Sick leave has been redefined!

A landmark Federal Court case brought against Cadbury’s is likely to leave a sour taste for many employers ….

Earlier this week the Federal Court made a landmark decision about what constitutes a working day for shift workers and part-time employees (but not casuals). 

Australia has millions of shift workers and part-time employees.  Most Australian employers are likely to be impacted by the Mondelez (Cadbury) case decision, both for current employees and potentially former employees.  The bill for the decision could be tremendous.

The Case

This case involved an appeal against a decision of the Fair Work Commission, who had earlier ruled that employees were entitled to take 10 working days of personal/carer’s leave per year. A day of personal/carer’s leave is to be paid according to the number of ordinary hours the employee would have worked on that day, and not an average of the hours worked across the week or roster cycle. The Federal Court confirmed this approach as correct, and held that a “day” of leave means a “working day” and not an average day (e.g. not a 7.6 hour day, as in the case of a full-time employee).

The original dispute, in this case, concerned employees who worked 12-hour shifts.  Their union claimed that a day of personal leave was 12 hours pay, and not 7.6 hours pay on a day they would have worked 12 hours if they were not sick.  In a 2-1 majority decision, the Court held that the union claim was correct as this was the language used in the personal/carer’s leave terms in the Fair Work Act 2009.  Therefore, the Federal Court confirmed that personal leave accrues in “days” over a year of service, and a “day” is the portion of a 24-hour period that would be ‘normally’ be allotted to work.  A normal working day is currently considered to exclude overtime.

The upshot is, that instead of 76 hours of personal leave, these employees were actually entitled to 120 hours.  If you have a part-time employee, they are also entitled to a full 10 days per year despite the number of days they work per week.

Implication for Employers

The decision is likely to have significant implications for how employers both accrue for personal leave and annual leave and the accuracy of leave records, and what an employee is entitled to be paid for taking each day of annual leave or personal/carer’s leave.  

We know most Australian employers have been operating on the understanding that the accrual of personal/carer’s leave occurs in standard hourly increments and it is similarly taken according to a standard day of work (i.e. 7.6 hours).  This is especially important for employees working non-standard hours, including compressed weeks, variable working hours per week, part-timers, shift-workers and creative flexible working practices.

This decision will impact employers as most Australian payroll providers do not use this approach for accruing annual leave and personal leave.  If this decision stands, it creates the possibility for current and former employees, or their representatives to demand calculations of historical payments for annual leave and personal/carer’s leave to see if there are grounds for underpayment claims.

We are already working with a number of clients to understand whether there is any risk of legacy compliance or underpayment issues, and steps that can be taken to address any such risk.

What do employers need to do?

It remains to be seen if this decision is appealed to the High Court and whether other claims are made, for example regarding annual leave.  Another case, with a similar argument, is currently awaiting a hearing in the Full Court.  The Australian Industry group supported by the Morrison Government represented the employer’s submission.  Employers will need to watch this space to understand the implications for them.  We will keep our clients and followers up to date.

It is likely that employers with EBA’s and unions will face claims based on this decision.

For now, all employers with non-standard working patterns, shift workers or part-timers should ask their payroll system provider to confirm how accruals of personal/carer’s and annual leave are calculated.  Employers will need to review these systems to ensure they are compliant with the legislative requirement that an employee is entitled to accrue 10 days of leave. 

If you have any questions or would like assistance with this matter or other employment matters, please contact our HR Experts on 1300 795 106

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This article is intended to provide commentary and general information only. It should not be relied upon as comprehensive or legal advice. Formal legal advice may be necessary, in particular transactions or on matters of interest arising from this article. The HR Experts International is not responsible for the results of any actions taken on the basis of information in this article, nor for any error or omission in this article.

Mondelez v AMWU [2019] FCAFC 138

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