Daniel Anstey, Graduate Associate

Background 

Recently, Mondelez and the Commonwealth Government have sought leave to appeal the significant and contentious decision in Mondelez v AMWU [2019] FCAFC 138. On 21 August 2019, the Full Federal Court (“FFC”) handed down the long-awaited decision, refusing to grant the declarations sought by Mondelez and the Commonwealth Government that when a 12-hour shift worker is absent from a shift, 12 hours personal/carer’s leave is to be deducted from their annual leave balance.

The majority of Justices Bromberg and Rangiah (Justice O’Callaghan dissenting) held that regardless of shift pattern, all permanent employees are entitled to ten days of personal/carer’s leave payments in accordance with the base pay they would have received, had they been able to work on that “day”, as opposed to a notional number of average hours.

The impact of the decision can be seen when comparing two shift workers who both work 36 hours a week doing the same job for the same employer, where one works three 12-hour shifts, and the other works five 7.2-hour shifts.  The FFC’s decision means that although both employees work the same total weekly ordinary hours, the employee who works a 12-hour shift is entitled to take 10 “days” of personal/carer’s leave a year, equalling 120 hours, whereas the worker who works five, 7.2 hour shifts a week would only be entitled to 72 hours.

Key points from the majority decision:

• A “day” in s 96(1) of the FW Act refers to the portion of a 24-hour period that would otherwise be allotted to work (a “working day”).
• How many hours of leave a "day" will convert into will depend on how many ordinary hours were to be worked on the day the leave is taken.
• The purpose of paid personal/carer’s leave is as a form of income protection for employees during the periods of illness, injury or unexpected emergency described in s 97. 

Why is this attracting so much attention?

It has been common industrial practice for employers across industries, to accrue and pay personal leave as an hour-based entitlement, providing an entitlement to a total number of hours accruing per year.  For example, many employers have traditionally accrued and paid personal leave in a manner that would allow a full time employee to accrue a total of 76 hours personal leave per year, and this accrual would be reduced (and paid out) based on the number of hours the employee was absent from work.

Because the decision runs contrary to the practice of most employers, the change will likely require employers to:

• Review their payroll systems to ensure that personal leave is accrued and paid out in a manner which aligns with the decision;
• Audit and correct their employee records with respect to personal leave;
• Determine and discharge any back-pay obligations which may have arisen as a result of the decision.

Leave to appeal

In announcing that the federal government was seeking leave to appeal, the IR Minister Christian Porter said that the decision has “sparked confusion and uncertainty around the way sick and carers leave entitlements should be calculated”.

He further stated that “employers and employees [previously] all understood that full-time staff who worked a 38-hour week were entitled to accrue 76 hours of personal leave each year, based on the number of ordinary hours they worked over a normal two-week period… That had been the situation that existed for decades”.

Porter, and the Australian Industry Group have further claimed that if the decision were to stand, it could cost businesses up to $2 billion annually.

The Minister’s strong statements may suggest that if an appeal is ultimately unsuccessful, there may be legislative change to give effect to the government’s stated position.

Strategies going forward

Given an appeal to the High Court has now been signalled, there will continue to be uncertainty into the immediate future as to whether the current decision (and the changes it would require) will be affirmed, or overturned.  While the prospect of a successful appeal does not of itself provide employers with a basis for inaction, employers will likely exercise caution before proceeding to implement material changes to their systems and employee records.

If your organisation requires advice on how to navigate these complexities, please feel free contact People + Culture Strategies on (02) 8094 3100.

Roxanne Fisch, Executive Counsel

In a previous article, we wrote about the decision of Venier v Baker Hughes Australia Pty Ltd[1] in Western Australia, and its effect on long service leave entitlements when an employee has lengthy overseas service with related entities. The employee in that case was employed by various associated entities outside Australia before commencing work in Australia.

In summary, the decision at first instance interpreted the meaning of “one and the same employer” under the Long Service Leave Act 1958 (WA) (the “LSL Act WA”) broadly, finding that prior overseas service with an associated entity counts towards the employee’s length of continuous service with their Australian employer for the purpose of calculating their entitlement to long service leave.

That decision has subsequently been appealed, with the decision at first instance being overturned.[2] The decision on appeal turned on the meaning of the phrase “one and the same employer” in section 8(1) of the LSL Act WA. Notably, the legislation in WA is drafted in different terms to the prevailing legislation in other States, particularly in New South Wales and Victoria, which provide for continuous service with “related corporations”.

The appeal judgment considered at length the relevant principles of statutory construction and the history of amendments to the LSL Act WA in assessing the nine grounds of appeal and whether the decision at first instance should stand. The judgment also briefly considered the wording used in other States and noted that those States “which used the phrase 'one and the same employer' amended their legislation to provide that service with related or associated bodies corporate be included in the calculation of any entitlement to long service leave.” [at 42].

The appeal judgment found that the phrase “one and the same employer” should not be given a liberal interpretation and should be construed according to the statutory text which is paramount. It therefore found that the phrase is a reference to a single legal entity and that employment with a related body corporate is not an implied exception to the requirement that employment must be ‘for one and the same employer’. This means that continuous employment is employment served with a single employer, rather than extending it to related employers. The initial decision therefore went too far in its interpretation of the legislation by reading words into the Act to “fill the gap” in an effort to accord with entitlements in other States. It further found that there is nothing in the text of the LSL Act WA which evinces an intention to lift or pierce the corporate veil to find that a corporate body is in fact the employer, despite the fact that another company claims to be the employer.

In WA therefore, this decision indicates that there is no statutory right to have overseas service recognised with related bodies corporate for the purpose of calculating an employee’s long service leave entitlements.

Ultimately, the treatment of service in jurisdictions outside of Australia needs to be considered in the context of the relevant governing long service leave legislation. In the case of WA, this case stands for the proposition that only service with a single employer will count towards an employee’s length of continuous service for the purpose of their entitlement to long service leave. In other States, for example in NSW, in addition to the issue around the nature of the relationship between the employing entities, consideration also needs to be given to the territorial application of the provisions, which has previously been interpreted to mean that service with the employer must have a “substantial connection” with NSW at the time the entitlement to long service leave crystallises.

Given the idiosyncrasies which exist between the States it is imperative that employers assess each employee’s service according to the prevailing circumstances in question.

If your organisation requires assistance with this process, please feel free contact People + Culture Strategies on (02) 8094 3100.

[1] 2016 WAIRC 00210

[2] 2016 WAIRC 00843