On 21 August 2019, a Full Federal Court issued a long-awaited decision of enormous significance within the industrial relations landscape, ruling that the annual entitlement to “10 days of paid personal/carer’s leave” contained within the Fair Work Act 2009 (Cth) is to be interpreted as 10 “working days” for all permanent employees. This entitlement to 10 “working days” per year also extends to part-timers, regardless of the number of hours or days they work per week.
In coming to its judgement in Mondelez v AMWU & Ors FCAFC 138, the Full Court rejected the long-standing and widely applied practice that the entitlement is notionally capped at 76 hours per year for full-timers with part-timers receiving a pro-rata amount, confirming instead that, in the case of employees who work as many as 12 ordinary hours per day, they will accrue an entitlement equivalent to as much as 120 hours of personal/carer’s leave per year (i.e. 10 days x 12 hours).
When the Work Choices legislation standardised personal/carer’s leave at the amount of 10 days per year across the federal system of industrial relations from March 2006, that legislation contained specific wording that implied that the entitlement of 10 days was taken to mean a maximum annual accrual of 76 hours (pro-rata for part-time employees). When the Fair Work Act 2009 (the FW Act) superseded Work Choices, the reference to “10 days of paid personal/carer’s leave”continued on within the National Employment Standards but no such wording was included to clarify if the entitlement equated to a notional number of total hours per year.
In the absence of specific wording to the contrary and, in light of the fact the FW Act contained no designated definition with respect to the term “day”, the vast majority of employers have continued to comfortably apply the traditionally accepted notion that “10 days of paid personal/carer’s leave” equated to a maximum of 76 hours per year (pro-rata for part-time employees). This interpretation of the wording within the National Employment Standards (NES) has not been so comprehensively considered by a relevant court until the current ‘Mondelez’ matter.
Worth noting: The traditionally accepted practice of accruing personal/carer’s leave on an hourly basis with a notional annual cap had a further foundation in the Queensland state system of industrial relations, wherein, prior to the commencement of Work Choices, many awards defined the sick leave entitlement (as it was known then) as an entitlement of 60.8 hours per year (equivalent to 8 days), which accrued on the basis of 7.6 hours per six week period. This entitlement was clearly pro-rata for part-time employees.
Why this decision matters
As this decision expressly rules on the interpretation of the NES/FW Act, it has application to all permanent employees captured by a Modern Award, as well as national-system employees that are award-free. Permanent employees captured by an enterprise agreement are also directly affected by this interpretation as no enterprise agreement,regardless of its age, can convey an entitlement that is less beneficial than the entitlements extended by the NES.
If you are one of the majority of employers who has traditionally accrued personal/carer’s leave on an hourly basis with reference to a notional maximum of 76 hours per year, you will need to examine and amend your payroll system to ensure that each full-time and part-time employee is now accruing an entitlement equivalent to 10 “working days” per year.
This means, if you employ a full-time employee who works four, 9.5-hour days per week, you need to ensure they are accruing the equivalent of 95 hours personal/carer’s leave per year(i.e. 10 days x 9.5 hours). Similarly, if you employ a part-time employee who works two, 8-hour days each week, you now need to ensure they are accruing the equivalent of 80 hours personal/carer’s leave per year (i.e. 10 days x 8 hours).
If your payroll program will allow you to accrue personal/carer’s leave in days as opposed to hours, you should explore how this can be action-ed.
As always, should you have any further questions or want assistance updating your payroll settings to comply with this change, please contact us as we are here to help.