Sweet relief for Mondelez. High Court reinstates the common practice for calculating personal leave

In a welcome relief for employers, the High Court earlier today confirmed that the NES reference to ’10 days’ of leave means the ordinary hours that an employee would work over a two week period. In doing so, it rejected the Federal Court’s working day construction which it described as creating ‘absurd’ and ‘unfair results’.

Where did the Federal Court get it wrong?

The Federal Court interpreted ‘day’ to mean a ‘working day’ and covered all the ordinary hours of work that the employee would have done in that 24 hour period. This interpretation would cause inconsistencies and unfairness in the application of personal leave for employees working part-time or non-standard hours. Part-time employees under the ‘working day’ interpretation would be entitled to 10 days of leave per year of service, even if the total leave taken in that year would exceed the employee’s notional hours across a two week period. Likewise shift workers on 12-hour shifts would have access to 120 hours of leave. Employees that worked a standard 38 hour week, 7.6 hours per day would continue to have 76 hours of paid leave available per year of service.

What did the High Court say?

The calculation of leave accruals is based on the simple formula of 1/26th of an employee’s ordinary hours of work in a year.An employee will then draw down on that leave entitlement according to the number of hours they are absent from their ordinary hours in that period. The High Court emphasised that this was consistent with the legislative history of personal leave entitlements and provided a level of ‘fairness’ between employees that worked standard or non-standard hours.

The High Court gave the actual example of a Mondelez employee working an average of 36 hours per week. If the employee was working 12 hour shifts, for each day of absence on personal leave 12 hours would be deducted from the annual bank of 72 hours.(Under the ‘working day’ method, that same employee would receive 12 hours pay for up to 10 times in a year.)

What should employers now do?

Employers should stick with the common practice of accruing and paying personal leave based on the employee’s ordinary hours of work. Employers with enterprise agreements should

continue to apply personal leave in accordance with those agreements (but, as always, subject to the NES). This includes being able to express an entitlement to 4 weeks annual leave as 152 hours for full-time employees.

This should now be the end of this matter.