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We have received a number of client queries in relation to EMA Note Issue 10, which summarised the implications of the Federal Court decision in Mondelez v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union [2019] FCAFC 138 (“Decision”) regarding personal/carer’s leave.

The Decision was a significant shift from how many employers have interpreted the entitlement to personal/carer’s leave under the National Employment Standards (“NES”). Clients have asked how the Decision affects the entitlement of employees who are employed on a part-time basis or who work variable hours, and how that entitlement accrues. This may require changes to an organisation’s payroll software, payslips and leave reports.

Entitlement

A key implication of the Decision is that every permanent employee (including a part-time employee) accrues ten days of leave in each single year of employment. For employees working variable hours, the value of one day of leave (in either hours or dollars) cannot be determined in advance as it will depend on which day the leave is taken. This means that the total monetary value of each employee’s yearly entitlement is ultimately different and will not be determinable in advance.

Accruing Leave

Section 96(2) of the Fair Work Act 2009 (Cth) (“Act”) provides that ‘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 words have historically been interpreted to mean that the progressive accrual results in some lesser or ‘pro rata’ entitlement to a part-time employee. The Decision confirms this is not the case.

The full ten-day entitlement accrues progressively throughout the year for all permanent employees. For example, an employee who has worked for a month will have accrued 0.83333 of a day. An employee who has worked for a fortnight will have accrued 0.3846 days.

Taking Leave

Most payroll and accounting systems account for leave in terms of hours rather than days. This has created confusion as to what amount is ‘deducted’ from an employee’s entitlement on each occasion that an employee takes personal/carer’s leave under the NES, especially for employees who work varying hours per day or week, or who work on a part-time basis.

The entitlement is the ability to be absent without loss of ordinary pay. This means that for such employees, ‘one day’ of leave may entitle an employee to be absent for (and paid for) a different number of hours depending on which day the leave is taken. If the employee is absent (in eligible circumstances) for the full ordinary working hours rostered on a particular day, then one day will be subtracted from the employee’s accrued entitlement to leave, regardless of the number of ordinary hours actually rostered for work on that day. If the employee is absent for part of the day, then the proportion of the hours leave to the ordinary hours rostered will be applied to determine the fraction of a day to be deducted from the accrued entitlement.

Example

An employee is a part-time employee who works three (3) days per week, being eight (8) hours on the first day and four (4) hours each on the following two (2) days, equating to 16 hours per week for the full year. The employee will accrue 10 days of personal/carer’s by the end of each year using the same accrual method noted above.

If the employee is absent for their rostered ordinary hours of work on any day, the employee will have one day of personal leave deducted regardless of whether the employee was rostered to work four or eight ordinary hours on that day. However, what the employee is paid will depend on which day is taken as personal leave.  If a day’s leave was taken on the eight-hour day, the value of leave for that day must equal eight hours pay, whereas leave taken on the other two days will be paid as four hours pay.

If the employee is absent for part only of the day, then the corresponding fraction of a day will be deducted from the ten days accrued entitlement. For example, if they are absent for a two-hour period on a day where four hours are rostered, they will have half a day deducted. Whereas, if the same absence occurred on a day where eight hours are rostered, they will have a quarter of a day deducted.

Liability for Past Periods

The implication of the Decision is that all personal/carer’s leave should have accrued and been paid this way since the commencement of the NES in January 2010.  If it has not, an under-accrual or underpayment may have eventuated – for example if personal/carer’s leave entitlements have been accrued for part-time employees on a pro rata basis such that they have accrued less than 10 days for any full year of service. If you suspect this, specific legal advice should be taken.  We can facilitate that through our preferred legal practitioner or a legal practitioner of your choice.

Contracts of Employment and Letters of Offer

Many employers will have template contracts or letters of offer that refer to paid leave entitlements accruing on a pro-rata basis for part-time employees. We recommend that you review your internal templates on this point.  Any such clauses in approved enterprise agreements will be of no effect.

EMA Consulting has up-to-date compliant templates available for purchase.  For Organisations that have subscribed to the contracts suite through the BuzzIQ portal, your Administrator will have automatic access to these templates via the recent update.

Require further information/assistance?

If you require further information or advice, please contact one of our Consultants.

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