High Court Decision about Personal Leave14 August 2020
Tom Earls from Fair Work Lawyers summarises the findings of an important high court decision about personal leave accrual.
On 13 August, the High Court overturned a controversial decision about the accrual and taking of personal and carer’s leave under s96(1) of the Fair Work Act 2009 (Cth) (‘the Act’)) for people working non-standard hours. The decision appears to restore the well understood principle that personal leave (and annual leave) entitlements are accrued by reference to the employee’s ordinary hours of work.
The issue before the Court was how the entitlement to paid personal/carer’s leave is calculated. The Full Federal Court had controversially determined and conceptually created a requirement that a ‘day’ of personal/carer’s leave referred to the portion of a 24-hour period that would otherwise be allotted to work (a “working day”) for a particular worker. This decision meant that part-time workers were entitled to receive ten days off a year, payable at the amount of hours they would have worked on the day off. This also had implications for the accrual and taking of annual leave, which although it sits under a different legislative provision, requires similar issues to be considered.
The employer and the Federal Government challenged the Federal Court’s decision, and in particular the correctness of the ‘working day’ interpretation, with an appeal to the High Court of Australia.
A majority of the High Court rejected the “working day” construction. It was determined that what is meant by a “day” or “10 days” in the personal/carer’s leave provisions must be calculated by reference to an employee's ordinary hours of work.
In particular, the High Court found that the entitlement of “10 days” in s 96(1) is two standard five-day working weeks for that employee. One "day" refers to a "notional day" consisting of one-tenth of the equivalent of an employee's ordinary hours of work in a two-week period. Because patterns of work do not always follow two-week cycles, the entitlement to “10 days” of paid personal/carer’s leave can be calculated as 1/26 of an employee's ordinary hours of work in a year.
This is particularly relevant for non-standard permanent employees (part-time and shift workers) and is consistent with the historical understanding of how personal/carer’s leave was to be accrued and taken, on a pro-rata basis for those workers.
Where to next?
The High Court has the final word on this issue (and any legal matter). Employers can be confident that this interpretation will remain, unless and until there is a legislative change or the High Court revisits the issue (unlikely any time soon). If employers took action to comply with the Federal Court’s initial decision, they should immediately take action to ensure their systems are in accordance with the corrected legal position. Care should be taken in communicating and implementing any changes to accruals with employees, as reflected on payslips and otherwise.
Tom Earls is a Founding Partner of Adelaide-based Fair Work Lawyers. This information has been republished with permission. The information contained here is general in nature and does not constitute legal advice. The reader should seek legal advice in relation to their own specific circumstances.