The Fair Work Ombudsman has released advice that all permanent employees are entitled to 10 days of paid personal/carer's leave for each year of employment.
This is a major departure from calculating personal/carer's leave entitlements in hours, which is the approach currently taken by most employers and employees.
This is likely to cause differences in payments to and between employees, particularly part-time employees and shift workers or those with non-standard work patterns. As such, employers may need to:
- rectify underpayments and alter their current systems; and
- review budgeting and workforce planning.
Having said this, the ombudsman's advice is based on Mondelez v AMWU,(1) which may not stand. The government has announced that it will support the applicant (Mondelez) in seeking special leave to appeal the decision to the High Court. If leave is granted, the case may be overturned. The government may also seek to amend the Fair Work Act 2009 (Cth) to prevent the operation of the decision; however, in the meantime employers must comply with the act.
The ombudsman has also updated its Fair Work Information Statement, which employers must provide to all new employees when they start their job.
Mondelez sought a declaration from the court that entitlements to personal/carer's leave under its enterprise agreement were more beneficial than under the Fair Work Act.(2)
Mondelez employs permanent full-time staff in a standard pattern of 7.2 hours per day, five days per week and a shift work pattern of 12 hours per day, three shifts per week.
Under the enterprise agreement, standard pattern employees were entitled to 72 hours of personal/carer's leave per year, while shift work pattern employees were entitled to 96 hours. Each time a shift worker took paid personal/carer's leave for one shift, Mondelez would deduct 12 hours from their leave balance. Over the course of one year, Mondelez's shift workers accrued personal/carer's leave for absences for eight shifts of 12 hours. In contrast, the standard pattern employees accrued personal/carer's leave for absences for 10 shifts of 7.2 hours.
The Australian Manufacturing Workers' Union (AMWU) argued that this was wrong and that shift workers should accrue 10 shifts of 12 hours of paid personal/carer's leave per year in order to meet the minimum National Employment Standards' (NES') entitlement of 10 days' paid personal/carer's leave.
Mondelez's arguments
Mondelez argued that the entitlement to "10 days of paid personal/carer's leave" in the relevant section of the NES must be understood according to the industrial meaning of the word 'day', which was said to be a 'notional day' (ie, the average weekly ordinary hours divided by five (for an ordinary working week)).
For example, an employee who works 36 ordinary hours per week, regardless of when they work the hours, works an average of 7.2 hours per day in a five-day week. The notional day' is 7.2 hours and the employee is entitled to 10 such days, or 72 hours, of paid personal/carer's leave for each year of service. If the employee takes one day of leave, they are paid wages for 7.2 hours and these hours will be deducted from their accrued leave balance.
AMWU and shift workers' argument
The AMWU and the shift workers argued that 'day' in the relevant section of the NES has its ordinary meaning of one 'calendar day' (ie, a 24-hour period). They argued that the relevant section entitled each employee to be absent from work without loss of pay on 10 calendar days per year when ill or caring for a member of their immediate family or household. They argued that an entitlement to be paid for one day is an entitlement to be paid for the hours that would have been worked by the employee on that day were it not for their illness or caring responsibilities.
The court accepted neither party's interpretation of the word 'day'. It preferred the concept of one working day. The court found that in the relevant section of the Fair Work Act, 'day' is used in the specific context of an authorised absence from work.
The court held that in that context, the natural and ordinary meaning of 'day' is not a 24-hour period, but the portion of a 24-hour period that would otherwise be allotted to working, which the court called a 'working day'. It concluded that the natural and ordinary meaning of "10 days of paid personal/carer's leave" under the relevant section means absence from work for 10 such working days.
The court reasoned that personal/carer's leave is a form of income protection – it provides income when an employee is absent from work due to illness, injury or the need to care for a member of their immediate family or household. Therefore, the court held that the Fair Work Act should protect against loss of earnings for one working day.
The court confirmed that:
- personal/carer's leave is a form of income protection for 10 working days per year;
- each employee accrues an entitlement to the same number of working days of paid personal/carer's leave for each year of service, which means that each employee will be equally protected against their loss of earnings should the need to take leave arise;
- all employees taking personal/carer's leave, whatever their pattern of shifts, are entitled to payments reflecting the income they would have earned had they been able to work; and
- for every day of paid personal/carer's leave taken, one day is deducted from the employee's accrued leave balance.
The effect of the court's finding is that an employee can access up to 10 working days of personal/carer's leave for each year of service, regardless of the number of ordinary hours that the employee ordinarily works on those days or their pattern of work.
For example, employees working three shifts of 12 hours per week should accrue entitlements to 10 working days per year and be paid the equivalent of an ordinary shift on the days that they are absent from work due to illness or caring responsibilities.
Employers should use the ombudsman's advice as a starting point to review how their business currently accrues and deducts personal/carer's leave. Many employers will need to change their approach to personal/carer's leave.
Where an enterprise agreement applies and includes entitlements for personal/carer's leave that are purportedly more beneficial than the NES in the Fair Work Act, employers must review whether those entitlements are actually more beneficial.
Finally, employers should also consider auditing personal leave accruals and deductions for at least the past six years. Accruing, paying and deducting leave based on an employee's ordinary hours (eg, 7.6 hours), irrespective of the employee's shift length (which might be 12 hours) or part-time employment (which might be eight hours per week), is inconsistent with Mondelez and the ombudsman's update.
Mondelez is complex and raises several legal and practical questions about accruing and deducting leave. Employers should consider seeking further advice on the effect of the decision, especially if they employ part-time employees or shift workers.
Endnotes
(2) Mondelez considered the entitlement to personal/carer's leave under the NES in the Fair Work Act 2009 (Cth) 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".
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