A Full Court of the Federal Court of Australia has confirmed that it is permissible to deduct annual leave from employees on a public holiday, where that employee receives an annual leave entitlement in excess of the National Employment Standards (NES).

Implications for employers

Employers should consider the options available to them in respect of contractual entitlements they provide to employees which exceed the employee’s guaranteed statutory entitlements under the NES. The decision confirms that employers can apply different rules to these additional contractual entitlements which may allow employers to achieve more flexible conditions particularly when it comes to employees working on public holidays.

Background

Mr Brendan Noyes (an employee of Glendell Mining) took annual leave at various times between 2010 and 2014. On a number of occasions, Mr Noyes’ annual leave fell on days that were a public holiday. On each public holiday, Glendell deducted a day’s annual leave from Mr Noyes’s balance.

Between 2010 and 2014, Mr Noyes was covered by the Black Coal Mining Industry Award 2010 and then two enterprise agreements – each of which granted Mr Noyes an annual leave entitlement which exceeded the NES standard (4 weeks’, or 5 weeks’ if the employee is a shift worker). In Mr Noyes’ case, he was entitled 6 weeks’ annual leave.

Against this backdrop, the Fair Work Act 2009 (FW Act), relevantly provides (in section 89) that a employee is not taken to be on paid annual leave on a public holiday. In other words, an employer is prohibited from deducting paid annual leave on a day that is a public holiday.

First instance decision

The Construction, Forestry, Mining and Energy Union (CFMEU), on Mr Noyes’ behalf, sought declarations in the Federal Circuit Court of Australia that Glendell had contravened the NES and orders restoring Mr Noyes’ annual leave balance for days that fell on a public holiday.

The Federal Circuit Court dismissed the CFMEU’s application. The CFMEU appealed to a Full Court of the Federal Court.

Decision on appeal

The central question on appeal was whether the prohibition on deducting an employee’s annual leave balance on a public holiday under section 89 of the FW Act applied to all of an employee’s paid annual leave entitlement (including, for example, an annual leave entitlement under an enterprise agreement) or whether the prohibition applied only to the paid annual leave entitlement under the NES.

In a split decision (2-1), the Full Federal Court dismissed the CFMEU’s appeal and confirmed the decision of the Federal Circuit Court. Justices White and Bromwich gave the majority judgement.

Justices White and Bromwich found that it was permissible for Glendell to deduct annual leave from Mr Noyes on a public holiday for the following reasons.

1. The NES contemplates that an employee may be entitled to additional annual leave under an award or enterprise agreement that is not governed by the NES. Further, the NES clarifies that the NES entitlements apply in parallel to any award or enterprise agreement entitlement that deals with the same benefit (e.g. annual leave), and that the NES acts as a minimum safety net in respect of the NES part of the parallel entitlement. The notes that follow section 55 of the FW Act, go further in saying:

“Note: For example, if the award or agreement entitlement is to 6 weeks of paid annual leave per year, the provisions of the National Employment Standards relating to the accrual and taking of paid annual leave will apply, as a minimum standard, to 4 weeks of that leave.”

2. The FW Act’s definitions state that “paid annual leave” means “paid annual leave to which a national system employee is entitled under section 87 [which says an employee is entitled to 4 or 5 weeks’ paid annual leave]”. Their Honours, said that the implication of this definition was that the restriction on deducting paid annual leave on public holidays contained in section 89 only applies in respect of the NES portion of an employee’s paid annual leave, and not the non-NES portion of their leave.

3. Justices White and Bromwich dismissed the CFMEU’s argument that Parliament could not have intended for there to be essentially two classes of paid annual leave (NES leave and non-NES leave) and further that it would introduce a level of administrative complexity (accounting for NES vs non-NES leave on a given public holiday day) that could not have been contemplated by Parliament. Their Honours held that it was not possible to read down the clear words of the FW Act because that interpretation might result in certain practical difficulties.

Construction, Forestry, Mining and Energy Union v Glendell Mining Pty Limited [2017] FCAFC 35