Legal update: The High Court’s ‘Mondelez leave’ decision
On 13 August 2020, the High Court of Australia handed down a decision in Mondelez Australia Pty Ltd v AMWU & Ors  HCA 29 (Mondelez High Court Decision) about the method of accruing and taking paid personal leave under the National Employment Standards (NES) contained in the Fair Work Act 2009 (FW Act). The Mondelez High Court decision overturns a decision made by the Full Federal Court of Australia in August 2019.
Summary of Matter
The NES, like the Queensland Employment Standards (QES) under the Industrial Relations Act 2016 (IR Act), provide minimum standards of entitlements and conditions for employees within the federal jurisdiction. Section 96 of the NES, that deals with personal leave, relevantly provides:
For each year of service with his or her employer, an employee is entitled to 10 days of paid personal/carer’s leave.
An employee’s entitlement to paid personal/carer’s leave accrues progressively during a year of service according to the employee’s ordinary hours of work, and accumulates from year to year.
The Mondelez High Court Decision dealt with how personal leave should be calculated for two employees (Ms Triffitt and Mr McCormack) of Mondelez Pty Ltd who worked an average of 36 ordinary hours of work per week, comprising, on average, of three 12-hour shifts a week. Under their enterprise agreement, Mondelez provided each employee with 96 hours of paid personal leave per year of service. When the employees access paid personal leave for one 12-hour shift, Mondelez deducts 12 hours from their accrued leave balance. Over the course of one year of service, both employees accrue paid personal leave sufficient to cover 8 days.
Ms Triffitt and Mr McCormack (together with the AMWU) argued that the NES entitles the employees to paid personal leave sufficient to cover ten absences from work per year (120 hours of paid personal/carer’s leave) and that Mondelez calculation of personal leave was in breach of Section 96(1) of the NES.
Mondelez, supported by the Commonwealth as intervener, argued that the word ‘day’ in section 96(1) does not refer to a calendar day or working day but rather to its ‘industrial meaning’ of a ‘notional day’, calculated by reference to the individual employee’s average weekly ordinary hours divided by five.
On this basis, a hypothetical employee who works 36 ordinary hours at an average of 7.2 hours per day over a 5-day working week has a ‘notional day’ of 7.2 hours. This means that the employee is entitled to 10 such days (or 72 hours) of paid personal leave for each year of service. If the employee took a day of personal leave, the employee would be paid 7.2 hours’ wages, and 7.2 hours would be deducted from the employee’s accrued leave balance.
According to Mondelez, this meant that the employees’ entitlement to 96 hours of personal leave per year under their enterprise agreement was in excess of their minimum entitlement under the NES.
The High Court accepted the argument of Mondelez and determined that 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. An employee’s entitlement to ‘10 days of paid personal leave’, regardless of their roster arrangement, is therefore to be calculated and paid at the rate of 1/26 of that employee’s ordinary hours of work in a year.
The consequence of this interpretation is that some employees who work their ordinary hours on a compressed roster may exhaust their entitlement to ‘10 days’ of personal leave in a year before they can take ten separate calendar days of leave without loss of pay.
In coming to their decision, the following considerations were given:
The concept of an employee’s ‘ordinary hours of work’ was the standard for determining leave under the personal leave arrangements, including the meaning of a ‘day’ under section 96(1) of the FW Act
In an employment context, the ‘10 days’ is likely to refer to two standard five-day working weeks. On this basis, it was decided that the relevant unit of a ‘day’ in section 96 was 1/10 of the ordinary hours worked in a two-week period or 1/26 of an employee’s ordinary hours of work in a year (the notional day)
The interpretation is supported by the language of the surrounding provisions which rely on the unit of ordinary hours and this approach was also supported by the Explanatory Memorandum to the FW Act and the previous statutory provisions
Taking into account the FW Act’s object of ‘fairness’, particularly fairness between employees, all employees working the same number of ordinary hours accrue paid personal leave at the same rate and, after working the same number of ordinary hours, are entitled to payment for the same number of ordinary hours, regardless of the roster pattern. The Applicants interpretation was rejected on the basis that it produced outcomes that would “give rise to absurd results and inequitable outcomes”.
The Mondelez High Court Decision overturned a majority decision of the Full Court of the Federal Court just under a year ago which determined that an employee’s entitlement to 10 days of personal leave in the FW Act is an entitlement to be paid for 10 separate 24 hour periods, where the employee is not able to attend for scheduled work because they are ill, injured, face an unexpected emergency or are required to care for a member of their immediate family or household.
Possible applicability to Council
The Mondelez High Court Decision is a positive outcome for Local Government. While this Decision dealt with the NES provisions under the FW Act, there are clear parallels with the QES provisions under the IR Act, not just in relation to entitlements to personal/carer’s leave but also annual leave, and would lend itself to being a reliable precedent for how leave should be calculated in the circumstances where employees work compressed hours, such as a nine day fortnight.
We are here to help
For further information, please contact us on (07) 3000 2148 or email email@example.com