The High Court of Australia has overturned a Federal Court of Australia decision about how personal or carer’s leave is calculated.

The ruling relates to a case last year in which the Federal Court of Australia sided with the Australian Manufacturing Workers Union (AMWU) which was representing two Cadbury employees who each worked three 12-hour shifts per week in a case against Cadbury owners, Mondelez Australia.

The Federal Court found employees working 12-hour shifts should have their 10 days of personal leave paid at 12 hours a day, rather than the notional 7.6 hours per day.

Mondelez Australia did not agree and maintained the view that the staff were entitled to a rate of 7.6 hours, and took the matter to the High Court.

Last week, the High Court of Australia overturned the Federal Court’s ruling and found leave calculated under section 96(1) of the Fair Work Act 2009 “must be calculated by reference to an employee’s ordinary hours of work”.

“Ten days in section 96(1) is two standard five-day working weeks. One ‘day’ refers to a ‘notional day’ consisting of one-tenth of the equivalent of an employee’s ordinary hours of work in a two-week period,” it said.

“Because patterns of work do not always follow two-week cycles, the entitlement to ‘10 days’ of paid personal or carer’s leave can be calculated as 1 in 26 of an employee’s ordinary hours of work in a year”.

The Real Media Collective general manager of industry relations, policy and governance Charles Watson said although the decision relates to employees at the Cadbury factory in Tasmania, it was of relevance to the print and visual communications industry given numerous employers utilise variable shifts and spread of hours under the Graphic Arts Award and related enterprise agreements.

“The High Court decision provides certainty and confirmation on what the business community has generally understood and been fairly practising since the inception of the Fair Work Act in 2009. This decision is consistent with the intention of the Fair Work Act which is meant to provide fairness, flexibility, certainty and stability for both employers and their employees,” he said.

“Prior to the Federal Court’s original decision in 2019, it was commonly understood employees accrued personal and carers leave by reference to their ordinary hours of work. The High Court decision reiterates that the amount of leave accrued does not vary according to the pattern of hours of work.

“The High Court found that the construction adopted by the Federal Court would lead to inequalities between employees with different work patterns, and so would be unfair. An employee whose hours are spread over fewer days with longer shifts would have been entitled to more paid personal leave than an employee working the same number of hours per week spread over more days.

“This is of particular relevance to the personal leave entitlement for shift workers and part-time workers, who would otherwise have had an enhanced entitlement under the ‘working day’ interpretation argued by the AMWU and originally adopted by the Federal Court.”

Watson added that those businesses with employees working across variable rosters now have a legislatively consistent approach to the accrual and application of personal leave.

“Employees are entitled to leave based on a ‘notional day’ and not the actual hours worked. Any employers who did change their personal leave calculation methodologies because of the original Federal Court decision should revisit their payroll systems and make appropriate amendments and adjustments.”

Ai Group CEO Innes Willox said the High Court ruling has clarified the quantum of personal/carer’s leave entitlements for millions of Australian employees.

“The High Court’s judgment preserves widespread industry practice. If the Federal Court’s interpretation of the expression ‘10 days of paid personal/carer’s leave‘ in section 96 of the Fair Work Act had been upheld, there would have been major cost implications for a very large number of businesses. In addition, a major barrier would have been imposed on employers agreeing to part-time employment arrangements, including for employees returning from parental leave,” Willox said.

“The interpretation adopted by the High Court ensures that all employees are entitled to take up to two weeks off work each year for personal/carer’s leave regardless of how many ordinary hours an employee works in that two-week period. A full-time employee who works 38 ordinary hours per week is entitled to 76 hours of personal/carer’s leave per year and a part-time employee who works 20 hours per week is entitled to 40 hours of personal/carer’s leave per year. The Court’s judgment ensures equity amongst full-time and part-time employees, and amongst 8-hour and 12-hour shift workers.”

The AMWU expressed its disappointment in the High Court decision as it said it means that Australian shift workers are entitled to less than ten days’ personal leave each year.

“While we respect the decision of the High Court, this is obviously a very disappointing outcome for us and for the delegates… who have been fighting for their personal leave entitlements through the courts for years now,” AMWU Tasmania state secretary John Short said.

“We are now calling for the Federal Government to amend the Fair Work Act so that every worker has access to ten days of paid personal leave every year, no matter what hours they work.

“COVID-19 has shown the importance of personal leave. The Government must change the law immediately to ensure that no matter whether you work 7.6 hours a day or 12 hours a day, you’ve got access to ten days of personal leave per year.”

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