Mondelez Update

In our November 2019 blog, we outlined the Full Court of the Federal Court of Australia’s decision on what amounted to a ‘day’ for paid personal/carer’s leave under section 96(1) of the Fair Work Act 2009 (Cth) (the FW Act).

The Federal Court of Australia Decision

The case concerned two employees who worked their contracted 36 hours per week over three 12-hour days. Other employees worked their 36 hours over five days, working 7.2 hours per day. Under the Mondelez Australia Pty Ltd, Claremont Operations (Confectioners & Stores) Enterprise Bargaining Agreement 2017 (the Enterprise Agreement), employees who worked 12-hour shifts were allowed 96 hours per year of paid personal/carer’s leave. This was compared to employees who worked 7.2-hour days and were allowed 80 hours per year of paid personal/carer’s leave.

One of the declarations sought by Mondelez was that the Mondelez’s employees’ entitlement to paid personal/carer’s leave was more beneficial under the Enterprise Agreement compared to the 10 days provided by the FW Act. Both Mondelez and the Australian Manufacturing Workers Union made submissions on what amounted to a ‘day’ for paid personal/carer’s leave under the FW Act.

The majority judgment of the Federal Court of Australia held that the definition of ‘day’ should be the ‘working day’, the portion of the 24-hour period that an employee was allocated to work. Many employers that had accrued personal leave for their employees on the basis of 76 hours per year, may have fallen into error in respect of providing this to part time employees on a pro rata basis.  In our blog, we advised that employers should hold off making any changes to their systems as leave to appeal to the High Court was being sought.

The High Court Decision

On 13 August 2020, the High Court handed down their decision on the appeal. The majority judgment of Kiefel CJ, Nettle and Gordon JJ overruled the decision of the Full Court of the Federal Court of Australia.

The majority judgment of the High Court held that a ‘day’ for paid personal/carer’s leave was to be determined by the ‘notional day’, being one tenth of the employee’s ordinary hours of work in a two-week period. For those employees who do not have standard ordinary hours over a two-week period, the 10 days can be calculated as one-twenty-sixth of the employee’s ordinary hours in a year.

The majority judgment came to this decision based on the following considerations:

  • the FW Act is intended to provide ‘fairness, flexibility, certainty and stability for employers and employees’;
  • section 99 provides that paid personal/carer’s leave is to be paid at the ‘base rate of pay for the ordinary hours of work in the period’;
  • sections 96 and 99 require the determination of the employee’s ordinary hours of work and that employees are paid for the hours, not days they are absent from work;
  • section 96(2) provides that paid personal/carer’s leave accrues over a year at the employee’s ordinary hours. It is not accrued based on days or patterns of work;
  • the ‘notional day’ definition conforms with how annual leave is accrued and paid out;
  • the FW Act definition of a ‘working day’ recognises a five-day working week by excluding Saturday, Sunday and public holidays;
  • the FW Act Explanatory Memorandum outlined that paid personal/carer’s leave accrued based on an employee’s ordinary hours and paid at the employee’s base rate of pay. Further, that accrual of paid personal/carer’s leave is not affected by the spread of an employee’s ordinary hours in a week; and
  • the ‘notional day’ definition is consistent with the paid personal leave section of the Workplace Relations Act which preceded the FW Act.

Take Home

The key takeaway for employers is that employers who have accrued their employee’s entitlement to paid personal/carer’s leave on an hourly basis will not need to change their accrual system. However, employers who change their accrual system after the Federal Court of Australia decision will need to recalculate based on hours.

Examples of how to apply the High Court decision include:

  • An employee who works 38 hours per week at 7.6 hours per day will accrue 76 hours of paid personal/carer’s leave in a year of service. The employee will be paid 7.6 hours for each day paid personal/carer’s leave taken.
  • An employee who works 38 hours per week at 12 hours for two days and 14 hours for one day each week will also accrue 76 hours of paid personal/carer’s leave in a year of service. This employee will be paid 7.6 hours for each day of paid personal/carer’s leave taken. This is so even though the employee would normally work 12 hours in a day.
  • An employee who works 24 hours per week will accrue 48 hours of paid personal/carer’s leave in a year of service. This employee will be paid 4.8 hours for each day of paid personal/carer’s leave taken no matter how many hours they were due to work on the day taken.
  • An employee who works 43 hours per week made up of 38 ordinary hours and 5 hours overtime each week will accrue 76 hours of paid personal/carer’s leave in a year of service. The employee will be paid 7.6 hours for each day of paid personal/carer’s leave taken no matter how many hours they were due to work on the day taken. The accrual of paid personal/carer’s leave does not take into account any overtime the employee would have worked.
  • For an employee who does not have regular weekly or fortnightly hours but works 50 hours each month, or 600 hours per year, will accrue 23.08 hours of paid personal/carer’s leave in a year of service. An employee would be paid 2.308 hours each day of paid personal/carer’s leave taken.

If you have any questions about the High Court decision, or how to calculate paid personal/carer’s leave, please contact us on 02 8436 2500 or by email to info@pcclawyers.com.au.

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Jessica Hatton

Jessica graduated from the University of New England in 2018 with a Bachelor of Laws and Bachelor of Business majoring in Human Resource Management. Jessica was admitted as a Solicitor in July 2018, and following her admission, Jessica practiced in property law in Tamworth, NSW. With an interest in employment law and human resources, Jessica moved to Sydney in 2019 to join PCC Employment Lawyers. Jessica has gained experience in a wide range of workplace law areas, including employment contracts, Unfair Dismissal matters, General Protections Applications, Workplace Investigations, Enterprise Bargaining, corporate governance, and discrimination.

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