Relief for employers as High Court declares the definition of a working day

Wednesday August 26, 2020

Staying on top of employee entitlements can be hard work when court rulings change the way we do things. This is highlighted in the case of Mondolez Australia OTY LTD v AMWU & ORS.

 In 2019, Mondolez appealed to the Full Court regarding the definition of a ‘working day’ after two employees claimed their enterprise agreement did not correctly calculate their personal/carers leave entitlements.

The Full Court held that leave entitlements should be calculated based on a 24 hour ‘working day’. The ruling caused some confusion and concern for employers regarding how personal/carers leave entitlements are calculated under the Fair Work Act 2009.

Recently, in a much-anticipated ruling, the High Court overturned this contentious decision by the Full Court. The new decision means that full-time employees accrue personal leave according to their ‘ordinary hours of work’ – regardless of their working arrangements or the pattern of hours they work. In other words, employees are entitled to 10 ‘notional days’ of personal leave per year, based on their ordinary hours.

Therefore, over a two week period, an employee would be entitled to 1/10th of their ordinary hours in personal leave (or 1/26th of their ordinary hours over a 12 month period).

What does this look like?

For a full-time employee working a 38 hour week (76 hours per fortnight), their leave entitlement would be based on a 7.6 hour ‘notional day’. That means their annual personal leave would be 10 x 7.6 i.e. 76 hours.

For a part-time employee working 10 hours a week (20 hours per fortnight), their leave entitlement would be based on a 2 hour ‘notional day’ (instead of the 7.6 hours of the full-time employee). This part-time employee would accrue 10 x 2 i.e. 20 hours per year.

For shift workers who have varying shifts and hours, the calculation can be done as 1/26th of their hours over a 12 month period. For example, most full-time shiftworkers generally work around 38 hours a week on average over a year. They will, therefore, be entitled to 10 x 7.6 hour day’s each year.

Are you calculating leave correctly?

On the basis of the above court decision and the complexities in accurately calculating accrued leave, we urge all employers to:

  1. Review your payroll systems and procedures to ensure you are accruing personal/carers leave according to the ruling.
  2. Review all employment contracts and enterprise agreements to ensure you are consistent with the High Court’s ruling.

Conducting a review is especially important if changes were made after the initial ruling made by the Full Court!

Annual personal and sick leave calculations can be confusing, especially for shift workers or employees who have fluctuating hours. Compliance in this area is critical as high-profile, underpayment cases have demonstrated.

If you aren’t sure what to do or don’t have the time to make this review a priority, the HR Dept is here to help you. Please get in touch to avoid problems occurring.

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