On 16 September, the Australian Government announced its intention to seek leave in the High Court to appeal the landmark Full Federal Court decision in Mondelez v AMWU.
The Morrison Government slammed the Court’s decision which it says sparks “confusion and uncertainty” around the way sick and carers’ leave entitlements should be calculated.
The decision in Mondelez in August confirmed that the proper construction of the statement in s 96(1) Fair Work Act 2009 (Cth) that “for each year of service … an employee is entitled to 10 days of paid personal/carer’s leave” is that the word ‘day’ refers to a portion of a 24-hour period which is allotted to work.
This construction was preferred over a calculation based on an employee’s daily ordinary hours averaged over a five day week.
The effect of the decision is that for a 36 hour work week, for example, some employees get the equivalent of 120 hours a year paid personal/carer’s leave if their week is three 12-hour shifts over three days whereas others might only get the equivalent of 72 hours a year if their 36 hour week is spread over five days.
The Attorney General and Minister for Industrial Relations Christian Porter said that the decision creates significant inequities between employees, while also exposing employers to cost increases estimated at up to AU$2 billion per year.
In deciding whether to seek leave to appeal the decision, the Government noted the dissenting opinion of O’Callaghan J who agreed with Mondelez that the traditional method of calculating leave should continue to apply as the inequities otherwise created (as above) could not have been intended by Parliament.
What happened in Mondelez?
Mondelez operates food and manufacturing plants across Australia, including at Claremont in Tasmania and its employees work a standard 36 hour week (made up of three 12-hour shifts).
Mondelez, its employees and the Australia Manufacturing Workers Union (AMWU) are all party to an enterprise agreement containing a clause stating: “… the entitlement to personal/carer’s leave (including sick leave) for employees working on 12-hour shifts will be 96 hours of paid personal leave per annum.”
As one of the National Employment Standards (which set the minimum employment entitlements that must be provided to employees in Australia), s 96(1) Fair Work Act would prevail over the enterprise agreement term if that term does not provide at least as beneficial an entitlement.
The Big Question, then: is 96 hours’ leave under the enterprise agreement the equivalent or better than 10 days’ leave (under the NES) for an employee who works 12-hour shifts?
Mondelez, contended that the entitlement to ’10 days of paid personal/carer’s leave’ in s 96(1) must be construed based on an employee’s average ordinary hours of work. Therefore, 96 hours’ paid leave was more beneficial than the NES provision which would only mean 72 hours of paid leave to an employee working a 36 hour week. Or so it thought.
The AMWU as respondent submitted that the effect of s 96(1) is to entitle each employee to be absent from work without loss of pay on 10 calendar days per year when ill or caring for a relative and that an entitlement to be paid for a ‘day’ is an entitlement to be paid for the hours that would have been worked on that day but for the illness or responsibility as a carer.
By a majority the Federal Court decided that an employee’s entitlement to a day’s paid personal/carer’s leave is an entitlement to be absent from work for the portion of a 24-hour period that would otherwise be allotted to work. For employees who work 12-hour shifts, that allotment is 12 hours and so they would be entitled under s 96(1) to ten such periods for each year of service, equivalent to 120 hours. Therefore the enterprise agreement does not comply with the NES as an employee working 12-hour shifts would exhaust their paid personal/carer’s leave under that agreement after only eight shifts, not ten.
The minority view was that Parliament never intended that the spread of an employee’s ordinary hours of work should produce the disparate result that some employees are entitled to ten periods of 12-hour shifts per year of service (in effect 120 hours), and others, with a five day, eight hour shift week, would only be entitled to the equivalent of 72 hours for doing the same overall number of hours.
What are the implications?
The judgment noted that there had been a shift in how paid personal/carer’s leave is calculated in the current drafting of s 96(1) away from the calculation under the now defunct Workplace Relations Act 1996 (Cth), which calculated the entitlement to paid personal/carer’s leave based on an average of ordinary hours. The Mondelez decision suggests that the intention of Parliament in drafting of the FW Act was to depart from that calculation in favour of a calculation based on ‘days’, using that word’s ordinary meaning. The question for the appeal will be whether this was a deliberate change made with its somewhat random consequences in mind or just loose drafting not really intended to change anything. Traditionally, however, the Courts must follow what Parliament send in new legislation if it is adequately clear to permit that, and cannot disregard statutory wording merely because it produces odd results or was perhaps not, with the benefit of hindsight, thought through thoroughly enough first time around.
The implications of the judgment are significant liabilities potentially arising for employers from past incorrect calculation of paid personal/carer’s leave as well as increased future costs. This is particularly relevant for those employers that employ shift workers in circumstances where the employer has been diligently complying with the terms of an enterprise agreement only now to find out that it does not comply with the NES, as is the case here.
The Government will try and prevent such ramifications by its appeal, but even if the Government is unsuccessful in its appeal to the High Court of Australia, amending legislation could always be introduced to reword s 96(1) of the FW Act to nullify the Court’s decision going forwards. It is not clear that it could do so with retroactive effect, however.