The case that has redefined personal leave

Important Update around the recent industrial relations decision that redefines how personal leave is accrued and taken.

The decision in the case of Mondelez v AMWU [2019] relates to the interpretation of the paid personal/carers leave (also known as Sick Leave) entitlements pursuant to the Fair Work Act. The effect of the Decision is that all full-time and part-time employees are entitled to accrue 10 days of Sick Leave for each year of employment and the crux of the issue is the interpretation of the word ‘day’. Before getting into the impact, it is important to emphasise that the entitlement to 10 days is not an entitlement to take 10 days Sick Leave. Sick Leave can only be taken in the circumstances set out in the Fair Work Act (i.e. when an employee is not fit for work due to personal illness or injury etc).

The decision in this case came down to the fact that the majority of the Full Court considered the term ‘working day’ to mean “the portion of a 24 hour period that would otherwise be allotted to working”. Accordingly, all part-time and full-time employees, whatever their pattern of shifts, are entitled to payments reflecting the income they would have earned had they been able to work. This has the most impact on employees who work a roster with varied hours over a week, part time workers and shift workers.

Examples for context:

A shift worker working three 12-hour shifts each week who had 1 day of personal leave would have 1 personal leave day of the 10 deducted from their entitlement. This worker would actually, based on this roster then accrue 120 hours of leave each year (calculated as 10 days x 12 hours). In comparison an employee who did the same 36-hour week across five shifts would only accrue 72 hours per year (10 x 7.2 hours).

Both full and part time workers are entitled to 10 working days of Sick Leave for each year of employment. This contradicts current common practice of part time employees only receiving the pro rata equivalent of the 10 days. The roster/ordinary weekly hours worked is critical in determining what personal leave is paid. Where an employee is ordinarily rostered for an 8 hour shift as an example, they are paid their personal leave entitlement of the full 8 hours and 1 day is taken from the balance. Where an employee is rostered for a 4 hour shift, those 4 hours are paid and again 1 day is removed from the balance. Accordingly, all part-time and full-time employees, whatever their pattern of shifts, are entitled to payments reflecting the income they would have earned had they been able to work.

If an employee is only absent for part of the day, that fraction of the particular day should be deducted from the employee’s accrued entitlement (of 10 days).

Of such significance is this decision, that the Federal Government itself has launched an appeal process. This is due to the significant deviation from current and widespread leave accrual practices that opens businesses to the risk of employees making underpayment claims for personal leave entitlements they should have accrued in the past and the impact of creating significant inequities between employees. As an employer it is worth being across this case as it develops to effectively manage any employee inquiries and seek legal advice where required.

We will continue to monitor the appeal process and will communicate information as it comes to hand, however it is important to note the decision means this is the current state of the law. Fair Work have updated their website but have noted the application to appeal the decision and will review its advice at the conclusion of those proceedings.

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