Major changes to sick leave entitlements
The Federal Court handed down a landmark decision in August 2019 which will have major impacts on employee’s paid personal/carer’s (sick) leave entitlements.
What is paid personal/carer’s (sick) leave?
The National Employment Standards (NES) in the Fair Work Act 2009 provides that employees (other than casual employees) are entitled to a minimum of 10 “days” of paid personal leave per year.
Put simply, the determination in this case is that employees are entitled to 10 days of personal leave regardless of the pattern of hours worked. Sounds easy enough, right?
The court itself commented in its opening paragraphs that “for a provision expressed so simply, its interpretation is surprisingly complex.”
Mondelez and the Federal Government have both been granted leave by the High Court to appeal the decision. In the meantime, the decision handed down in August remains current law.
What is this case?
Mondelez (the employer) submitted a new enterprise agreement to the Fair Work Commission for approval in 2017 to cover employees working at its Cadbury plant in Tasmania. The agreement as approved provided an entitlement to personal leave of 96 hours per year for employees working 12-hour shifts and 80 hours per year for other employees. In the course of approval, a dispute arose about whether the leave entitlements met the minimum “10 day” requirement in the Fair Work Act.
As a result, Mondelez commenced proceedings in the Federal Court seeking to clarify the leave entitlements of two employees. Both employees worked three 12-hour shifts of ordinary hours per week, making them subject to the 96-hour personal leave provisions of the agreement.
‘Notional day’ vs ‘Calendar day’
Mondelez and the Federal Government agreed that an employee’s paid personal leave entitlement should be calculated using the ‘notional day’ construction. Under this method, an employee who works 36 ordinary hours per week working an average of 7.2 hours per day over an assumed five-day working week is said to work a “notional day” of 7.2 hours.
The employee is entitled to 10 days, or 72 hours, of paid personal leave for each year of service. If the employee takes a day of personal leave, the employee is paid 7.2 hours’ wages, and 7.2 hours is deducted from the employee’s accrued leave balance. On this basis, all employees who work the same average weekly ordinary hours are entitled to receive the same number of hours of paid personal leave.
The Union’s preference for calculating paid personal leave entitlements is simply that a ‘day’ has its ordinary calendar meaning and an employee is entitled to be absent from work without loss of pay on 10 calendar days per year.
What’s the difference?
The different methods can produce different outcomes for employees, most often between those who work consistent hours across 5 days and those who compress the same hours into less days.
If you have employees who all work 36 hours per week and some work 7.2 hours per day, five days per week whereas others work 12 hours per day, three days per week, their entitlement to paid personal leave will be different.
On the ‘notional day’ construction, each employee is entitled to accrue 72 hours of paid personal leave over a year; but the employee’s entitlements who works 7.2-hours per day will be used up over ten calendar days, whereas a 12-hour employee’s entitlement will be used up over six calendar days.
Using the ‘working day’ method where each employee is entitled to be absent for 10 calendar days, regardless of the number of hours they would have worked on that day, the 7.2 hour employee would, over the course of the year, be paid 72 hours of paid personal leave, whereas the employee working 12 hours per day would be paid 120 hours of paid personal leave.
What did the court decide?
The Federal Court rejected the arguments of Mondelez and the Federal Government and ultimately accepted the arguments advanced by the Union, albeit adopting a slightly different approach.
The Court approved the use of the ‘working day’ method of calculating paid personal leave, where a ‘day’ is the portion of a 24-hour period that would be allotted to work. The law is now that a “day” of paid personal leave is not based on an employee’s average daily ordinary hours worked in a week, capped at a maximum of 38 ordinary hours per week (or an average of 7.6 hours per day).
While a day of leave could be converted into hours, how many hours of leave a “day” will convert into will depend on how many hours are worked on the day the leave is taken.
What does this mean for employers?
An employee’s entitlement to paid personal leave is to be paid for the hours they would have worked on the day the leave is taken. Employers should review their systems for the accrual, taking and payment of paid personal leave to ensure they are compliant with the law as it now stands.
This applies especially to employers who currently accrue and deduct paid personal leave in hours rather than days. Employers also need to be aware of the risk of claims for backpay and contraventions, potentially as far back as 6 years.
Greenhalgh Pickard will keep clients up-to-date and informed of any changes or updates on this issue as the High Court case progresses. If you’re unsure whether your workplace is compliant, call us today on 07 5444 1022 to discuss.
Harry McDonald is a solicitor admitted to practice in the Supreme Court of Queensland, practising in the Commercial and Property Law team at Greenhalgh Pickard Solicitors. Within commercial law, Harry has a keen interest in employment law and enjoys assisting commercial clients in all areas of their employment & industrial relations with experience in employment contracts, sub-contractor agreements, restraint clauses, unfair dismissals, general protections, workplace policies and guidelines and general HR advice.
The material contained in this publication is of a general nature only and is based on the law as of the date of publication. It is not, nor is intended to be legal advice. If you wish to take any action based on the content of this publication we recommend that you seek professional advice.