What an interesting notion: “Notional days” to be used for annual leave entitlements
In the recent case of Mondelez Australia Pty Ltd v AMWU & Ors  HCA 29, the High Court has overturned an earlier Federal Court decision that had determined that paid personal/carer’s leave was calculated in working days, not working hours.
The High Court has now ruled that the entitlement to 10 days of paid personal/carer’s leave under the National Employment Scheme (NES) is calculated based on an employee’s ordinary work hours, not work days. As such, in terms of paid personal/carer’s leave, a “day” means a “notional” day and consists of 1/10th of an employee’s ordinary hours of work in a fortnightly period or 1/26th of the employee’s ordinary hours of work in a year.
In this case, the High Court was asked to determine how the entitlement to paid personal/carer’s leave is calculated under section 96(1) of the Fair Work Act 2009 (Cth) (“the Act”)– which entitles an employee to 10 days of paid personal/carer’s leave per year. As such, the question for the High Court was whether “day” in “10 days” referred to a “notional day” (i.e. an amount of time consisting of one-tenth of the employee’s ordinary hours of work in a fortnight) or a “working day” (consisting of the portion of a 24 hour period that would otherwise be allotted to working).
A majority of the High Court determined that the concept of a “notional day” is more consistent with the purposes of the Act, the extrinsic materials and legislative history, in particular placing importance on the accrual of paid personal/carer’s leave.
The High Court noted in particular that:
- entitlement to paid personal/carer’s leave accrues over the course of a year of service for all employees by reference to ordinary hours worked and not by reference to days or working patterns;
- employees working the same number of ordinary hours accrue paid personal/carer’s leave at the same rate and are thus entitled to be paid for the same number of ordinary hours, regardless of whether their ordinary hours over a two-week period are worked across a differing amount of days in that period; and
- the purpose of paid personal/carer’s leave is to protect employees against loss of earnings by reference to their ordinary hours of work – the amount of leave accrued does not vary according to their pattern of hours of work.
The High Court further noted that the “working day” construction would not encourage flexible working arrangements, which is one of the purposes of the Act.
Therefore, employers must be mindful that:
- There is now a return to the accrual of leave on an hourly basis. When leave is taken, it is deducted from the employee’s accrued paid personal leave on an hourly basis. This is of a particular concern for payroll.
- Part-time employees are entitled to 10 “notional days” of paid personal/carer’s leave per year, calculated as 1/10th of the employee’s ordinary hours of work in a two-week period (for example, an employee working 20 hours in a two-week period accrues paid personal/carer’s leave on the basis of an entitlement to a 2 hour “notional day”).
- You may wish to check your system to ensure that accruals are being recorded correctly.
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If you are concerned about what this may mean for your business, the experienced team at Bell Legal Group can discuss your options and advise and assist you with this process. For further information and assistance on this or any other employment matter, please contact a member of our team at Bell Legal Group on (07) 5597 3366 or email firstname.lastname@example.org.
Please note that this article was written by Josephine Vernon solicitor with Bell Legal Group for general information purposes only. It is not legal advice and should not be relied upon as such.