Fairness and flexibility restored - High Court provides clarity on employee leave entitlements

In Mondelez Australia Pty Ltd v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union [2020] HCA 29, the High Court has overturned the Federal Court decision and restored a common-sense approach to employee leave entitlements.  

What you need to know

• The High Court's decision in Mondelez restores a common-sense approach to employee leave entitlements.
• Employees accrue and take leave according to their ordinary hours of work. This ensures that full-time employees receive the same amount of annual leave and personal/carer's leave (measured in ordinary hours), regardless of their working pattern. 
• The High Court's judgment preserves widespread industry practice and is consistent with the stated objectives of the Fair Work Act of providing fairness, flexibility, certainty and stability for employers and employees. 

What you should do now

• Breathe a sigh of relief.  A different outcome would have seen employers needing to adjust employee leave accruals, undertake wholesale reviews of their payroll systems and consider rolling back more innovative and flexible work and roster patterns.
• Carefully review the terms of your enterprise agreements to confirm they give effect to the approach now confirmed by the High Court.

Background

The employer operates a chocolate factory at which its full-time employees work 36 ordinary hours per week. Some employees work 7.2 hours per day, five days per week. Others work three 12-hour shifts per week. Under the relevant Enterprise Agreement, the employees were each credited with 96 hours of paid personal/carer's leave per year. On this approach, the employees working 12 hour shifts accrued enough leave over the course of a year to cover absences from work for eight x 12-hour shifts. 

The employer and the Minister contended that the National Employment Standards should be construed as providing employees with personal/carer's leave that is accrued and taken according to each employee's ordinary hours of work (a 'notional day' approach). 

The union contended that the word 'day' should be given its ordinary meaning of a 'calendar day' and that the NES entitlement instead covered absences on 10 calendar days for each year of service. On this basis, the 12-hour shift workers were entitled to 120 hours of personal/carer's leave each year, as opposed to the 96 hours provided in the Agreement. 

Decision of the Full Federal Court of Australia 

In the decision under appeal, a majority (Bromberg and Rangiah JJ) of the Full Court of the Federal Court held that full-time and part-time employees are entitled to 10 'working days' of paid personal/carer's leave for each year of employment. The entitlement to a 'day' was construed as a 'working day', meaning the portion of a 24-hour period that would otherwise be allocated to work. 

(See our full client update on the Federal Court decision here)