The High Court of Australia (“HCA”) has delivered sweet justice for chocolate manufacturer Mondelez with the Federal Court’s personal leave decision overturned.

The earlier personal/carer’s leave (“PCL”) decision of the Full Court of the Federal Court of Australia (the “FCA”) is now no longer relevant. Organisations now have certainty in relation to the application of PCL under the Fair Work Act 2009 (Cth) (the “FW Act”), with the HCA declaring that:
“A “day” for the purposes of s 96(1) of the FW Act 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”
(the “Notional Day Construction”)

1. The Notional Day Construction – sweet justice for chocolate manufacturer Mondelez

The HCA decision affirms the Notional Day Construction proffered by Mondelez. On the Notional Day Construction, all employees who work the same fortnightly average of ordinary hours of work are entitled to receive the same number of hours of PCL per year, regardless of whether, for example, those ordinary hours are worked across ten, six, or five days per fortnight.

2. The FCA Proceedings

In August 2019, the 2:1 majority of the FCA disagreed with the Notional Day Construction and determined that a “day” in section 96(1) of the FW Act refers to the portion of a 24 hour period that would otherwise be allotted to work (the “Working Day Construction”). Under the Working Day Construction, every permanent employee was entitled to be absent from work without loss of pay on 10 calendar days per year, regardless of the number of ordinary hours of work performed across each of those 10 calendar days.

3. Impact – what a difference a day makes

The different constructions produced different practical outcomes between, on the one hand, employees who work the same number of hours each day over a five-day week, and, on the other hand, employees who work shifts that compress their weekly hours into a shorter number of days, or who work different hours on different days of the week. On both constructions, employees are entitled to be paid for the employees’ actual ordinary hours of work during the PCL period.

An example of these differences can be demonstrated by reference to the facts of this case. Mondelez’ employees each work 36 ordinary hours per week. Some work 7.2 hours per day, five days per week. Others work 12 hours per day, three days per week. On the Notional Day Construction, each employee is entitled to accrue 72 hours of paid personal/carer’s leave over a year; but a 7.2-hour employee’s entitlement will be used up over ten calendar days, whereas a 12-hour employee’s entitlement will be used up over six calendar days. In contrast, on the Working Day Construction, the 12-hour employee is entitled to more hours of PCL than the 7.2-hour employee (that is, 120 hours vs 72 hours), but neither would lose income over a period of ten calendar days.

4. Next steps

Employers will be familiar with the Notional Day Construction as it was predominantly applied prior to the FCA decision. With the personal leave decision overturned, and in light of the HCA’s decision to adopt the Notional Day Construction and provide sweet justice for chocolate manufacture Mondelez, all organisations should:
• review their payroll systems to ensure that PCL is accrued and paid out in a manner which aligns with the Notional Day Construction;
• conduct PCL reconciliation exercises to assess whether any employees have been disadvantaged by the treatment of PCL since the FCA decision;
• audit and correct employee records with respect to PCL and in accordance with the Fair Work Regulations 2009 (Cth); and
• take steps to ensure that references to PCL in employment documentation, policies and enterprise agreements are consistent with the Notional Day Construction.

See the full decision here.

People + Culture Strategies