Yesterday, the majority of the High Court of Australia (HCA) found that ‘a day’, for the purposes of calculating paid personal / carer’s leave, is a ‘notional day’.
In other words, section 96 of the Fair Work Act 2009 (the Act), entitles an employee to accrue up to 76 ordinary hours (or 10 days) of paid personal / carer’s leave per year of service.
In arriving at this conclusion, the HCA overturned the decision of the Full Court of the Federal Court of Australia, which held that ‘a day’, for the purposes of calculating paid personal / carer’s leave, consisted of the portion of a 24 hour period that would otherwise be allotted to working and thereby authorising an employee to be absent, without loss of pay, for 10 days per year. And in so doing, it maintained the usual arrangement for employer’s to calculate paid personal / carer’s leave for their employees.
The HCA’s focus on the historical process for calculating personal / carer’s leave and ordinary hours of work being the cornerstone of the entitlement to paid personal / carer’s leave appear to be the two most significant reasons for the majority decision.
The majority held that:
As s 96(2) states, an entitlement to paid personal / carer’s leave accrues progressively in the course of a year of service, for all employees, by reference to ordinary hours worked and not by reference to days or working patterns. All employees working the same number of ordinary hours accrue paid personal / carer’s leave at the same rate and, after working the same number of ordinary hours, are entitled under s 99 to be paid for the same number of ordinary hours, regardless of whether their ordinary hours over a two-week period are worked across ten, six or five days in that period.
The majority also found the Explanatory Memorandum to the Act helpful and it focused in on the following part:
Although this is expressed as an entitlement to 10 days [personal leave] (reflecting a ‘standard’ 5 day work pattern), by relying on an employee’s ordinary hours of work, the Bill ensures that the amount of leave accrued over a period is not affected by differences in the actual spread of an employee’s ordinary hours of work in a week.
Therefore, a full-time employee who works 38 hours a week over five days (Monday to Friday) will accrue the same amount of leave as a full-time employee who works 38 ordinary hours over four days per week. Over a year of service both employees would accrue 76 hours of paid personal / carer’s leave.
Lessons
The effect of this decision is, in reality, to maintain the status quo for accruing and calculating an employee’s entitlement to paid personal / carer’s leave for the majority of businesses.
However, the attention placed by the HCA on an employee’s ordinary hours of work as being the determinative factor in the accrual of personal / carer’s leave means that employers should check both their contracts and their organisational practices to ensure that it is clear and unambiguous that the accrual of personal / carer’s leave is calculated only by reference to the ordinary hours of work of an employee.
The entitlement set out in the National Employment Standards are the ‘minimum’ entitlements for employees.
If, through custom and practice, or by unintentional contractual terms employees’ personal / carer’s leave entitlements are calculated by reference to hours worked in addition to their ordinary hours of work, this may mean that an underlying unpaid wage entitlement may be lurking and this may extend beyond personal leave entitlements.
If you wish to find out more details regarding this case and how the outcome may affect your business, please contact one of our Workplace Law team members.
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