Personal leave is not accrued in hours but days

A day means a day: Full Federal Court hands down important decision for accrual and payment of paid personal leave

The Full Federal Court yesterday confirmed that all employees (including part-time employees) are entitled to 10 “working days” of personal/carer's leave per year under the Fair Work Act, regardless of how many hours the employees work per day or how many days are worked per week. 

The decision will have wide-ranging implications for employers, the overwhelming majority of whom do not presently accrue personal/carer's leave in this manner. 

What's happened?

Section 96 of the Fair Work Act entitles employees to 10 days personal/carer's leave per year, which accrues by reference to ordinary hours of work.

In Mondelez v AMWU & Ors [2019] FCAFC 138, Mondelez argued that its shiftworkers who worked 3 x 12 hour days per week (36 ordinary hours per week) should accrue 76 hours personal leave per year, reflecting 10 days’ worth of 7.6 ordinary hours. Mondelez argued that this reflects the industrially accepted standard number of hours to be allocated to any day of leave.

The Minister for Employment (intervening in the case) supported this approach, similar to what was adopted under the Workplace Relations Act 1996 (which preceded the Fair Work Act).

The Full Court, by a 2-1 majority, rejected Mondelez’s approach as inconsistent with the natural and ordinary meaning of the words used in the Fair Work Act. The Court instead held that all employees are entitled to 10 working days personal/carer's leave per year, regardless of how many hours are worked in a particular day.

Under this approach:

• Mondelez’s shiftworkers were found to be entitled to 10 x 12 hour days of personal/carer's leave each year (equating to 120 hours per year); and
• more interestingly, part time employees – who may work as little as 1 or 2 days per week – are also entitled to 10 full working days of personal/carer's leave per year.

Importantly, the Court found that a working day is not a calendar day. Rather, it is the working hours the employee is scheduled to work in the 24 hour period commencing from the time an employee starts work on a particular day.

What this means for employers

Most payroll systems accrue personal/carer's leave on an hourly basis. Rather than expressing an employee’s leave entitlement in days or weeks, payroll software tends to record the accrual as an hourly amount (with 7.6 hours often reflecting one day’s accrual). In all, payroll systems tend to accrue 76 hours of personal/carer's leave per year for full time employees, and a pro-rata amount for part time employees.

If your payroll system works in this way, you will need to ensure that: 

• 12 hour shift workers either accrue 120 hours of personal/carer's leave per year (instead of 76) or, alternatively, only have 7.6 hours leave deducted whenever they are absent from an entire 12 hour shift;
• similar treatment is afforded to other shiftworkers who work more than 7.6 ordinary hours in a day; and
• part-time employees accrue a full 10 working days per year (as opposed to a pro-rated amount based on their shorter working week).

What about annual leave?

The case is likely to have implications for the accrual and payment of annual leave. Annual leave is an entitlement which expressed in weeks, as opposed to hours, and similar considerations will likely apply to how “one week’s leave” is calculated. However, the Full Court did not deal with annual leave on this occasion.

If you have concerns about whether your personal/carer's leave or annual leave accrual methods are compliant you should contact us for further advice regarding your specific circumstances by ringing 1300 565 846.