Calculating Leave – It’s all in a day’s work
Section 96(1) of the Fair Work Act 2009 (Cth) provides that an employee is entitled to 10 days of paid personal/carer’s leave for each year of service. This seems like a simple entitlement, except, of course, when certain employees work longer ‘days’ than others. Are those with longer shifts entitled to a longer paid day of absence? Or is their paid entitlement the same as those working ‘standard’ day shifts?
In the recent decision of Mondelez v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union Known as the Australian Manufacturing Workers Union (AMWU)  FCAFC 138, the Full Federal Court of Australia answered ‘yes’ to the first question above, and addressed other considerations in relation to accrual and deduction of paid personal/carer’s leave. The decision means employers should immediately review how they calculate and deduct personal/carer’s leave.
At Mondelez’s Cadbury factory in Tasmania, all factory employees worked an average of 36 hours a week; however, some employees were shift workers, working 12-hour shifts, 3 times a week. Other employees at the factory worked 7.2 hours per day, 5 days a week. Employees accrued and were debited leave on an hourly basis.
Mondelez argued that the entitlement to a day’s leave is calculated by reference to a ‘notional day’, meaning an employee’s average daily ordinary hours based on an assumed five-day working week. That is, average weekly ordinary hours divided by five. For example, for employees working an average of 36 hours a week, if the employee takes a day of personal/carer’s leave, the employee is paid 7.2 hours’ wages, and 7.2 hours is deducted from the employee’s accrued leave balance. This is because their ‘notional day’ is 7.2 hours work.
Under the ‘notional day’ approach, a 7.2-hour employee’s entitlement would be used up over ten calendar days, whereas a 12-hour employee’s entitlement would be used up over six calendar days. A 12-hour employee would then be on unpaid leave after six calendar days.
The AMWU argued that the entitlement was for 10 calendar days of leave with no loss of pay, and that employees working 12-hour shifts should be entitled to 120 hours of paid personal/ carer’s leave, being 10 calendar working days for them.
The AMWU submitted this was fairer to employees who work shifts that compress their weekly hours into a shorter number of days.
Mondelez argued that the calendar day construction created inequities between employees working irregular shifts and those working regular shifts. It also raised the problem of difficulties for employers when cashing out leave and predicting how to budget for paid personal/carer’s leave.
The majority of the Court agreed with the AMWU, coming to its decision using the logic that employees should be able to take leave on 10 different working days when needed, regardless of the number of hours of work involved.
The majority held a ‘day’ in section 96(1) of the Fair Work Act refers to the portion of a 24 hour period that would otherwise be allotted to work (a ‘working day’). This means a ‘day’ of ‘paid personal/carer’s leave’ under section 96(1) is an authorised absence from work for a working day due to personal illness or injury or to care for an immediate family member.
The majority looked to the meaning of the word in the context of section 96(1) as a whole. It found that ‘leave’ is defined as ‘permission to be absent, as from duty’ and that therefore, the reference to a ‘day’ was a ‘working day.’ In that sense, it said, every employee is entitled to income protection to take 10 days of leave on days when they would otherwise be working.
The majority conceded that ‘it is impossible to avoid unequal outcomes between employees on either construction’ and that ‘to say that outcomes are unequal is not, however, to say that such outcomes are necessarily inequitable or unintended.’ Justification for the difference in total hours available to be taken in leave is that the entitlement is conditional on illness or injury affecting the employee or an immediate family member. The majority’s focus was that no employee should suffer loss of income for that contingency for 10 days every year of service.
The majority of the Full Federal Court has made clear that under section 96(1) of the Fair Work Act, an employee accrues an entitlement to be absent from work for such a reason ten such working days for each year of service. The accrual is expressly based upon time served with the employer and is to be calculated in days, not hours. The majority said that, for example, every 5.2 weeks, an employee accrues an entitlement to another full day of paid personal/carer’s leave. For every day of paid personal/carer’s leave taken, a day is deducted from the employee’s accrued leave balance.
The same applies to accrual and taking of part days. An employee may take a part-day of paid personal/carer’s leave, and an equivalent part-day is deducted from the employee’s leave balance. Any entitlement in respect of a part-day can be calculated as a fraction of the ordinary hours of work for that day.
As outlined above, this decision was a majority verdict and, as such, it remains to be seen whether Mondelez will appeal the decision. However, it is important that employers review how their payroll systems accrue and calculate paid personal/carer’s leave. They must ensure the accrual and deduction of paid personal/carer’s leave is consistent with the current state of the law as set out in Mondelez.