Employment Law – changes to calculation of personal leave.


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Employment Law – changes to calculation of personal leave.

A recent Federal Court decision regarding employment law will affect all businesses in Australia, with wide-ranging implications for employers who do not abide.  This is essentially due to a change in what was considered a “standard working day!”

On 21 August 2019, in Mondelez v AMWU & Ors [2019] FCAFC 138, the Full Federal Court of Australia confirmed that all employees (including part-time employees) are entitled to the 10 “working days” of personal/carer’s leave per year prescribed in s96(1) of the Fair Work Act 2009, regardless of how many hours the employees work per day or how many days are worked per week.  The Full Court has clarified how the word “day” is to be interpreted and how this will impact all employees.

Pending any appeal to the High Court (if leave is granted) the Full Federal Court’s decision reflects the current state of the law.  Full-time and part-time employees are entitled to 10 working days of paid personal/carer’s leave for each year of employment.  Personal leave is not accrued in hours but days!  A working day is the portion of a 24-hour period that an employee would otherwise be working.

So what was the case about?

Section 96 of the Fair Work Act entitles employees to 10 days personal/carer’s leave per year, which accrues by reference to ordinary hours of work.  Mondelez employees worked 36 ordinary hours per week – some worked 7.2 hours per day for 5 days per week, and some worked 12 hours per day for 3 days per week.  Mondelez argued that its shift workers who worked 3 x 12-hour days per week, or 36 ordinary hours per week, should accrue 72 hours personal leave per year, being 10 days at 7.2 ordinary hours, which they argued reflected the standard numbers of hours for a day of leave.  The union argued that the shift workers should be entitled to 10 days of personal/carer’s leave at 12 hours per day.  The Full Court, by a majority, did not agree with Mondelez and held that all employees are entitled to 10 working days personal/carer’s leave per year, regardless of how many hours are worked in a particular day.

Under this approach, the shift workers were found to be entitled to 10 x 12 hours of personal/carer’s leave per year, or 120 hours in total.  On that basis the other employees (those working 7.2 hours per day for 5 days) would only be entitled to 72 hours of personal/carer’s leave per year.  The decision also confirms that part-time employees (regardless of the number of days worked each week) are also entitled to 10 full working days of personal/carer’s leave per year.

The Court also found that a working day is not a calendar day.  Rather it is the working hours that the employee is scheduled to work in the 24-hour period commencing from the time an employee starts work on a particular day.

It would seem, therefore, that a “standard” day is no longer a defined period of hours but depends on the nature of the employment.

The decision will have wide-ranging implications for employers, the overwhelming majority of whom do not presently accrue or account for personal/carer’s leave in this manner.  In particular, most payroll systems accrue personal/carer’s leave on an hourly basis and/or pro rata based on days worked.  In other words, payroll systems tend to accrue 76 hours of personal/carer’s leave per year for full-time employees, and a pro-rata amount for part-time employees.  If you or your client has such a payroll system, and your employees work anything other than a 7.6 hour day, 5 days a week, you may need to review how you are accruing and paying for personal/carer’s leave, i.e. ensure that they calculate leave under s96(1) for each employee based on the employee’s particular “working day”, that is the “portion of a 24-hour period that would otherwise be allotted to work”.

It is also important to stress that the 10 days of personal/carer’s leave is there, regardless of whether your employees are part-time or full-time.  In other words, an employee working 2 days per week is entitled to 10 days of personal/carer’s leave per annum, and an employee working 5 days per week is also entitled to 10 days of personal/carer’s leave per annum.  So that part-time employee effectively has 5 weeks of personal/carer’s leave per year, compared to 2 weeks for the full-time employee.  Potentially, that has material cost implications for the employer.

Failure to accrue and pay in accordance with the current law will have financial and legal implications so check your payroll systems and speak with your employment law advisors for more information.  You can also check with Fair Work Australia for more information on your obligations.

Please contact Suelen McCallum on 02 9633 3333, email mail@dvtgroup.com.au or complete our online contact form to find out more about how we can help you or your client. 

 dVT Group is a business advisory firm that specialise in business turnaround, insolvency (both corporate and personal), forensic services and business strategy support.