The Way Personal Leave Is Calculated May Be About To Change

Case Law Update: Mondelez Australia Pty Ltd v AMWU & others (VID 731/2018)

A case currently before the Federal Court of Australia could potentially change the way that personal leave for employees is awarded in the future.

Mondelez Australia Pty Ltd (formerly Cadbury)(‘Mondalez’) developed an Enterprise Agreement with their employees, which afforded the 12 hour shift employees 96 hours of personal/carer’s leave per year. A ‘standard’ 38 hour per week employee accumulates just 76 hours of personal/carer’s leave per year, based on a ‘standard’ 7.6 hour work day.

 

How is personal leave calculated?

 

Standardly, personal/carer’s leave is calculated accumulatively, to a total of 10 days a year. This reflects section 96 of the Fair Work Act which 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.” [1]

It is the interpretation of this section which is the basis of the current litigation. There has been some inconsistency in employment terms as to whether 10 days means 10 average, ordinary days per a 38 hour week, or a standard day in that particular worker’s contract; i.e. a 12 hour shift worker would have more hours in a work day than a 38 hour, 5 day per week worker.

 

The Fair Work Commission’s Recent Interpretation Of Personal Leave Calculations

 

This concept was tested recently in the matter of AWU v AstraZeneca Pty Ltd [2018] FWC 4660.

Here, employees’ personal leave accrued at a standard rate, so as to accumulate 10 days or 76 hours of leave per year. However, employees on different rosters would use their leave differently, as explained by the AWU in their submissions, such that:

  1. An employee working on Roster 1 who accrues 72 hours of personal/carer’s leave each year of services, and has 12 hours deducted from their leave balance on each occasion they are absent for an entire shift, will exhaust his/her annual entitlement after being absent for six (6) full shifts.
  2. An employee working on Roster 2 who accrues 72 hours of personal/carer’s leave each year of services, and has 10.28 hours deducted from their leave balance on each occasion they are absent for an entire shift, will exhaust his/her annual entitlement after being absent for seven (7) full shifts.
  3. An employee working on Roster 3 who accrues 76 hours of personal/carer’s leave each year of services, and has eight hours deducted from their leave balance on each occasion they are absent for an entire shift, will exhaust his/her annual entitlement after being absent for 9.5 shifts, hence the entitlement will be exhausted during his/her absence on the 10th shift.[2]

In AstraZeneca, employees on different rosters accumulated leave at the same rate, but were required to use it in greater proportions. The Commission ultimately upheld the interpretation provided by the AWU, in that the entitlement should actually be calculated based on the length of shifts completed by shift workers who work 12-hour or greater shifts, reflecting their ‘typical’ work day. Lyndall Dean, Deputy President for the Fair Work Commission concluded that she “cannot accept AstraZeneca’s submission that the entitlement to 10 days of paid personal/carer’s leave means an entitlement to payment equal to the time that would have been worked on 10 ordinary or standard days of averaged ordinary hours, i.e. of 7.2 or 7.6 hours duration.”[3]

 

The Current Federal Court case

 

Mondelez, however, seeks a different interpretation and has taken its case to the Federal Court for clarification, stating that the Fair Work Commission had previously given “inconsistent decisions”.[4] The interpretation of what a ‘day’ actually means is at the centre of the case. The Mondalez Enterprise Agreement give 96 hours per year personal leave, which is above the 76 hour standard, but is not equal to 10 working days for a 12 hour shift worker.

The clarification of the meaning of a ‘day’ in these circumstances is crucially important and could have widespread effect across all employment sectors. If the Federal Court concludes that the Mondelez Enterprise Agreement is in accordance with section 96 of the Fair Work Act, then it effectively overturns recent decisions made by the Fair Work Commission. However, if the Federal Court finds that a ‘day’ means the ordinary hours a person is required to work in a 24 hour period, then many businesses will be affected.

 

What The Decision Could Mean

 

Peter Strong, the Chief Executive of the Council of Small Business Organisations Australia is concerned about the potential ramifications such an outcome would have. “This would lead to thousands of SMEs going bankrupt instantly. This would mean employees wouldn’t get anything, and they’d just lose their jobs.”[5]

If the Federal Court upholds the Commission’s AstraZeneca decision in Mondalez, small businesses with shift workers could have employees making claims for back pay, employees who had run out of leave may be entitled to more, and leave entitlements would have to be fully recalculated. Small businesses would struggle to employ anyone outside of a standard 38 hour week, as the leave entitlements would severely impact on the business’ capacity to make a profit.

With this matter now within the jurisdiction of the Federal Court it will certainly be one to watch, with the outcome potentially affecting small businesses throughout Australia.

Keep an eye on our blog for updates as they are published.

If you run a business and are concerned about how this decision might affect you, or about any other employment situation, please contact our employment lawyer Julia Adlem or call our office to make an appointment on 08 8410 9294.

[1]  Fair Work Act 2009, Cth, 96.

[2]  AWU v AstraZeneca Pty [2018] FWC 4660, 19.

[3]  https://www.smartcompany.com.au/business-advice/legal/controversial-fair-work-commission-decision-sick-leave-grave-consequences-small-businesses/

[4]  Mondelez Australia Pty Ltd. [2018] FWC 2140.

[5]  https://www.smartcompany.com.au/business-advice/legal/controversial-fair-work-commission-decision-sick-leave-grave-consequences-small-businesses/