Common sense prevails – High Court settles crucial Personal Leave debate

Early in July, the appeal against the Full Court of the Federal Court of Australia’s August 2019 decision in Mondelez v AMWU & Ors [2019] FCAFC 138 was heard before the High Court of Australia. This morning, just shy of one year to the day the Federal Court issued the significant decision, the High Court has set aside the ruling.

After granting both the employer (Mondelez Australia Pty Ltd) and the Federal Government leave to appeal the decision just prior to Christmas 2019, a majority High Court determined the Federal Court erred in finding that the entitlement to “10 days of paid personal/carer’s leave” contained within the Fair Work Act 2009 (Cth) (the Act) was to be interpreted as 10 “working days” for all permanent employees. According to the Federal Court, this entitlement to 10 “working days” per year also extended to part-timers, regardless of the number of hours or days they work per week.

Much to the relief of Australian employers, the High Court instead found the Act’s reference to “10 days of paid personal/carer’s leave” should be interpreted in the traditionally-accepted manner, to provide for a maximum entitlement per year for a permanent worker of 2 weeks’ leave, generally the equivalent of 76 hours per annum. Importantly, the High Court’s judgement also provides for the entitlement to apply on a proportionate basis to employees who work less than 38 hours per week (i.e. part-timers). Specifically, the High Court judgement summarises the entitlement to Personal Leave as follows:

“The expression ’10 days’ in s 96(1) of the Fair Work Act 2009 (Cth) means an amount of paid personal/carer’s leave accruing for every year of service equivalent to an employee’s ordinary hours of work in a week over a two-week (fortnightly) period, or 1/26 of the employee’s ordinary hours of work in a year. A ‘day’ for the purposes of s 96(1) refers to a ‘notional day’, consisting of one-tenth of the equivalent of an employee’s ordinary hours of work in a two-week (fortnightly) period.”

In reference to the Federal Court’s August 2019 interpretation, a majority High Court commented:

“The alternative construction is that the reference to “10 days” entitles every employee, regardless of their pattern of work or distribution of hours, to be absent without loss of pay on ten working days per year (“the ‘working day’ construction”). That construction is rejected. It would give rise to absurd results and inequitable outcomes, and would be contrary to the legislative purposes of fairness and flexibility in [the Act], the extrinsic materials and the legislative history.”

In reaching its judgement, the High Court acknowledged the importance of having regard for the traditionally accepted approach and the Explanatory Memorandum which accompanied the implementation of the Act (though was entirely disregarded by the Federal Court) as follows:

“It is necessary to construe the expression “10 days” in s 96(1) in the context of the Fair Work Act as a whole and, in particular, by reference to the provisions described below. It is necessary to construe the expression also in light of the relevant extrinsic materials and the legislative history. Those materials, and that history, show not only continuity between the Workplace Relations Act 1996 (Cth) and the Fair Work Act but also that the provision in issue is to be understood as a restatement, in simpler terms, of long-standing provisions of industrial relations law containing minimum employment conditions.”

The majority ruling, which reinforces the traditional method of calculating an employee’s entitlement to personal/carer’s leave, was issued by Chief Justice Susan Kiefel and Justices Geoffrey Nettle and Michelle Gordon . Justice James Edelman supported the appeal but proposed different orders with Justice Stephen Gageler providing the only dissenting view.

Mondelez Australia Pty Ltd v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union, Minister for Jobs and Industrial Relations v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union [2020] HCA 29 (13 August 2020)

Although now overturned and subsequently unenforceable, employers can refresh on the Federal Court’s original decision of August 2019 here – Entitlement to Personal Leave – Full Court rules on Test Case.