Personal/​carers leave — how it should be cal­cu­lat­ed- lat­est devel­op­­ments- August 2019

Cal­cu­lat­ing employ­ee enti­tle­ments can be com­plex and demand­ing at the best of times, how­ev­er the deci­sion of the Full Court of the Fed­er­al Court in Mon­delez v Auto­mo­tive, Food, Met­als, Engi­neer­ing, Print­ing and Kin­dred Indus­tries Union known as the Aus­tralian Man­u­fac­tur­ers Work­ers Union (AMWU) [2019] FCAFC 138 will, unless dis­turbed, add a fur­ther dimen­sion to this task. 

In Mon­delez the Full Bench reviewed an Enter­prise Agree­ment that relat­ed to the oper­a­tions of Mon­delez, a food man­u­fac­tur­er which has, amongst oth­er things, a Cad­bury plant at Clare­mont in Tasmania. 

Under par­tic­u­lar scruti­ny was whether or not the Agree­men­t’s terms with respect to personal/​carer’s leave were incon­sis­tent with the way in which such leave is dealt with under the Fair Work Act (Act). This required an analy­sis of the Act in rela­tion to the accu­mu­la­tion and pay­ment of (paid) personal/​carer’s leave.

Under sec­tion 96 (1) of the Act, an employ­ee is enti­tled to 10 days ” of paid personal/​carer’s leave for each year of ser­vice with his or her employ­er. Such enti­tle­ment to paid personal/​carer’s leave accrues pro­gres­sive­ly dur­ing a year of ser­vice accord­ing to the employ­ee’s ordi­nary hours of work’, and accu­mu­lates from year to year.

Pay­ment for paid personal/​carer’s leave is pro­vid­ed for in sec­tion 99 of the Act which states that where an employ­ee takes a peri­od of paid personal/​carer’s leave, the employ­er must pay the employ­ee at the employ­ee’s base rate of pay for the employ­ee’s ordi­nary hours of work’ in the period.

At issue was the mean­ing of the word day’. Day’ is not defined in the Act.

Mon­delez sub­mit­ted the word day’ as it appears in sec­tion 96(1) of the Act has its indus­tri­al mean­ing’ of being a notion­al day’. That is to say day’ is used as a short­hand ref­er­ence to the employ­ee’s aver­age dai­ly ordi­nary hours based on an assumed 5 day work­ing week. 

It gave, as an exam­ple, that a full time employ­ee who works 38 hours a week over 5 days will accrue the same amount of leave as a full time employ­ee who works the same num­ber of hours over 4 days per week – over a year of ser­vice, both employ­ees would accrue 76 hours of paid personal/​carer’s leave.

Mon­delez relied heav­i­ly on the Explana­to­ry Mem­o­ran­dum (to which we will return).

The Union assert­ed that the word day’ had its nat­ur­al mean­ing. It sub­mit­ted that the enti­tle­ment of a work­er to be paid for a day’ is an enti­tle­ment to be paid for the hours that would have been worked on that day but for the ill­ness or respon­si­bil­i­ty as car­er which caused the absence. 

On the Union’s inter­pre­ta­tion employ­ees work­ing 36 hours a week whether they work 7.2 hours every day over 5 days or 12 hour shifts on say 3 days a week, both will be enti­tled to be paid at their base rate for the hours they would have worked but for the ill­ness or injury etc. Fur­ther­more, regard­less of whether an employ­ee worked for exam­ple 7.2 hours a day or 12 hours a day, the employ­er could only deduct one day for each cal­en­dar day of leave taken. 

Vary­ing out­comes could occur depend­ing on the hours nor­mal­ly worked. For exam­ple, the enti­tle­ment of a 12 hour employ­ee to take 10 days paid per­son­al car­er’s leave could amount to up to 120 hours (per annum). On the oth­er hand, a 7.2 hour employ­ee’s enti­tle­ment could be only up to 72 hours (per annum). For an employ­ee who fell ill only on days where they were ros­tered to work 4 hours, their enti­tle­ment could amount to 40 hours (per annum). 

The Full Court was influ­enced by the con­cept that per­son­al leave was designed to pro­tect the income of employ­ees when they need­ed to take personal/​carer’s leave. If the Union’s inter­pre­ta­tion was favoured, then the employ­ee would be paid at the base rate for the ordi­nary hours they would have worked had it not been for the ill­ness or injury which kept them away from work. In that con­text no employ­ee would lose that income. 

