Employers need to be aware of the Federal Court’s decision in August this year in Mondelez v AMWU [2019] FCAFC 138, particularly those who employ shift workers and part-timers.
Mondelez operates the Cadbury chocolates plant at Claremont in Tasmania. The employees in the case were employed full time as confectioners, working on average three 12-hour shifts a week. Their ‘ordinary hours’ totalled 36 hours a week on average. Under s.96 of the Fair Work Act, employees are entitled to “10 days” of paid personal/carer’s leave for each year of service. Common practice has been to treat this as an entitlement to a certain number of hours of leave, based on the employee’s average daily ordinary hours, assuming a 5 day working week. For example, an employee working 36 ordinary hours per week is treated as working an average of 7.2 hours per day over 5 days. On the basis of this “notional day” the employee’s entitlement to 10 such days personal/carer’s leave equates to 72 hours of paid leave for each year of service.
Mondelez proposed a new enterprise agreement entitling the employees to 96 hours of paid personal leave per year, for full time employees who worked 36 hours per week ordinary hours in 12 hour shifts. Mondelez apparently thought that this was well in excess of the minimum entitlement under the Fair Work Act, which it assumed to be 10 “notional days” or 72 hours per year.
A dispute arose about whether the proposed entitlements met the minimum “10 day” requirement under the Act. The employees’ union argued that the employees were entitled to be paid for their ordinary hours on each of the 10 actual days of leave. In other words, if an employee worked 12 hour shifts as their ordinary hours on a working day, they were in effect entitled to a total of 120 hours of paid personal/carer’s leave per year. On that basis, the proposed enterprise agreement provided less than the minimum entitlement under the Fair Work Act.
The majority of the judges in the Full Federal Court agreed substantially with the union and held that:
- For the purposes of entitlements to personal leave under the Act, a “day” of leave is not based on an employee’s average daily ordinary hours worked in a week. Instead, personal leave accrues for each day worked over a year of service and a “day” is the portion of a 24 hour period that would be allotted to work.
- For every day of personal/carer’s leave taken, a day is deducted from the employee’s accrued personal/carer’s leave balance. If only a part of a day is taken, then the number of days in the employee’s leave balance is reduced proportionally.
- While a day of leave could be converted into hours at any time, how many hours of leave a “day” will convert into will depend on how many hours would be worked on the day the leave is taken.
What this meant was that an employee who worked 36 hours per week in 3 shifts of 12 hours was entitled to be paid for their standard hours on 10 days of sick leave in each year – in effect a total of 120 hours of paid personal/carer’s leave per year.
As a result of the reasoning in the case, an employee who works a greater number of ordinary hours per week (say the standard 38 hours) over a 5 day week, with an average of 7.6 hours per day, has a lesser entitlement to personal leave (in hours) than the workers in this case, because they have less ordinary work hours per day. Mondelez advanced this as an argument against the approach adopted by the majority judges; however the majority held that this was not an unreasonable or unfair result, but was actually consistent with the purpose of paid personal leave as providing for “income protection for employees during the periods of illness, injury or unexpected emergency”.
Another significant potential result of the decision is that there is no pro-rata reduction of the personal leave entitlement of part time employees. The Fair Work Act appears to make no express distinction between part time and full time employees, so all employees (apart from casual employees) are entitled to “10 days” personal leave per year of service. Arguably a part time employee who works 2 days per week has the same entitlement to personal leave as a full time employee, namely 10 days per year of service. Accordingly, a part time employee could theoretically be entitled to take more working weeks of personal leave than a full time employee with the same length of service. This was not directly considered in Mondelez v AMWU, as the relevant employees were classified as full-time.
Mondelez and the Commonwealth have sought leave to appeal the decision to the High Court. Pending a different outcome in the High Court, employers need to bear in mind the following key points:
- Employers should review their systems around accruing and paying leave and if entitlements are currently accrued and deducted in hours, employers will need to consider whether this is consistent with the number of days of leave required under the Fair Work Act, having regard to the pattern of ordinary hours worked by the relevant employees.
- If employees have not been paid for full ordinary hours for the required number of days of personal/carer’s leave, there is a risk of claims for back-pay and contravention of the Fair Work Act.
- Employers should review their systems for recording ordinary and overtime hours and rostering and if necessary, change the way they calculate personal leave entitlements to comply with the current interpretation of the law as determined by the Full Federal Court.