In a win for common sense, the High Court has overturned the Full Federal Court’s decision in Mondelez v AMWU [2019] FCAFC 138 about the accrual of personal leave.
You may recall the Full Federal Court decision of Mondelez v AMWU [2019] FCAFC 138 found all permanent employees (including part-time employees) are entitled to 10 days of paid personal leave per year of service.
The Federal Court’s original decision indicated that all permanent employees should accrue one day of paid personal leave for every 5.2 weeks worked, irrespective of their ordinary hours. This posed a significant challenge for most payroll accrual systems that calculate personal leave entitlements against ordinary hours of work, generally capping personal leave at 76 hours per year (for full-time employees).
Unsurprisingly, the decision created confusion and uncertainty for employers.
Last week the High Court provided welcome clarity on the correct method of calculating personal leave, finding that a ‘day’ of personal leave is a notional day, being 1/10 of ordinary hours in a fortnight.
Moores welcomes the decision in Mondelez v AMWU [2020] HCA 29, which quashed the decision of the Full Federal Court and reinstated the historical approach to personal leave accrual. The High Court noted:
“[The original decision] would give rise to absurd results and inequitable outcomes, and would be contrary to the legislative purposes of fairness and flexibility in the Fair Work Act, the extrinsic materials and the legislative history”
The proper and lawful approach to personal leave accrual is now settled. A ‘day’ of personal leave is a notional day, being 1/10 of ordinary hours in a fortnight. This means that an employee accrues one hour of personal leave for every 26 ordinary hours of work.
Lessons for employers
In light of the decision, Moores recommends that employers:
- Provide new staff with the updated Fair Work Information Statement; and
- Review their contracts to ensure that they clearly stipulate ordinary hours of work.
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For further information or guidance, please do not hesitate to contact us.