Employers win High Court victory on personal leave

The federal government has welcomed a High Court decision that employees who worked long shifts at a Cadbury factory were not entitled to more personal leave than other employees.
Thursday’s majority judgment overturned a Full Federal Court ruling in August 2019 that attracted the ire of employer groups and had implications for more than a million people doing shift work, particularly in manufacturing and mining.

“Restores clarity”: Senator Mathias Cormann. Alex Ellinghausen

The High Court said personal/carer’s leave under section 96(1) of the Fair Work Act “must be calculated by reference to an employee’s ordinary hours of work”.

It said the “working day” construction proposed by the Australian Manufacturing Workers Union – and accepted by the Full Federal Court – was incorrect.

Acting Industrial Relations Minister Mathias Cormann said the decision “restores clarity and certainty in relation to how paid personal/carers leave entitlements are calculated”.

“If the Federal Court’s decision had been allowed to stand, it would have created inequities between employees and exposed employers to significantly increased costs, estimated to have been as much as $2 billion per year.

“That is the last thing employers needed right now as they continue to regrow their businesses and the jobs lost in recent months due to the pandemic.

“What the Federal Court found in its original decision is that workers doing the same number of hours each week but on different shift patterns should be entitled to different amounts of personal/carers leave.”

The AMWU took on the case on behalf of two workers at a Cadbury factory at Claremont, 15 kilometres north of the Hobart CBD.

A 2018 enterprise agreement provided for a 36-hour week, with the two workers concerned doing three shifts of 12 hours. It allowed for sick/carer’s leave of 96 hours, but the AMWU argued – and the Full Court agreed – that it should instead be 120 hours, or 10 days of 12 hours.

The court’s judgment summary noted that “10 days” in section 96(1) is two standard five-day working weeks.

“One ‘day’ refers to a ‘notional day’ consisting of one-tenth of the equivalent of an employee’s ordinary hours of work in a two-week period.

“Because patterns of work do not always follow two-week cycles, the entitlement to ’10 days’ of paid personal/carer’s leave can be calculated as 1/26 of an employee’s ordinary hours of work in a year.”

Mr Cormann said the decision “ensures employees who work the same number of hours per week accrue the same number of hours of leave each year, regardless of how their shifts are rostered”.

“This is the situation that Labor had reassured employers would be maintained when it drafted the Fair Work Act [in 2009] and replaced the long-standing method of how leave was to be accrued, based on hours worked over a normal fortnight, with a new definition of “10 days” per year.

“In fact, Labor was repeatedly warned by business that this new definition was open to interpretation, but those warnings were ignored.”

Australian Mines and Metals Association chief executive Steve Knott said the economy had “dodged a bullet”.

“A significant amount of businesses would have been exposed to huge liabilities if the Federal Court’s interpretation stood,” Mr Knott said.

“The concern with the ‘working day’ construction was that it would create great disparity between different groups of employees in workplaces where there are multiple different shifts and rosters in place, such as manufacturing plants or mine sites.

“It might, for example, have seen some employees receive 120 hours’ of leave entitlement and others receive 76 hours, despite working the same number of hours across a two-week period.”