On Thursday 13 August 2020, the High Court handed down its much-anticipated decision in the “Mondelez” case. This matter involved an appeal by Mondelez against the Federal Court Full Court decision which effectively held that 10 days personal leave under the National Employment Standards was 10 days regardless of the ordinary hours worked on any day. For Mondelez, this meant that 12-hour shift workers could have 10 days of 12 hours of personal leave per year, equal to 120 hours of personal leave per year.
The majority of judges in the High Court upheld the appeal and issued the following order:
“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.”
In explaining its reasoning, the majority said:
“Section 96 confers a progressively accruing entitlement to paid personal/carer’s leave equivalent to an employee’s ordinary hours of work in a two-week period, for each year of service. “10 days” is two standard five-day working weeks. One “day” refers to a notional day consisting of one-tenth of the equivalent of an employee’s ordinary hours of work in a two-week period. To account for the fact that patterns of work or distribution of hours do not always follow two-week cycles, the entitlement can also be calculated as 1/26 of an employee’s ordinary hours of work in a year. That construction of s 96 (“the ‘notional day’ construction”) is consistent with the legislative purposes of the Fair Work Act, the extrinsic materials and the legislative history.”
The majority also referred extensively to the Explanatory Memorandum to the Fair Work Act (FW Act) when it was introduced to Parliament in 2008, quoting the following:
“Although this is expressed as an entitlement to 10 days (reflecting a ‘standard’ five-day work pattern), by relying on an employee’s ordinary hours of work, the Bill ensures that the amount of leave accrued over a period is not affected by differences in the actual spread of an employee’s ordinary hours of work in a week.
Therefore, a full-time employee who works 38 hours a week over five-days (Monday to Friday) will accrue the same amount of leave as a full-time employee who works 38 ordinary hours over four-days per week. Over a year of service, both employees would accrue 76 hours of paid personal/carer’s leave[.]”
Therefore, if an employee simply works 38 hours each week (five-days of 7.6 hours per day), the entitlement accrued over one year is 10 days which equals 76 hours. Where hours can vary over a work cycle, ordinary hours must average a maximum of 38 per week throughout a year and therefore ordinary hours over a year cannot exceed 1976 ordinary hours. 1/26th of 1976 is 76 hours. This means that if an employee works 12 hour days, this would translate to 6.3 days of personal leave at 12 hours per day.
Uncertainty arises in relation to employees working a rostered day off (RDO) system over a four-week cycle. Such employees usually work eight hours per day, with 0.4 of an hour being carried forward to the RDO. An employee taking personal leave could be paid 7.6 hours personal leave for the day (their usual pay per day), however, where does the 0.4 accrual for the RDO come from? If the 0.4 is drawn from the personal leave balance, then this would result in personal leave being 9.5 days of leave. Employers will need to give careful consideration as to how they deal with this particular issue.
The decision does make it clear that part-time employees accrue personal leave according to their ordinary hours of work over a week. Hence a part-time employee working 19 ordinary hours per week would accrue a total of 38 hours of personal leave per year.
Message for Employers
After some years of uncertainty, employers can continue or revert to accruing personal leave on the basis of an annual accrual of 76 hours per year for full-time employees, and pro-rata for part-time employees according to their ordinary hours of work as a percentage of 38.
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If you would like advice or assistance with any of the above issues, please contact a member of our Workplace Relations team.
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.
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