28 Aug CHANGES IN CLARIFICATION TO SICK LEAVE ENTITLEMENTS
On 21 August 2019 the full Federal Court handed down a judgment in a landmark decision that has confirmed how sick leave entitlements are to be applied.
The decision from the full Federal Court will have wide ranging implications for all national system employers. Many employers will require a review of their payroll systems and leave accrual balances, and some may potentially be exposed to claims of underpayment.
What’s the Decision?
The Fair Work Act 2009 (“the Act”) contains an entitlement to 10 days personal/carer’s leave per year which accrues progressively during the year of service according to an employee’s ordinary hours of work.
In short the decision of the Court is that all eligible employees are entitled to 10 working days of personal/carer’s leave per year. This is regardless of how many hours the employee works per day or how many days are worked per week.
Why is this significant?
Many employees accrue leave based on the hours an employee works and accrue an entitlement to personal/carer’s leave on the basis of a maximum of a 38 hour working week. This however would have a negative effect on say a shift worker who regularly works 12 hours shifts as they would exhaust their accrued paid personal/carer’s leave entitlement earlier than an employee working 7.6 hours a day.
In the case of Mondelez v AMWU the question was one of an entitlement to personal/carer’s leave under a particular Enterprise Agreement and whether or not that entitlement was consistent with the entitlement to personal/carer’s leave under the Act.
The employer made submissions that an entitlement to personal leave under the Act should be accrued on the basis of a 7.6 hour working day to a maximum of 10 days per year. The Commonwealth Government intervened in the proceedings and made submissions largely consistent with those of the employer. The Union however argued that the Act specifically provides for an entitlement to 10 days of personal/carer’s leave and that they should not be accrued on the basis of hours worked.
Ultimately the Federal Court found that a day of leave is not to be based on an employee’s average daily ordinary hours capped at a maximum of 38 ordinary hours in a week or 7.6 hours per day. Instead, personal/carer’s leave accrues in days over a year of service.
The upshot is for employers who have been paying employees who work longer shifts than 7.6 hours, personal/carer’s leave on the basis of 7.6 hours are exposed to backpay claims for underpayment of leave taken and claims for reconciliation and adjustment of leave accruals to reflect the interpretation of the Act provided by the Court.
The decision also has implications for part time employee as again their entitlement to personal/carer’s leave is to 10 days paid personal/carer’s leave which accrues progressively during a year.
In this regard the Court found that an employee’s entitlement is expressly based upon time working for the employer and is expressly calculated in days. For example, every 5.2 weeks, an employee accrues an entitlement to another full day of leave.
Employers should now take time to consider the implications of this decision on their own business and the accrued entitlements for their employees.
Employers should be assessing their payroll system to ensure that shift workers, full time employees and part time employees are accruing a full 10 working days of personal/carer’s leave for each year of service, as opposed to a pro rata amount based on their hours of work capped at 38 hours per week.
For specific advice regarding your circumstances and the implication for your business, please contact our office for assistance.