On August 13, 2020, 11 years after the enactment of the Truthful Work Act 2009 (Cth) (the “FW Act”), Australian employers obtained steering from the Excessive Courtroom concerning learn how to rely the entitlement to “10 days” of non-public go away per yr of employment, as required beneath Part 96 of the FW Act.

The Excessive Courtroom decided that staff’ go away entitlement is equal to the common of staff’ “peculiar hours” of labor over the course of a two-week interval (i.e., 1/26th of the peculiar hours of labor in a yr) and never 10 “working days” of paid go away per yr. This determination doubtless could have far-reaching implications for all Australian employers, significantly these with a workforce that works exterior the parameters of the peculiar 9-to-5 workday, 5 days per week.

Till this determination, uncertainty about learn how to rely staff’ “peculiar hours” of labor led to inconsistent practices when calculating the go away entitlement, significantly throughout totally different industries the place staff work versatile schedules.

Statutory Context

Section 96 of the FW Act gives the quantity of go away to which staff are entitled. Particularly, Part 96 gives that “[f]or annually of service together with his or her employer, an worker is entitled to 10 days of paid private/carer’s go away.” The go away entitlement “accrues progressively throughout a yr of service in response to the worker’s peculiar hours of labor, and accumulates from yr to yr.” This go away is meant to guard staff towards lack of earnings by reference to peculiar hours of labor when they’re incapacitated by sickness, harm, or want to offer care to household.

Factual Background & Procedural Historical past

Two Mondelez Australia Pty Ltd. (“Mondelez”) staff labored 36 hours per week. These staff labored 12-hour shifts, three days per week. Mondelez offered these staff with 96 hours of non-public go away per yr of service, equal to eight 12-hour days of non-public go away.

In August 2019, the Full Federal Courtroom decided that these staff had been entitled to 120 hours of non-public go away per yr (i.e., 12-hour working days multiplied by 10 days per yr). Beneath this method to calculating the non-public go away entitlement, full-time staff working 7.6-hour shifts 5 days per week would have obtained much less private go away (76 hours of non-public go away (i.e., 7.6-hour working days multiplied by 10 days per yr) than staff who labored longer shifts throughout three days.

The Full Federal Courtroom’s determination adopted a “working day” interpretation (i.e., accounting for the hours labored in every particular person day) somewhat than a “notional day” interpretation (i.e., the common day by day peculiar hours based mostly upon a five-day workweek) of the FW Act. Following the Full Federal Courtroom determination, the Excessive Courtroom granted the events go away to enchantment the choice.

Excessive Courtroom of Australia’s Choice

The Excessive Courtroom overturned the Full Federal Courtroom’s determination and rejected the ten “working day” development of the FW Act. For the needs of calculating “10 days” of go away entitlement, the Excessive Courtroom offered {that a} “day” or “10 days” should be calculated by reference to staff’ peculiar hours of labor in two commonplace five-day workweeks. One “day” refers to a “notional day,” consisting of 1/10th of the equal of staff’ peculiar hours of labor in a two-week interval. As a result of work patterns don’t at all times comply with two-week cycles, the entitlement to “10 days” of paid private/carer’s go away could be calculated as 1/26th of staff’ peculiar hours of labor in a yr.

The Excessive Courtroom acknowledged that the “working day” interpretation of the FW Act was inconsistent with the FW Act’s targets and language. The Excessive Courtroom emphasised that the aim of the FW Act is to offer “equity, flexibility, certainty, and stability” for each employers and staff. The precept of equity additionally applies between staff. The Excessive Courtroom acknowledged that the “notional day” interpretation meets the FW Act’s goal of defending staff towards lack of wages by guaranteeing that staff’ accrued go away entitlement doesn’t differ based mostly upon the sample of hours of labor. Due to this fact, staff who work 36 hours per week are entitled to 72 hours of non-public go away, no matter what number of days the staff really labored that week. As well as, the “notional day” interpretation helps to make sure that part-time staff don’t accrue extra private go away than these working full-time.

Wanting Forward: Implications for Employers

The Excessive Courtroom’s determination clarifies how employers, significantly these with a workforce consisting of part-time staff and shift staff, could adjust to the FW Act. Employers ought to evaluate and replace payroll techniques as essential, particularly if present payroll techniques are based mostly upon the earlier Full Federal Courtroom interpretation of a “day.” As well as, employers ought to evaluate their present accrual ranges to make sure that they’re appropriate. If accrual ranges are incorrect, this might result in staff’ having accrued much less or extra private/carer’s go away than they’re entitled to and/or receiving the incorrect quantity of pay when on private/carer’s go away.

Though the Excessive Courtroom didn’t handle annual go away intimately, it’s doubtless that the FW Act’s annual go away provisions (offered for in Section 87) that entitle staff to “4 weeks” of annual go away must be calculated equally, based mostly on staff’ “peculiar hours” of labor.

The Excessive Courtroom’s determination, nonetheless, won’t have an effect on staff coated by enterprise agreements or contracts of employment that present for a unique go away entitlement beneath the FW Act, relying on the language of such contracts.