Legal Advice & Consulting

UPDATE: Chocolate Factory Workers Given Golden Ticket by Full Federal Court in Leave Test Case

17 September 2019


UPDATE: Chocolate Factory Workers Given Golden Ticket by Full Federal Court in Leave Test Case

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.

Posted in Legal Advice & Consulting, Resources.
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