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In a long-anticipated decision, the HCA has overturned the illogical decision of the Full Court of the Federal Court of Australia in relation to its interpretation of the definition of a “day” for the proposes of the NES.
The following information has been derived from information provided by the Fair Work Ombudsman and analysis by Kingston Reid lawyers (and HR@Work sponsors) Dominic Fleeton and Shivani Gosai.
Also, important, the FWO has updated the Fair Work Information Statement that must be provided to all new employees We’ve also updated the information on our Paid sick and carer’s leave and Payment for sick and carer’s leave pages, as well as the Fair Work Information Statement.
On 13 August 2020, the High Court of Australia handed down a decision clarifying how paid personal/carer’s leave is accrued and taken under the National Employment Standards (NES).
In the decision of Mondelez Australia Pty Ltd v AMWU & Ors  HCA 29, the High Court clarified that:
- the entitlement to 10 days of personal/carer’s leave under the NES is calculated based on an employee’s ordinary hours of work, not working days
- 10 days of personal/carer’s leave is calculated as 1/26 of an employee’s ordinary hours of work in a year.
The High Court’s decision overturns a decision made by the Full Federal Court of Australia in August 2019. In that decision, the Full Federal Court held that personal/carer’s leave accrues in working days, not hours.
Kingston Reid analysis
Read on, or read the article here.
The Kingston Reid’s report by Dominic Fleeton and Shivani Gosai report headed “Keep calm and carry on accruing paid personal leave based on ordinary fortnightly hours…” advises that…
Employers can breathe a heavy sigh of relief!
By a majority (4:1), the Court has overturned last year’s Full Federal Court majority decision which found that section 96 of the Fair Work Act 2009 (Cth) entitles all employees (except casuals), regardless of their weekly hours of work, to 10 days of paid personal leave per year, with a “day” being the portion of a calendar day that would be allotted to working. The High Court majority found that such an interpretation “would give rise to absurd results and inequitable outcomes and would be contrary to the legislative purposes of fairness and flexibility in the Fair Work Act”.
The HCA decision confirms that a ‘day’ is a “notional day consisting of one-tenth of the equivalent of an employee’s ordinary hours of work in a two-week period” for the purposes of accruing and taking paid personal leave under the Act.
The key arguments advanced by Mondelez in support of its “average day” construction of the word “day” were that:
- It means that the leave entitlement is effectively converted into hours based on an employee’s ordinary hours of work over a week, regardless of how those hours are distributed throughout the week. For example, an employee who works 36 hours per week will have worked, across a standard five-day working week, 7.2 hours per day on average. Over the course of the year, that employee will accrue 72 hours personal leave, irrespective of the number of days over which that employee’s hours are worked.
- It ensures that leave accrual for part time employees achieves the expected results. For example, a part time worker who works half the weekly hours worked by a full-time colleague accrues half the amount of personal leave that the full-time employee accrues.
- Interpreting a “day” based on a “calendar day” or “24-hour period” (as the Full Federal Court majority did), produces varied results as to the accrual of personal leave. For example, an employee who works 36 ordinary hours per week at 7.2 hours per day would accrue 72 hours of personal leave per year. Comparatively, if the 36 hours were compressed into 3 x 12-hour shifts, that employee would be entitled to 120 hours of personal leave per year.
- For employees who work different hours on different days, their “day” will vary depending on the day that the leave is taken.
- Ultimately, the High Court majority accepted these arguments and rejected the working day construction, finding that such a construction would lead to inequalities amongst employees with different work patterns, resulting in unfair outcomes.
- In particular the majority noted that an employee whose hours are spread over fewer days but with longer shifts would accrue more paid personal leave than an employee working the same number of hours throughout the week, with shorter shifts, spread over more days.
- The majority also noted that the “working day” construction would discourage employers from employing anyone other than on a five-day working week basis, which would not be consistent with assisting employees to balance their work and family responsibilities.