All in a day’s work: a landmark decision on personal/carer’s leave entitlements

The Full Federal Court has handed down an important decision about personal/carer’s leave entitlements under the Fair Work Act 2009 (Cth) (Act).

This decision is now the authority for how personal/carer’s leave should be treated and, for some employers, will have significant implications on how they treat personal/carer’s leave.

The Court has said that:

  • eligible employees (including part-time employees) are entitled to accrue 10 working days of personal/carer’s leave per year regardless of how many hours or days they work each week;
  • the leave protects employees against loss of earnings when they are unable to work because they or a member of their family or household is ill or injured or there is an unexpected emergency;
  • the leave is calculated in working days not hours, so for every 5.2 weeks an employee accrues an entitlement to one day of personal/carer’s leave; and
  • for every day of personal/carer’s leave taken an employer should deduct a day from the employee’s leave balance. If the employee takes a part-day of leave, a part-day should be deducted.

As an example, an employee working 12-hour shifts on three days per week is entitled to leave from a 12-hour shift on ten separate working days.

Importantly for employers, most payroll systems accrue personal/carer’s leave on an hourly basis with 7.6 hours reflecting one day’s accrual, resulting in a total of 76 hours per year for full-time employees. Consideration will need to be given to:

  • the treatment of employees who work more (or less) than 7.6 ordinary hours in a day. For example, does the system allow you to accrue a higher amount of hours per year?; and
  • the accrual of 10 working days per year for part-time employees, as opposed to a pro-rated amount.

On 16 September 2019, Mondelez and the Morrison Government indicated their intention to seek leave, in the High Court, to appeal this decision. For the moment, this decision remains the authority for the accrual of personal/carer’s leave under the Act.

The case

The dispute centred around the meaning of a “day” pursuant to section 96 of the Act.

Section 96 of the Act establishes the entitlement to paid personal/carer’s leave and the rate of accrual of such leave:

Entitlement to paid personal/carer’s leave

Amount of leave

(1)  For each year of service with his or her employer, an employee is entitled to 10 days of paid personal/carer’s leave.

Accrual of leave

(2)  An employee’s entitlement to paid personal/carer’s leave accrues progressively during a year of service according to the employee’s ordinary hours of work, and accumulates from year to year.

The employer argued that “day” is used as a shorthand reference to the employee’s average daily ordinary hours based on an assumed five-day working week.

The Union argued that “day” has its ordinary meaning of a “calendar day”, or a 24 hour period, and that it allows every employee to be absent from work without loss of pay on 10 calendar days per year.

The Full Court held that the natural and ordinary meaning is not a bare 24 hour period, but the portion of a 24 hour period that would otherwise be allotted to working. A “day” consisting of the portion of a 24 hour period that would otherwise be allotted to working may conveniently be described as a “working day”.

The natural and ordinary meaning of “10 days of paid personal/carer’s leave” in s 96(1) is authorised absence from work for ten such “working days” for a reason set out in section 97 of the Act (illness, injury or unexpected emergency).

The Court was reluctant to accept the employer’s construction of “day” based on the following comparison:

Example employee 1

This employee works 7.2 ordinary hours each day over a five-day week. The employee’s 72 hours of paid personal/carer’s leave entitlement would be used up by taking leave for ten shifts of 7.2 hours over ten separate calendar days.

Example employee 2

This employee works a 12-hour shift on three days per week. This employee will also have 72 hours paid personal/carer’s leave per annum. For each shift that the employee takes paid personal/carer’s leave, the employee is paid for 12 hours and will have 12 hours deducted from their accumulated leave balance. The whole of the employee’s annual accrual of 72 hours would be depleted by taking leave for six 12-hour shifts on six calendar days.

Example employee 3

This employee works four days of eight hours and one day of four hours each week. This employee will also have 72 hours paid personal/carer’s leave per annum.

If the employee happens to fall ill on a day when rostered for four hours, the employee is paid for four hours and four hours leave is deducted from their balance. In this way, the employee may use up their 72 hour annual accrual by taking paid personal/carer’s leave for up to 18 shifts on 18 separate calendar days.

