High Court clear as day on “notional” day in the life

In a decision that has been heralded by businesses as providing welcome clarity and certainty on the meaning of ‘10 days’ personal leave in the Fair Work Act 2009 (Cth) (‘FW Act’), the High Court of Australia overturned the decision of the Full Federal Court that held a day is a ‘24-hour period of absence’. Instead, the High Court adopted the widely accepted method of accruing and deducting 10 days personal leave according to ordinary hours of work, determining that a day is calculated as 1/26^th of an employee’s ordinary hours of work.

The decision

In Mondelez Australia Pty Ltd v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union Known as the Australian Manufacturing Workers Union (AMWU) [2020] HCA 29 (‘Mondelez‘), the High Court, by a 4:1 majority, provided much-needed clarification as to what is meant by ‘a day’ in s 96 of the FW Act for the purpose of calculating employee entitlements to paid personal/carer’s leave (‘personal leave’).

The Court held that one ‘day’ refers to a notional day consisting of one-tenth of the equivalent of an employee’s ordinary hours of work in a two-week period. An employee’s entitlement to ‘10 days of paid personal leave’, regardless of the employee’s roster arrangement, is therefore to be calculated and paid at the rate of 1/26 of that employee’s ordinary hours of work in a year.

The effect of the decision is that part-time employees and shiftworkers may exhaust their entitlement to ‘10 days’ of personal leave in a year before they can take 10 separate calendar days of leave without loss of pay, and that part-time employees will receive personal leave on a pro-rata basis.

In arriving at this conclusion, the High Court overturned a majority decision of the Full Court of the Federal Court in 2019 which determined that an employee’s entitlement to 10 days of personal leave in the FW Act is an entitlement to be paid for 10 separate 24-hour periods of illness or injury. (See: de Flamingh & Hogan ‘A day in the life: Federal Court takes personal leave back to basics’ 60 Law Society of NSW Journal, Oct 2019, 74-75).

Facts

The facts of this case are not unusual. Mondelez provided its employees with a fixed amount of personal leave each calendar year, and deducted the leave based on the hours actually ‘worked’. In particular Mondelez employees were:

• employed to work 36 ordinary hours per week, averaged over a four-week cycle. They worked these ordinary hours in 12-hour shifts on an average of three shifts per week (with the effect that each shift comprised 12 ordinary hours), and
• credited with 96 hours of paid personal leave per year of service.

This had the effect that the employees would exhaust their entitlement before having the benefit of 10 separate calendar days of leave (and have to access any additional leave as unpaid leave). In this case, an employee provided with 96 hours of personal leave and working a 12-hour shift, would exhaust the entitlement after an absence of eight shifts.

The legislation

Section 96 of the FW Act is part of the National Employment Standards set out in Part 2-2 of the FW Act. Relevantly, it provides that: ‘(1) For each year of service with his or her employer, an employee is entitled to 10 days of paid personal/carer’s leave. (2) An employee’s entitlement to paid personal/carer’s leave accrues progressively during a year of service according to the employee’s ordinary hours of work, and accumulates from year to year.’

Mondelez, supported by the Commonwealth as intervener, argued that the word ‘day’ in s 96(1) does not refer to a calendar day or working day but rather to its ‘industrial meaning’ of a ‘notional day’, calculated by reference to the individual employee’s average weekly ordinary hours.