A ‘day’ is a “notional day” not a “working day”: High Court overturns Mondelez decision – employers breathe a sigh of relief

Yesterday the High Court of Australia handed down its much-anticipated leave decision of Mondelez,1 overturning the earlier decision of the Full Court of the Federal Court. The majority held in favour of Mondelez and Federal IR Minister Christian Porter, declaring that "a 'day' for the purposes of s 96(1) [of the Fair Work Act] refers to a 'notional day', consisting of one-tenth of the equivalent of an employee's ordinary hours of work in a two-week (fortnightly) period". The judgement effectively confirms the position most employers were following prior to the full Federal Court decision last August.

 

Background

Mondelez, a national systems employer, operates four food manufacturing plants in Australia. The Mondelez Australia Pty Ltd, Claremont Operations (Confectioners & Stores) Enterprise Agreement 2017 (Enterprise Agreement) came into effect in 2018, which covers employees working at a Cadbury confectionary plant in Tasmania.

Ms Triffitt and Mr McCormack (two employees of Mondelez) each worked 36 hours per week, averaged over a four week cycle, in 12-hour shifts.

When Ms Triffitt or Mr McCormack took paid personal/carer's leave for a single 12-hour shift, Mondelez deducted 12 hours from their accrued paid personal/carer's leave balance. Using this method of calculation, over the course of a year, Ms Triffitt or Mr McCormack each accrued an amount of personal/carer's leave that is sufficient to cover only eight 12-hour shifts.

A dispute arose between the employees and Mondelez as to how the entitlement to paid personal/carer's leave is quantified under s 96(1) of the Fair Work Act 2009 (Cth) (FW Act). Section 96(1) of the FW Act provides:

"For each year of service with his or her employer, an employee is entitled to 10 days of paid personal/carer's leave"

Mondelez submitted that "day" in s 96(1) of the FW Act is a "notional day", which consists of an employee's average daily ordinary hours based on an assumed five-day working week. This interpretation means that if an employee works 36 ordinary hours a week, irrespective of whether the employee works three 12-hour shifts that week, the average ordinary hours per day is 7.6. Therefore, as 'day' equates to 7.6 hours, employees are entitled to receive 76 hours of personal/carer's leave per year.

The Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union (AMWU), on behalf of the employees, submitted that a 'day' in s 96(1) of the FW Act has its ordinary meaning of a "calendar day", which is "a 24 hour period". On this basis, Ms Triffitt or Mr McCormack should still be entitled to be absent from work without loss of pay on 10 calendar days per year, even if rostered to work 12-hour shifts.

The Minister for Small and Family Business, the Workplace and Deregulation (Minister) was granted leave to intervene in the proceeding and did so in support of Mondelez' construction of s 96(1) of the Act.

Decision of Full Federal Court

On 21 August 2019, the Full Federal Court of Australia handed down its decision.2

The majority rejected Mondelez' construction of "day" in s 96(1) of the FW Act as being a "notional day" and instead held that "day" refers to "the portion of a 24 hour period that would otherwise be allotted to working". Their Honours Bromberg and Rangiah JJ described this to be a "working day", meaning that section 96(1) of the FW Act authorises employees to be absent from work for 10 such "working days" per year.

The Federal Court held that employees working 12-hour shifts would therefore be entitled to ten 12-hour days of personal/carer's leave per year (equating to 120 hours), as opposed to ten shifts of 7.6 hours per year (equating to 76 hours).

Appeal to the High Court

In December 2019 the High Court granted special leave to Mondelez and the Minister to appeal the decision of the Full Federal Court.

The grounds of appeal were that:

  1. The Full Federal Court erred in its conclusion that a "day" in s 96(1) of the FW Act means “the portion of a 24 hour period that would otherwise be allotted to work”. "Day" should instead be considered an "average working day", that is, the employee's average daily ordinary hours of work based on a standard five-day working week.
  2. The Full Federal Court erred in construing s 96(1) of the FW Act as entitling national system employees (other than casuals) to paid personal/carer's leave equivalent to 10 "working days" (of the duration the employee would have worked on a particular day in question) per year.

Decision of the High Court

On 13 August 2020, the High Court set aside the decision of the Full Court of the Federal Court and in its place declared that:

"The expression '10 days' in s 96(1) of the Fair Work Act 2009 (Cth) means an amount of paid personal/carer's leave accruing for every year of service equivalent to an employee's ordinary hours of work in a week over a two-week (fortnightly) period, or 1/26 of the employee's ordinary hours of work in a year. A 'day' for the purposes of s 96(1) refers to a 'notional day', consisting of one‑tenth of the equivalent of an employee's ordinary hours of work in a two-week (fortnightly) period."

In making this declaration, the majority of the High Court rejected the "working day" construction adopted by the Federal Court on the basis that:

(a)   It would be unfair as it would lead to inequalities between employees with different work patterns. An employee whose hours are spread over fewer days with longer shifts would be entitled to more paid personal/carer's leave than an employee who was working the same number of hours per week but spread over more days.

(b)   It would result in part-time employees being entitled to the same amount of leave as, or more leave than, full time employees. For example, an employee who only works one day per week for 7.6 hours would accrue the same amount of personal/carer's leave per year (i.e. ten days per year) as an employee who works five days per week for 7.6 hours.

(c)    It would create uncertainty if employees take only part of their shift as personal/carer's leave.

Implications

Thankfully, the decision means that most employers will not need to change the way that they accrue and pay employees for their paid personal/carer's leave. Effectively the status quo (pre the Full Federal Court decision) continues.

The High Court's decision provides clarity on how the entitlement to paid personal/carer's leave under s 96(1) of the FW Act should be interpreted, which is, in effect, an entitlement to 76 hours per year for an employee working a usually 38 hour week.

While most employees will not be affected by the decision, those who are engaged to work shifts of longer than 7.6 hours (i.e. 12-hour shifts) will not receive enough hours of paid personal/carer's leave per year to cover all ten occasions they are absent from work for the duration of their shift due to illness or injury.

ACTU secretary Sally McManus has called for legislative changes claiming the decision blows a "massive" hole in the nation's defences against COVID-19. McManus said:

"Now, the Federal Government is allowing even more gaps to open up by not stepping in to protect workers’ sick leave entitlements…The Federal Government must amend the Fair Work Act so that every worker has access to 10 days of paid personal leave every year, no matter what hours they work, and must also legislate paid pandemic leave for all workers."

Acting IR Minister Mathias Cormann said the High Court's ruling "restores clarity and certainty in relation to how paid personal/carer's leave entitlements are calculated".

Please note this information is a guide only and does not constitute legal advice. If you have any questions regarding employee entitlements to personal/carer's leave, please get in touch with McCabe Curwood's Employment group.


1 Mondelez Australia Pty Ltd v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union, Minister for Jobs and Industrial Relations v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union [2020] HCA 29 (13 August 2020).
2 Mondelez Australia Pty Ltd v AMWU [2019] FCAFC 138.

Contributors

Kim Hodge Partner
Liliana Freeman Lawyer