Common sense prevails for personal leave: High Court decision in Mondelez

Yesterday, the High Court of Australia handed down its much awaited decision about personal leave entitlements in Mondelez Australia Pty Ltd v AMWU & Ors and Minister for Jobs and Industrial Relations v AMWU & Ors [2020] HCA 29. By overturning the decision of the Full Court of the Federal Court of Australia (Full Court), the High Court has adopted a common sense approach to the calculation of employee leave entitlements. The decision means that full time employees accrue personal leave according to their ordinary hours of work, regardless of their working arrangements or the pattern of hours they work. This is fair to employees, and gives employers much needed certainty when calculating leave accruals under the Fair Work Act 2009 (Cth) (FW Act).

What should employers do?

As a result of the High Court decision, employers should:

• Review their employment contracts and enterprise agreements for consistency with the approach adopted by the High Court.
   
• Revisit their payroll systems for leave accruals to ensure consistency with the High Court approach to leave accruals, especially if any changes were made following the Full Court decision.

The Mondelez case

A majority of the High Court allowed an appeal by Mondelez and the Minister for Jobs and Industrial Relations, from a judgment of the Full Court. The Full Court previously held that Ms Triffitt and Mr McCormack (Employees), employed by Mondelez at its Cadbury plant in Tasmania, were entitled to 120 hours of personal/carer’s leave per year.  This was based on the Full Court’s construction that a "day" in s. 96(1) of the FW Act meant a "working day" which in the case of the Employees, was a 12 hour shift.

The Employees were employed under an Enterprise Agreement and worked an average of 36 hours per week in a four-week roster cycle. These hours were worked in 12 hour shifts with an average of 3 shifts per week. In the Full Federal Court, Mondelez argued that the word "day" in s. 96(1) of the FW Act comprised the employee's average daily ordinary hours of work, based on an assumed five-day working week – that is, average weekly ordinary hours divided by five.

The majority of the Full Court of the Federal Court rejected Mondelez's construction holding that "day" in s. 96(1) of the FW Act referred to "the portion of a 24 hour period that would otherwise be allotted to work".

High Court decision

The High Court found that the construction upheld by the Full Court would lead to inequalities between employees with different work patterns, and so would be unfair. An employee whose hours are spread over fewer days with longer shifts would be entitled to more paid personal/carer's leave than an employee working the same number of hours per week spread over more days.

Adopting the construction  of the Full Court majority, an employee working 36 ordinary hours in a week in three shifts of 12 hours (as the Employees did) would be entitled to ten, 12-hour days of paid personal/carer's leave per annum, or 120 hours. On the other hand, an employee working 36 ordinary hours in a week in five days of 7.2 hours would only be entitled to ten 7.2-hour days of paid personal/carer's leave per annum, or 72 hours.

Similarly, on the "working day" construction of the Full Court, part-time employees would be entitled to the same amount of leave, or more leave, than full-time employees. 

As a result, the majority of the High Court adopted the Mondelez “notional day construction”, and rejected the Full Court’s “working day” construction. The High Court held that the expression "10 days" refers “to the equivalent of an employee's ordinary hours of work in a two-week period or 1/26 of their ordinary hours of work in a year.”

The High Court noted that this is consistent with the purpose of the paid personal/carer's leave scheme which is to protect employees against loss of earnings when they are unable to work for one of the reasons set out in s 97 of the FW Act.

Further, the High Court stated that the purpose of s 96 of the FW Act 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 an employee’s pattern of hours of work. As such, "10 days" is two standard five-day working weeks.