s ordinary hours of work in a two-week period; or
2. the “working day” construction (as determined by the Full Federal Court).
The High Court determined that the concept of “notional day” is consistent with the meaning of section 96(1) of the Act.
Calculation of Personal/Carer’s Leave
The findings of the High Court of Australia were as follows:
1. the term “10 days” under section 96(1) of the Act refers to two standard five-day working weeks;
2. the term “one day” refers to a notional day (consists of one-tenth of the equivalent of an employee’s ordinary hours of work in a two-week period); and
3. as some patterns of work do not follow the two-week cycle, the 10-day entitlement to personal/carer’s leave can be calculated as 1/26 of an employee’s ordinary hours of work in a year.
High Court’s Observations
In addition to its findings, the High Court observed that:
1. an entitlement to paid personal/carer’s leave accrues progressively in the course of a year of service, for all employees, by reference to ordinary hours worked and not by reference to days or working patterns;
2. employees working the same number of ordinary hours accrue paid personal/carer’s leave at the same rate and, after working the same number of ordinary hours, are entitled to be paid for the same number of ordinary hours, regardless of whether their ordinary hours over a two-week period are worked across ten, six or five days in that period; and
3. the purpose of paid/carer’s leave is to protect employees against loss of earnings, and it does that by reference to their ordinary hours of work. As a result, the amount of leave accrued does not vary according to their pattern of hours or work.
This clarification means that employers (and in particular those dealing with payroll) can return to the accrual of personal/carer’s leave on an hourly basis. When leave is taken it is deducted from the employee’s accrued paid personal/carer’s leave on an hourly basis.
Further, part-time employees are entitled to 10 “notional days” of paid personal/carer’s leave per year, which is calculated as 1/10th of the employee’s ordinary hours of work in a two-week period.
If you updated your payroll systems taking into account the Full Federal Court decision in the Mondelez case, you will need to update your system to ensure that your employees’ accruals are being recorded correctly.
Disclaimer: This summary is a guide only and is not legal advice. For more information on legislative obligations, please call NECA Legal on 08 6241 6129 or email email@example.com