High Court overturns Mondelez personal leave decision

The High Court has handed down its much awaited decision in the ‘Mondelez Personal Leave test case.’*

The decision clarifies the interpretation of the entitlement to personal leave under  the Fair Work Act 2009 (Cth).  The Act provides as follows

Section 96: Entitlement to paid personal/carer’s leave

1. For each year of service with his or her employer, an employee is entitled to 10 days of paid personal/carer’s leave

On 22 August 2019, the Federal Court handed down a decision that significantly changed the meaning of a ‘day’ with regards to the accrual of personal/carer’s leave. Prior to the Mondelez case^, the common industry practice was for employees to accrue 76 hours of personal/carer’s leave calculated on 10 standard working days of 7.6 hours.  Unions contended this approach denied shift workers or employees who regularly work shifts exceeding 7.6 hours their full entitlement to 10 days personal leave.

The Federal Court decided that s96(1) of the Fair Work Act provided employees with 10 days of personal/carer’s leave per year of service regardless of the length of the days. For example, if working 12 hours shifts 10 days would equate to 120 hours.

The decision made by the Federal Court was appealed and heard by the High Court on 7 July 2020. The High Court were deciding between two interpretations of the words “10 days” in section 96(1):

1. A “working day” consisting of the portion of a 24 hour period that is spent working
2. A “notional day” consisting of one tenth of the equivalent of an employee’s ordinary hours of work in a two week period

The Court stated that the first interpretation and construction of ’10 working days’ is rejected as it would give rise to ‘absurd results and inequitable outcomes’ and be contrary to the legislative purposes of fairness and flexibility the Act provides. The Court proposes that an employee whose hours are spread over fewer days with longer shifts would be entitled to more leave than those who work the same number of hours per week but spread over more days. The Court used an example of 2 employees, both who work 36 hours per week – The first works 3 shifts of 12 hours and would be entitled to 120 hours of leave, whereas the second works 5 shifts of 7.2 hours and would be only entitled to 72 hours of leave. It also gave the example of a part time employee who works one 10 hour shift a week, receiving 100 days of leave – significantly more than their full time colleagues.

Instead, the Court states that the actual construction of s96(1) is the second interpretation of a ‘notional day.’ It was decided that section 96 provides for an accruing entitlement of paid personal/carer’s leave that is equivalent to an employee’s ordinary hours of work in a two week period and therefore “10 days” refers to two standard five-day working weeks.

The Court further states that the NES recognises different patterns of work, and that is why the concept of ‘ordinary hours of work’ is applied as it can be easily used with different patterns of work. The use of ordinary hours of work in s96 is to protect employees against lost of earnings – as a result the amount of leave accrued does not vary to their pattern of hours of work.

Therefore, “one day” is considered to be one 10^th of the employee’s ordinary working hours of work in a two week period.

“The expression ’10 days’ in s 96(1) of the Fair Work Act 2009 (Cth) means an amount of paid personal/carer’s leave accruing for every year of service equivalent to an employee’s ordinary hours of work in a week over a two-week (fortnightly) period, or 1/26 of the employee’s ordinary hours of work in a year. A ‘day’ for the purposes of s 96(1) refers to a ‘notional day’, consisting of one-tenth of the equivalent of an employee’s ordinary hours of work in a two-week (fortnightly) period.”

The Decision handed down by the Federal Court in August last year has had wide reaching implications for employers over the last year, and caused significant confusion for employers and employees alike.

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* Mondelez Australia Pty Ltd v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union Minister for Jobs and Industrial Relations v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union [2020] HCA 29.

^ Mondelez v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union Known as the Australian Manufacturing Workers Union (AMWU) [2019] FCAFC 138

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