Clarity on personal/carer’s leave

THE HIGH COURT handed down its much awaited and welcome decision in Mondelez Australia Pty Ltd v AMWU & Ors [2020] HCA 29 on 13 August 2020 which clarified recent uncertainty concerning how the entitlement to paid personal/carer’s leave is calculated under the National Employment Standards (NES) in the Fair Work Act 2009 (Cth).

The High Court decision determined 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, and not working days;
• •10 days of personal/carer’s leave can be calculated as 1/26 of an employee’s ordinary hours of work in a year.

The High Court decision reverses the controversial decision of the Full Federal Court in Mondelez Australia Pty Ltd v AMWU & Ors [2019] FCAFC 138 on 21 August 2019 that personal/ carer’s leave was calculated in working days, and not hours.

Background

The case involved two employees who worked 36 ordinary hours per week, being three 12-hour shifts averaged over a four-week cycle. The dispute concerned the paid personal/carer’s leave entitlement for these employees.

The union argued that the employees should be entitled to 10 days of personal/carer’s leave at 12 hours per day (i.e. 120 hours of paid personal/carer’s leave per year of service).

The employer argued that like other employees who worked 36 hours per week, these employees were entitled to 10 days of personal/carer’s leave at 7.2 hours per day (i.e. 72 hours of paid personal/carer’s leave per year of service).

Full Court decision

In its controversial decision on 21 August 2019, which the High Court has since reversed, the Full Court found that the employees were entitled to 10 working days of personal/carer’s leave for each year of service, a working day being the portion of a 24-hour period that an employee would otherwise be working.

The Full Court decision meant that the employees in this case were entitled to 120 hours of paid personal/ carer’s leave per year of service. This decision changed the status quo as it represented a departure from the generally understood method of calculating personal/carer’s leave entitlements.

Appeal to High Court

Employers across Australia viewed the Full Court decision as problematic because of the cost impacts for employers. It also created barriers to part time and flexible working arrangements for employees.

The Australian Government and the employer applied to the High Court to appeal the Full Court decision. The High Court granted these applications on 13 December 2019 and an appeal was heard in the High Court on 7 July 2020.

High Court decision

On 13 August 2020, the High Court handed down its decision to allow the appeal. It found that the Full Court’s interpretation was not consistent with the purpose or stated objectives of the Fair Work Act of fairness, flexibility, certainty and stability. The High Court rejected the Full Court’s construction, finding that it would lead to inequalities between employees with different work patterns, and so would be unfair.

The High Court instead found that the employee’s entitlement to 10 days of personal/carer’s leave for each year of service should be calculated by reference to an employee’s ordinary hours of work where 10 days is two standard five-day working weeks or, because patterns of work do not always follow two week cycles, 1/26 of an employee’s ordinary hours of work in a year.

What does this mean for employers?

The High Court decision is welcome news for employers. It is now no longer necessary to change how leave is calculated, adjust employee leave balances or review your exposure to potential underpayment claims.

The status quo before the Full Court decision prevails. Employees will continue to accrue personal/carer’s leave based on their ordinary hours of work. When leave is taken it is deducted from the employee’s accrued paid personal leave on an hourly basis.

You should check your payroll system and employee records to ensure that the entitlement to personal/ carer’s leave is in line with the High Court decision.

How can AMA assist?

If you have any questions about personal/carer’s leave or any other workplace matter, contact the AMA (NSW) Workplace Relations Team by emailing workplace@amansw. com.au.