In a significant victory for Australian employers, Cadbury manufacturer Mondelez Australia Pty Ltd and Federal IR Minister Christian Porter have won their High Court challenge to previous rulings about the meaning of the word "day" in the context of the Fair Work Act entitlement to personal/carer's leave.
Traditionally, employers around Australia have calculated and recorded personal/carer's leave entitlements on the basis that the Fair Work Act entitlement to "10 days" of leave is equivalent to 76 hours of leave for full time employees per year, and a pro rata amount of leave for part time employees.
However, in a previous majority judgment of the Full Federal Court against Mondelez, it was held that the word "day" in section 96(1) of the Act, which provides for the entitlement to personal/carer's leave, did not mean any notional number of hours of work, or a notional "working day". Instead, "day" was held to have its "ordinary meaning", being a 24 hour period. According to this interpretation, for each year, each full time or part time employee would be entitled to take and be paid personal/carer's leave for whatever number of ordinary hours he or she would have worked in each of ten 24 hour periods, regardless of the total number of hours this came to.
For Mondelez, this meant that a day worker who worked 36 hours per week over five days of 7.2 hours each would be entitled to a total of 72 hours of paid absences for each year, while a shift worker working the same number of weekly hours in a pattern of 12 hour shifts over three days each week would be entitled to paid absences from work for ten 12 hour shifts per year, totalling 120 hours.
More broadly, this judgment not only meant that different employees working the same number of weekly hours could be entitled to a different number of hours of leave, depending on the pattern of hours worked, but also that part time workers could be entitled to the same number of hours of leave as a full time workers, or even more.
Even further, this interpretation meant that it would no longer be lawful or possible for employers to record leave entitlements as any particular number of hours of leave at all, creating significant confusion, uncertainty and impracticality for the administration of leave balances and payroll.
In a joint decision handed down on 13 August 2020, a majority of the High Court has now agreed that that the interpretation taken by the Full Federal Court and argued for by union parties in the Mondelez case "would give rise to absurd results and inequitable outcomes, and...be contrary to the legislative purposes of fairness and flexibility in the Fair Work Act."
In place of the previous judgment, the High Court has ordered that "the expression '10 days' in section 96(1)...means an amount of paid personal/carer's leave accruing for every year of service equivalent to an employee's ordinary hours of work over a two-week (fortnightly) period, or 1/26 of the employee's ordinary hours of work in a year. A 'day' for the purposes of s96(1) refers to a 'notional day', consisting of one-tenth of the equivalent of an employee's ordinary hours of work in a two-week (fortnightly) period."
In practice, this means that for each ordinary hour worked, every full time or part time employee should be credited with 1/26th of an hour of personal/carer's leave.
While the Federal IR Minister was actively involved in the case in support of the traditional approach now accepted by the High Court, the ACTU has now called for the Federal Government to amend the Fair Work Act to adopt the Full Federal Court's alternative interpretation of the word "day" and "stop big companies undermining worker's hard-won sick leave entitlements during a pandemic".
Although not directly in issue in this case, the High Court's decision is also likely to have flow on effects in relation to similar arguments about the meaning of a "week" of annual leave under the Act.
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