Cadbury not getting the chocolates

The Full Court of the Federal Court of Australia (the Full Court) recently handed down a majority decision regarding how the entitlement to paid personal/carers leave (Personal Leave) is accrued and calculated.

The decision of Mondelez Australia Pty Ltd v AMWU [2019] FCAFC 138 has clarified the appropriate method of accruing and taking Personal Leave in accordance with the Fair Work Act 2009 (Cth) (the Act).

The effect of the decision, which has now been appealed to the High Court, is that all employees, both full-time and part-time, are entitled to accrue 10 days of Personal Leave for each year of employment. The Full Court held that Personal Leave must be calculated in working days, not hours. Importantly, a ‘working day’ is the portion of a 24 hour period that an employee works. The entitlement to Personal Leave may therefore differ amongst individual employees, depending on the length of their shifts.

Facts

Cadbury is the owner of Mondelez Australia Pty Ltd (Mondelez). Mondelez brought a claim against two employees and the Australian Manufacturing Workers’ Union (collectively, the AMWU). The two employees work their ordinary hours on a 3 day work week in 12 hour shifts.

Mondelez sought declarations from the Federal Court that:

• On proper construction of its enterprise agreement, when the employees are absent for a 12 hour shift on Personal Leave, 12 hours is to be deducted from their accrued Personal Leave balance; and

• On proper construction of its enterprise agreement and sections 96 and 99 of the Act, the two employees’ entitlements to Personal Leave under the enterprise agreement are more beneficial than their entitlements under the Act.

In short, Mondelez firstly submitted that the term “day” in section 96(1) of the Act should refer to its “industrial meaning” of a “notional day”. It submitted that a “notional day” for every employee is 7.2 hours, consisting of 36 hours averaged over 5 standard days of work. Therefore, the entitlement to 10 days Personal Leave amounts to 72 hours for each year of service. If any employee takes a day of Personal Leave, the employee will be paid for 7.2 hours at their base rate of pay and have the 7.2 hours deducted from their accrued leave balance.

On this construction, employees who work 12 hour shifts across 3 days per week will also have 72 hours Personal Leave per annum. For each shift the employee takes Personal Leave, the employee is paid for 12 hours and will have 12 hours deducted from their leave balance. As such, the whole of 72 total annual Personal Leave hours would be depleted by taking 6 Personal Leave days rather than 10 days (as set out in section 96(1) of the Act).

The AMWU argued that the term “day” refers to a 24 hour “calendar day” and should be given its ordinary meaning. The AMWU asserted that the entitlement to Personal Leave allows employees to be absent from work on 10 calendar days or 10 periods of 24 hours. The AMWU explained that regardless of whether an employee works 7.2 hours per day or 12 hours per day, an employer is only entitled to deduct one day for each calendar day of leave taken.

Decision

The Full Court rejected Mondelez’s “notional day” assertion that the term “day” should be construed to mean the average weekly hours worked. The majority of the Full Court coined the term “working day” to mean “the portion of a 24 hour period that would otherwise be allotted to working.” The Full Court held that under the ‘working day’ construction, all part-time and full-time employees, whatever their pattern of shifts, are entitled to payments reflecting the income they would have earned had they been able to work.

The Full Court agreed with the AMWU’s submissions and described Personal Leave as a form of ‘income protection’ for employees when they are entitled to be absent from work in the circumstances described in section 97 of the Act.

Consistent with the Full Court’s determination that the intention of this provision, in applying the ‘working day’ construction, all employees are able to take an equal number of Personal Leave days and as such, neither loses income. This would not have been the case under Mondelez’s “notional day” construction. This is because the 12-hour shift employees would suffer a loss of earnings as, in effect, they would only receive six days of Personal Leave in comparison to 10 days of Personal Leave for employees working 7.2 hours per shift. This argument was therefore rejected by the Full Court.

Accordingly, the Full Court declined to make the declarations sought by Mondelez.

Take Home Messages

The decision has now been appealed to the High Court, which could change the outcome of the Full Court’s decision regarding Personal Leave. However, the Full Court’s Decision reflects the current state of the law.

In the meantime, Employers must therefore ensure that their employees’ entitlements to Personal Leave are reflective of the ordinary hours they actually work. Employers in industries who engage employees for longer ordinary shifts or those who engage part-time employees must be particularly aware of this requirement.

If this decision does affect your employees, it may give rise to claims being brought. If your current working and Personal Leave engagements are unclear, we recommend your business seeks advice tailored to your circumstances.

For more specific information on any of the material contained in this article please contact Sathish Dasan on +61 8 8210 1253 or sdasan@normans.com.au or Michael Foley on +61 8 8217 1355 or mfoley@normans.com.au.