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By Bayside Group

Aug 26, 2019

Changes to personal leave: accrual in days rather than hours

The Full Federal Court’s decision on paid personal leave

The majority of the Full Federal Court handed down an important decision in Mondelez v AMWU & Ors [2019] FCAFC 138 that all full time and part time permanent employees are entitled to 10 working days of personal/carer's leave (a.k.a. sick leave) per year, regardless of how many hours per day or days per week they work.

The National Employment Standards provide for 10 days personal leave per year, which accrues by reference to ordinary hours of work. The Court held that the natural and ordinary meaning of the words used in the Fair Work Act means that all employees are entitled 10 working days instead of 76 hours of personal leave per year, irrespective of how many hours are worked on any day.

While the decision is complex, it can be summarised as follows:

 

  • Personal leave entitles an employee to be absent from work on a working day because of illness or injury, or to care for a family/household member
  • An employee accrues 10 working days of personal leave for each year of service
  • For every day of personal leave taken, a day is deducted from the accrued leave balance
  • If a part-day of sick leave is taken, an equivalent part-day is deducted
  • An employee is paid at their base rate of pay for all of the ordinary hours the employee would have worked on that working day, whether that is 4 hours, 8 hours or more.

In addition, the Court held that a working day is not a calendar day. A working day consists of the working hours the employee is scheduled to work in a 24 hour period, which commences from the time they start work.

 

What are the implications?

This has implications for employees who work outside the ‘traditional’ 38 hour, 5 day a week scenario:

 

More than 7.6 hours a day:
Workers who work a 12-hour shift are entitled 10 x 12 H = 120 hours of personal leave per year instead of 10 x 7.6 H or 76 hours. The same applies for those who work 8 hours a day: 10 days of 8 hours, instead of 76 hours. 

 

Less than 7.6 hours a day:
Part time workers are also entitled the full 10 days of personal leave per year. If an employee works part-time for four hours a day, five day per week, they would be entitled to 10 x 4 H = 40 hours of leave. This scenario does not provide a change between the calculations in days or hours.

However, working part time for three eight-hour days per week would see an entitlement of 10 x 8 H = 80 hours instead of 48 hours, which would be the pro-rata amount.

Conversely, a part-time worker who works 2 ½ days a week would be deducted a full day’s personal leave when they take personal leave on the ½ day.

 

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Going for forward

  1. Mondelez has 28 days to file an application for Special Leave to Appeal with the High Court.
  2. If this decision is not overturned by the High Court, or by legislative change, many employers will need to undertake a major reconciliation of personal leave accruals and usage for at least the past six years. This will most likely result in under and over accrual and subsequent under and overpayments for employees working outside the normal nine to five routine.
  3. Given the uncertainty associated with any High Court appeal and legislative process, it is recommended to start auditing your organisation's potential exposure now and start making contingency plans based on the potential exposure.


Potential impact on annual leave

Although the Full Court did not deal with annual leave, this case could have implications for the accrual and payment of annual leave.

The annual leave entitlement is expressed in weeks instead of hours, but similar considerations would apply to the calculation of annual leave, for example when employees are working different number of days or hours over a period of time.

Our Workplace Relations team can help you to ensure that your business is correctly adhering to workplace legislation. Click here for more information or to contact us.

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