New High Court Decision - Paid Personal Leave Accrual

On the 13 August 2020, the High Court of Australia handed down a decision about the method of accruing and taking paid personal/care’s leave in accordance with the National Employment Standards (“NES”).

This decision overturns a previous decision made by the Full Federal Court in August 2019. The High Court of Australia has determined that:

• the entitlement to 10 days of personal/carer’s leave is calculated based on an employee’s hours of work, not days.
• 10 days of personal leave can be calculated as 1/26 of an employee’s ordinary hours of work in a year.

Background

The Fair Work Act 2009 (the Act) defines an employee’s entitlement to personal/carer’s leave. Employees are entitled to 10 days each year for full-time employees and pro-rata 10 days each year for part-time employees. An employee’s entitlement to personal/carer’s leave accrues progressively and accumulates from year to year.

Employees are entitled to paid personal/carer’s leave if they are unfit because of illness or injury or to provide care or support to a member of their immediate family or household, because of personal illness or injury or an unexpected emergency.

Case summary

The case considered was Mondelez Australia and their employees Ms Triffitt and Mr McCormack. Under their enterprise agreement, the employees worked on average 36 hours per week, comprising of 3x 12-hour shifts per week.

Mondelez credited Ms Triffitt and Mr McCormack with 96 hours of paid personal leave per year of service. When taking personal/carer’s leave for one 12-hour shift, Mondelez deducted 12 hours from their employees accrued leave balance. Based on this, over the course of one year of service, the employees would accrue sufficient paid personal/carer’s leave to cover their absence for eight 12-hour shifts.

The employees argued that considering the wording of the Act, they were entitled to paid personal/carer’s leave to cover ten absences from work per year or 120 hours of paid leave.

However, Mondelez argued that an employee’s entitlement to 10 days of paid personal/carer’s leave was to be calculated considering an employees ordinary working day. It was argued that generally, a full-time employee will work 7.6 hours per day therefore, they are only entitled to 76 hours of paid personal/carer’s leave per year. 

Initially, the Full Federal Court agreed with the employees and their unions and decided against Mondelez.

The decision was then appealed to the High Court and a majority of the High Court overturned the Full Federal Courts decision.

What should employers do?

1. Conduct a review of enterprise agreements and employment contracts to ensure consistency with the determination of the High Court.
2. Review payroll processing systems to ensure that personal/carer’s leave is calculated and accumulated in a way that is consistent with the new ruling.
3. Make adjustments if required. If your payroll system accrues personal/carer’s leave in a way that differs to the ruling there is a risk that your employees are accruing less than their entitlement and/or being paid the wrong amount when taking a period of paid personal/carer’s leave.

If you have any questions about an employee’s entitlement to personal/carer’s leave, contact Preston HR in Cairns today.