The majority of the High Court of Australia has overturned a controversial decision of the Federal Court regarding the calculation of paid personal leave. The High Court’s decision will come as a relief to employers as it clarifies that employees’ personal leave accruals do not vary based on the pattern of hours worked.
The Full Federal Court Decision
The Federal Court accepted the AMWU’s argument that where workers worked three 12 hour shifts per week, their 10 days of personal/carer’s leave (under the National Employment Standards) should be accrued at a rate of 12 hours a day, rather than by reference to a “notional” day (ie. An average of the weekly hours divided by 5).
The Federal Court decision was criticised due to the potential for unfair and uneven days of paid personal/carer’s leave granted to employees working varying shift lengths despite having the same average of 38-hour working week. Ultimately, the Full Federal Court held that employees should receive paid personal/carer’s leave based on the length of a shift, rather than the traditional nominal hours.
The High Court Decision
On 13 August 2020, the High Court handed down its decision to overturn Mondelez on appeal with Chief Justice Susan Kiefel expressing that the federal court judgement “would give rise to absurd results and inequitable outcomes,” Ultimately the High Court confirmed that personal/carer’s leave that is accrued should be calculated based on a worker’s nominal hours. ‘A day’ as referred to in s96(1) of the Fair Work Act was clarified to be a ‘notional day’, being a tenth of an employee’s average fortnightly working hours rather than a full 24 hour period. It was also explained that the entitled ‘10 days’ of leave refers to two standard five-day working weeks.
The Court expressed, that “because patterns of work do not always follow two-week cycles, the entitlement to ’10 days’ of paid personal/carer’s leave can be calculated as 1/26 of an employee’s ordinary hours of work in a year.”
Considering the current COVID-19 climate, this High Court decision has received criticism for its implications on shift workers, with Trade Unions calling for the Fair Work Act to be amended and Ms. Sally McManus, secretary of the Australian Council of Trade Unions, arguing for a standard 10 days of paid leave per year for all workers, irrespective of hours worked.
What this means for employers
This decision has provided certainty for employers, clarifying how to calculate accruals and alleviating a payroll headache. If you have any further questions regarding paid personal/carer’s leave please do not hesitate to contact Nick Stevens or Jane Murray.