A landmark judgement on leave entitlements has been delivered by the Federal Court, marking a significant shift in the way personal/carer’s leave is accrued by employees.
Cadbury manufacturer Mondelez took the Australian Manufacturing Workers Union (AMWU) to court to dispute the Fair Work Act’s ambiguous terminology regarding the accrual of personal leave entitlements. In a 2 to 1 majority the Federal Court ruled in favour of the AMWU, confirming that personal leave should be accrued and taken in ‘days’, rather than a number of hours.
Paid personal leave can be used by an employee who is unfit for work due to illness or injury. It also covers employees who are caring for a member of their family or are dealing with a family emergency.
Employees are entitled to 10 days’ personal leave per year. Previously this meant that when an employee needed time off, the number of hours they usually worked on that day was deducted from the balance of their personal leave accrual. The new law means that employees will now be entitled to 10 working days of leave, regardless of how many hours the employee works per day or the number of days worked per week.
Another significant implication is that part-time employees – who may work as little as 1 or 2 days per week – will also be entitled to 10 full days of personal/carer’s leave per year.
Consider this example. Sue is an employee who works 32 hours per week over 4 days. She works 10 hours each on a Monday and Tuesday, and 6 hours on Wednesday and Thursday. Previously, if Sue was sick on a Monday, 10 hours of personal leave was deducted from her balance, while if she was sick on a Wednesday only 6 hours would be deducted.
The changes handed down by the Federal Court mean that Sue will be entitled to take 10 days leave per year, regardless of the number of hours she usually works on the day of her absence. If circumstances required, she could take all 10 days on a Monday, effectively getting 100 hours of personal leave per year, or all 10 days on a Wednesday, getting 60 hours personal leave per year. If Sue was to take a part-day of leave, an equivalent part-day would be deducted from her accrued leave balance.
The Morrison government is seeking to overturn the ruling on the basis that it creates significant inequities between employees and has far-reaching implications, including exposing businesses to an unprecedented level of financial risk. At the moment, the Federal Court decision stands but the Fair Work website will review its advice at the conclusion of the appeal proceedings.
If you would like further clarification on this issue or need assistance, please contact your TJL Client Manager.