In the recent significant decision Mondelez v AMWU [2019] FCAFC 138, the Full Court of the Federal Court clarified that an employee’s annual entitlement to 10 days’ personal leave under the NES should be calculated on the basis of a ‘working day’ (the number of hours worked in a 24 hour period) as opposed to a ‘notional day’ of 7.6 hours.

This decision will impact employers, particularly those of full-time and part-time employees working an uneven spread of hours, including shift workers.

Take for example Employee A who works three x 12 hour shifts each week. Based on the ‘working day’, Employee A will be entitled to take up to 10 x 12 hour shifts as paid personal leave each year (120 hours). Employee B, a part-timer who works two shifts per week (one four hours and the other eight), will be entitled to take paid personal leave of up to anywhere between 40 hours and 80 hours depending on the days leave is taken.

Contrast Employee A and Employee B with Employee C who works 38 hours a week spread evenly Monday through Friday. Employee C will be entitled to up to 10 x 7.6 hour shifts as paid personal leave a year (76 hours). Even though Employee C works the most hours out of the three, she may (depending on the days Employee B takes personal leave) have the lowest entitlement.

The Court, however, emphasised the aim of personal leave which is to provide income protection for employees during periods of illness, injury or unexpected emergencies. Using ‘working days’ means no employee misses out on pay over the ten day entitlement period.

Implications for Employers

The case leaves a number of unanswered questions:
• How, for example, should part-days be deducted from an employee’s leave balance based on ‘ordinary hours’ where the employee works shifts of varying lengths. It is straightforward when an employee takes half a day’s leave but not so for an hour taken here or there.
• Cashing out provisions in modern awards and enterprise agreements is another aspect in need of clarification. The Court declined to decide precisely how these provisions are to be construed, however, suggested for an employee working shifts of varying lengths, the cashing out either cannot apply or should perhaps be based on the longest shift worked.

The decision may be appealed to the High Court especially given the minority judgment in which Justice O’Callaghan persuasively relies on parts of the Explanatory Memorandum to hold that a ‘notional day’ was Parliament’s intention.

In the meantime, employers need to modify their method of calculating personal leave in accordance with the decision and be aware of the increased entitlements that will flow for shift workers and part-timers with working days of varying length.

CIE Legal’s workplace relations team regularly assists businesses with issues involving employee entitlements.

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