An argument of how the word ‘day’ should be interpreted means organisations across Australia have to rethink entitlements.
If you’re in HR and you deal with shift workers, last week’s Federal Court ruling might have you re-configuring the payroll.
The case was between two workers at Cadbury’s Chocolate Factory in Claremont, Tasmania, and Cadbury’s parent company, Mondelez Australia.
The two employees work 12-hour shifts. But, when it came to personal paid leave, Mondelez Australia said it should not have to pay beyond 6 days for the 12 hour shift workers (roughly the same amount of hours a typical full-time employee works). The workers represented by the Australian Manufacturing Workers Union (AMWU) disagreed.
Justice Mordy Bromberg and Justice Darryl Rangiah agreed, while Justice David O’Callaghan didn’t, resulting in a win for the workers, in a 2-1 split decision.
What even is a ‘day’?
The crux of the case came down to the meaning of the word “day”. The Fair Work Act 2009 section 96(1) states that, “for each year of service with his or her employer, an employee is entitled to 10 days of paid personal/carer’s leave”.
However, the Act doesn’t define a “day”, leaving it open to interpretation. Would it be 10 days as in 10 versions of the typical 7.5 hours, or would it just be 10 days total, regardless of the hours worked in those days? In other words is a “day” a standard working day, or is it a standard day?
Justices Bromberg and Rangiah concluded a day “refers to the portion of a 24 hour period that would otherwise be allotted to work (a ‘working day’)”. They also pointed out that personal paid leave is a “form of income protection” for employees who can’t work due to illness, injury or the need to care for someone else.
“If you need to take a sick day, you should be paid for your normal hours of work, it’s as simple as that. And you should be able to take ten sick days paid at your normal hours of work,” said John Short, State Secretary, AMWU Tasmania.
However, in his judgement, Justice O’Callaghan, who dissented, expressed concern that the decision could lead to “inequities between different classes of employees”. Essentially, the more you work in a single day, the more you’re owed, regardless whether overall you’re working the same number of hours.
For example, an employee who works a 38-hour week, in the form of five 7.6-hour days would be entitled to 76 hours’ personal paid leave per year. But, an employee who works a 36-hour week, in the form of three 12-hour days, would be entitled to 120 hours’ personal paid leave per year.
Michael Byrnes, employment law partner at Swaab, says, “The decision could have widespread ramifications and has the potential to create an anomalous situation. It requires that employers examine closely the way they’re accruing and paying personal leave, to ensure employees are receiving their full entitlements under the National Employment Standards. Payroll systems may need adjustment.”
Talitha Maugueret, a lawyer at McDonald Murholme, says, “The decision will mean that various employees who are employed by the same company will accrue a different number of leave hours. The decision is likely to cause some confusion for employers who pay annualised salaries to shift-workers… particularly where those annualised salaries include compensation for regular overtime performed. The Court confirmed that employees do not accrue leave on overtime hours, nor should they be paid for those overtime hours when on leave.”
Byrnes says the decision “opens up the spectre of underpayment claims”. Workers could, potentially, request retrospective payment of personal paid leave. But, Byrne says, “the statute of limitation will confine any back pay to six years.”
Having been determined by the Full Federal Court, the decision is binding – immediately and nationally. However, there’s a possibility that Mondelez Australia will try and appeal to the High Court.
“It’s yet to be seen as to whether the decision will be appealed,” says Maugueret. “If it is, the appeal will clarify any ambiguity.”
In the meantime, are you worried about the consequences for your company’s payroll? The Fair Work Ombudsman has updated their paid sick and carer’s leave page to reflect the decision.
Here’s a few of their points of advice:
“Full-time and part-time employees are entitled to 10 working days of paid personal/carer’s leave for each year of employment.
“The leave must be calculated in working days, not hours. A working day is the portion of a 24 hour period that an employee would otherwise be working.
“An employee’s entitlement is expressly based upon time working for the employer and is expressly calculated in days. For example, every 5.2 weeks, an employee accrues an entitlement to another full day of leave.”