The takeaways

Personal/carer’s leave as a form of income protection

The Court held that:

  • section 96(1) of the Act must be understood as establishing a statutory form of income protection for all national system employees, other than casual employees;
  • that protection is provided by authorising employees to be absent from work during periods of illness or injury and requiring employers to pay employees as if they had not been absent; and
  • the legislative purpose is to protect employees against loss of earnings when unable to work due to relevant illness, injury or unexpected emergency.

A “working day”

A “day” consisting of the portion of a 24 hour period that would otherwise be allotted to working may conveniently be described as a “working day”.

Under this construction, all part-time and full-time employees, whatever their pattern of shifts, are entitled to payments reflecting the income they would have earned had they been able to work.

For example, employees who work 36 ordinary hours per week, whether an employee works 7.2 hours every day over five days, or 12-hour shifts over three days, under the “working day” construction, both will be paid at their base rate for the ordinary hours they would have worked if not for the illness or injury.

The effect of this construction is that, for the most part, no employee who is unable to work because of illness or injury will lose income.

Ten working days for each year of service

Does this mean an employee who works longer shifts effectively gets more personal/carer’s leave than an employee who works a standard five-day week? The Court says no.

The entitlement of employees is to ten days’ personal/carer’s leave for each year of service. It is not an entitlement to take ten days’ paid personal/carer’s leave.

An employee is only entitled to take the leave if the employee or a member of his or her family or household is ill or injured or there is an unexpected emergency.

Under the “working day” construction, each employee accrues an entitlement to the same number of working days of paid personal/carer’s leave for each year of service. That entitlement to leave may or may not eventually be used.

Example

An employee working 12-hour shifts on three calendar days per week is entitled to leave from a 12-hour shift on ten separate calendar days.

For every day of paid personal/carer’s leave taken, a day is deducted from the employee’s accrued leave balance

Regardless of whether an employee works, for example, ordinary hours of 9 hours per day or 12 hours per day, the employer is only entitled to deduct one day for each calendar day of leave taken.

Example

An employee works part-time and work one day a week on a nine-hour shift and two days a week on a three-hour shift. If the employee takes a “day” of leave on a day when rostered for nine hours they will be paid for nine hours and have “one day” deducted from their leave balance. If the leave happens to fall on a day when the employee is only rostered for three hours, the employee will be paid for three hours and still have a day’s leave deducted.

Part-days of paid personal/carer’s leave

The reference to “ordinary hours” in section 96(2) of the Act allows an employee’s entitlement to paid personal/carer’s leave to be taken as a part-day.

An entitlement in respect of a part-day can be calculated as a fraction of the employee’s ordinary hours of work for that day.

Example

An employee who has been employed for 7.8 weeks has accrued an entitlement to 1½ day’s paid personal/carer’s leave. If the employee requires paid personal/carer’s leave on a day when rostered to work eight ordinary hours and on the following day when rostered to work four ordinary hours, the employee is entitled to take and be paid for a day’s (eight hours’) leave plus a half-day’s (two hours’) leave. The employee’s leave balance is reduced by 1½ days.

Overtime hours.

The Act provides that an employee is entitled to payment at the base rate for ordinary hours of work. This does not include overtime.

The overtime that an employee may otherwise have been required to work assists to explain why the accrual of paid personal/carer’s leave under the Act is expressed in terms of “days” and not “hours”.

The Court held that the intention must be to authorise employees to be absent, not only for their ordinary hours of work, but also any overtime hours they would otherwise have been required to work. That is, the employee is authorised to be absent from work for the portion of a 24 hour period that would otherwise be allotted to work (the working day), irrespective of whether that work is ordinary time, or overtime.

If you would like to discuss this decision further and the implications for your business please contact our Employment + Workplace Relations Partner, Erin Lynch.

Erin Lynch, Partner
M +61 477 330 202
E erin.lynch@vincentyoung.com.au