The Full Bench in a 2:1 major­i­ty deci­sion reject­ed the respec­tive posi­tions advanced by Mon­delez and the Min­is­ter for Jobs and Indus­tri­al Rela­tions. It con­clud­ed (at para 199) that:

  1. A day’ in s 96(1) of the FW Act refers to the por­tion of a 24 hour peri­od that would oth­er­wise be allot­ted to work (a work­ing day’). 
  2. A day’ of paid personal/carer’s leave’ under s 96(1) is an autho­rised absence from work for a work­ing day for a rea­son set out in s 97
  3. Under s 96(1), an employ­ee accrues an enti­tle­ment to be absent from work for a rea­son set out in s 97 for ten such work­ing days for each year of service. 
  4. The enti­tle­ment to paid personal/carer’s leave under s 96(1) is not an enti­tle­ment to take such leave, which only aris­es when one of the con­di­tions in s 97 is satisfied.
  5. For every day of paid personal/carer’s leave tak­en, a day is deduct­ed from the employee’s accrued leave balance. 
  6. Under s 96(1), the accru­al is of part-days of paid personal/carer’s leave, not only full days.
  7. An employ­ee may take a part-day of paid personal/carer’s leave, and an equiv­a­lent part-day is deduct­ed from the employee’s leave balance. 
  8. The expres­sion ordi­nary hours of work’ in ss 96(2) and 99 dis­tin­guish­es ordi­nary hours from over­time hours.
  9. The expres­sion ordi­nary hours of work’ is used in s 96(2) to indi­cate that part-days of paid personal/carer’s leave enti­tle­ment are cal­cu­lat­ed on the basis of ordi­nary hours.
  10. The pur­pose of paid personal/carer’s leave is as a form of income pro­tec­tion for employ­ees dur­ing the peri­ods of ill­ness, injury or unex­pect­ed emer­gency described in s 97.
  11. Paid personal/carer’s leave accrues over the whole length of employee’s employ­ment with a par­tic­u­lar employ­er, to the extent that it is not taken.
  12. The amount of paid personal/carer’s leave that may be tak­en in a year is lim­it­ed to the amount that has been accrued, but is not oth­er­wise limited.

O’Callaghan J in a dis­sent­ing judg­ment con­sid­ered that, giv­en there was ambi­gu­i­ty in the leg­is­la­tion, it was appro­pri­ate to resort to the Explana­to­ry Mem­o­ran­dum which stated:

  1. Although [the enti­tle­ment to accrue two weeks leave] is expressed as an enti­tle­ment to 10 days (reflect­ing a stan­dard’ 5 day work pat­tern’), by rely­ing on an employ­ee’s ordi­nary hours of work, the Bill ensures that the amount of leave accrued over a peri­od is not affect­ed by dif­fer­ences in the actu­al spread of an employ­ee’s ordi­nary hours of work in a week; and
  2. There­fore, a full time employ­ee who works 38 hours a week over 5 days (Mon­day to Fri­day) would accrue the same amount of leave as a full time employ­ee who works 38 ordi­nary hours over four days per week. Over a year of ser­vice both employ­ees would accrue 76 hours of paid personal/​carer’s leave’.

O’Callaghan J’s ref­er­enced the exam­ples giv­en in the Explana­to­ry Mem­o­ran­dum which illus­trat­ed the intend­ed oper­a­tion of the accru­al and pay­ment pro­vi­sions before con­clud­ing (para 217):

Those exam­ples, in my respect­ful view, rein­force the expres­sion of the deter­mi­na­tion of Par­lia­ment that the amount of personal/carer’s leave to be accrued is not to be affect­ed by any dif­fer­ent spread of an employee’s ordi­nary hours of work in a week, and is designed to achieve what senior coun­sel for the appli­cant, cor­rect­ly in my view, described as equi­ty as between dif­fer­ent class­es of employ­ees”. In my view, the posi­tion advanced by the respon­dents pro­duces an out­come that cre­ates inequities between dif­fer­ent class­es of employ­ees that Par­lia­ment did not intend.

Whilst he favoured the inter­pre­ta­tion of the Act advanced by Mon­delez and the Min­is­ter, his is a minor­i­ty deci­sion and there­fore of lim­it­ed weight. 

Mon­delez (which it is under­stood was rep­re­sent­ed by the AIG) may seek leave to appeal this deci­sion to the High Court; which if left undis­turbed, is like­ly to have sub­stan­tial impli­ca­tions for many employers. 

If this hap­pens, the Gov­ern­ment will like­ly seek to inter­vene in any High Court chal­lenge and one can­not dis­miss the pos­si­bil­i­ty of leg­isla­tive reform. 

In the inter­im, employ­ers should, at the very least, keep a watch­ing brief on this sig­nif­i­cant case. If this case stands then employ­ers may need to revis­it how their pay­roll func­tion accrues for per­son­al leave for shift­work­ers to ensure those employ­ees are not short changed. It also, of course, rais­es the spec­tre of back­pay for employ­ees who did not receive pay­ment for personal/​carer’s leave in cir­cum­stances where they were enti­tled to it in accor­dance with the decision.