27 September, 2019
The Full Court of the Federal Court of Australia has handed down a landmark decision in relation to how entitlements to paid personal (sick)/carer's leave should be calculated under section 96(1) of the Fair Work Act 2009 (FW Act).
The decision confirms that employees are entitled to 10 days of personal/carer's leave regardless of the pattern of hours worked.
What was the case about?
The case concerned a dispute between Mondelez (which owns Cadbury) and an industrial union, who made an application on behalf of two 12-hour shift workers, as to how entitlements to paid personal/carer's leave should be calculated under section 96(1) of the FW Act. Relevantly, section 96(1) 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".
Mondelez argued that the entitlement under section 96(1) of the FW Act must be construed according to the "industrial meaning" of the word "day"; that is, a "notional day", consisting of an employee's average daily ordinary hours divided by five. So, for example, an employee who works 36 ordinary hours a week works, or an average of 7.2 hours per day of the assumed five day week, will accrue 72 hours of personal/carer's leave each year. Under this approach, the 12-hour shift workers' entitlement to personal/carer's leave would be used up over six calendar days, i.e. 72 divided by 12 = 6.
Conversely, the Union submitted that a "day" has its ordinary meaning of a "calendar day" or a 24-hour period and that this interpretation allows employees to be absent from work without loss of income for 10 calendar days per year.
The Court noted that the differing constructions produced different practical outcomes between employees who work regular hours over five days compared to employees who compress their hours over shorter days, as commonly occurs with shift work . The Court further stated that "it is impossible to avoid unequal outcomes between employees on either construction. However, such unequal outcomes are not necessarily inequitable."
The decision
The majority of the Court rejected Mondelez's argument of a "notional day", and instead adopted a "working day" construction. On this basis, the Court determined that the shift workers were entitled to 10 x 12-hour paid personal/carer's leave days per year. In adopting this construction, the Court held that the meaning of the word "day" under section 96(1) is "the portion of a 24-hour period that would otherwise be allotted to working."
Under the "working day" construction, the court noted that whether an employee works 7.2 hours over five days or, 12-hour shifts over three days, neither group of employees would lose income, as both would be paid their base rate for the ordinary hours they would have worked if not for the illness or injury.
Appeal
The Federal government has confirmed it will seek leave to appeal the decision in the High Court, stating that the ruling will "create significant in equities between employees".
Mondelez International has also announced it will lodge its own appeal stating that the decision "creates inequality and uncertainty for businesses and workers and potentially impacts the competitiveness of local manufacturing."
Key message for employers in the retail and consumer sector
This decision poses significant implications for employers whose employees work variable hours and days. Unless and until any appeal is successful, employers should review their payroll systems to ensure that personal/carer's leave is calculated on the basis of the employee's "working day".
Mondelez v AMWU & Ors [2019] FCAFC 138
For further information, please contact:
Kristy Peacock-Smith, Partner, Bird & Bird
kristy.peacock-smith@twobirds.com
