Last month the Full Federal Court handed down its decision in Mondelez v AMWU [2019] FCAFC 138, where it rejected the
position put by Mondelez (the employer) that employees are entitled to personal/sick leave based on an average of their ordinary
hours worked, and only up to a maximum of 76 hours per year. This is the widely-held view of most employers pursuant to the Fair
Work Act 2009. Under this Act, the entitlement to sick leave is 10 days per year. Accordingly, the common approach taken when
accruing personal leave was to accrue 76 hours per year (based on the premise that this equates to 10 days i.e. 7.6 hours per
day, for a 38-hour working week).
The Federal Court however confirmed that personal leave is required by the Fair Work Act to be accrued and taken by reference to
"days" (10 days per year) rather than a notional number of average hours. Consequently, Mondelez employees who worked
three 12-hour shifts of ordinary hours per week are entitled to be paid for 12-hours per day of personal leave taken, rather
than only 7.2-hours per day as was argued by Mondelez (i.e. 36 hours that they worked divided by 5 days per week).
This new interpretation is at odds with employers across a range of industries who provide for leave entitlements in enterprise
agreements and payroll systems as a set number of hours per year, rather than 10 days per year. This approach is a hangover and
is consistent with the former Workplace Relations Act, where the entitlement to leave was based on a number of hours. The Fair
Work Act however expresses the entitlement in terms of days.
The key points from the Federal Court’s ruling include:
Contrary to what was thought to be the case and is widespread practice, a "day" of leave is not based on an
employee's average daily ordinary hours worked in a week, capped at a maximum of 38 ordinary hours per week (or an average of
7.6 hours per day).
Instead, personal leave accrues in "days" over a year of service, and a "day" is the portion of a 24-hour
period that would be allotted to work.
For every day of personal leave taken, a day is deducted from the employee's accrued leave balance.
If only a part of a day is taken, then the number of days in the employee's leave balance is reduced proportionally.
While a day of leave could be converted into hours at any time, how many hours of leave a "day" will convert into
depends on how many hours are worked on the day the leave is taken (see example 3, below).
EXAMPLE 1
As per the Mondalez case, an employee works 3 x 12-hour shifts of ordinary hours
EXAMPLE 2
Tim and Jake both work 38-hour weeks for the same employer. Tim works 5 days for 7.6 hours, while Jake works 4 days for 9.5
hours.
EXAMPLE 3
Kate works three x 9 hour days (Monday to Wednesday) and one x 7 hour day (on Friday)
Take Home Messages
The employer (Mondalez) may seek leave to appeal this decision to the High Court, though there is no guarantee the Court will
hear the case (leave is only granted in special, landmark cases where the law is uncertain or the Court thinks a mistake may
have been made). As such, employers should continue to calculate leave entitlements as per normal while we await direction
from Fair Work Australia on their final position on this issue.
If this interpretation stands, depending on further direction from Fair Work, employers may need to review their systems for
the accrual and taking of leave – you may need to contact your payroll software provider
Time counted towards annual leave continues to be based on ordinary hours not overtime.
For Our Payroll Clients We currently accrue the sick leave for your team members based on ordinary hours worked and
not as a set 76hrs per year.
Key Action - You need to ensure that any sick leave hours submitted are for the actual rostered hours your employee would have worked on
that day.
We will keep an eye on any objections to this ruling.
Our team attended XeroCon 2019 recently. Apart from all the amazing Xero functions coming up it lead me to reflect on the team we have
built and how this has impacted our business.
Last month the Full Federal Court handed down its decision in Mondelez v AMWU [2019] FCAFC 138, which affects how sick leave is
accrued and taken by employees
