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One headline which has favoured attention was the sick leave entitlements win for Cadbury shift workers which could flow on across Australian workplaces. The Federal Court has found that shift workers who work extended daily hours (10 hours per day in this instance) should be entitled to 10 hours per day for the legislated 10 days of sick leave per year, rather than the 7.6 hours per day as suggested by Cadbury.

Because the sick leave entitlements decision could affect many workplaces around Australia, we thought we would break it down and explain to you what it might mean for your workplace.

We will start with a legal interpretation of this decision.

Legal discussion of the case:

Mondelez Australia Pty Ltd (“Cadbury”) filed an application with the Federal Court of Australia against the Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union (“Union”) and against two Cadbury workers.

The purpose of the application was to consider a decision of the Fair Work Commission which interpreted section 96(1) of the Fair Work Act 2009 (Cth) which provides “for each year of service with his or her employer, an employee is entitled to 10 days of paid personal/carer’s leave”.

Cadbury contended to the Federal Court that the entitlement to “10 days of paid personal/carer’s leave” must be construed according to the “industrial meaning” of the word “day”. That meaning is said to be a “notional day”, consisting of an employee’s average daily ordinary hours based on an assumed five-day working week—that is, average weekly ordinary hours divided by five. For example, an employee who works 38 ordinary hours per week works an average of 7.6 hours per day over an assumed five-day working week. The “notional day” is 7.6 hours and the employee is entitled to 10 such days, or 76 hours, of paid personal/carer’s leave for each year of service.

Arguably, if the employee takes a day of personal/carer’s leave, the employee is paid 7.6 hours’ wages, and 7.6 hours is deducted from the employee’s accrued leave balance. On this basis, all employees who work the same average weekly ordinary hours are entitled to receive the same number of hours of paid personal/carer’s leave.

Interestingly, the Minister for Small and Family Business, the Workplace and Deregulation, was granted leave to intervene in the proceeding and went on to support Cadbury’s interpretation of sick leave.

On the other side, the Union, and the workers, argued that a “day” in the Act has its ordinary meaning of a “calendar day”, or a 24 hour period, and that it allows every employee to be absent from work without loss of pay on 10 calendar days per year.

What sounds like quite a simple question – is a day 7.6 hours, or 24 hours – became a lengthy and complicated legal issue. The outcome of this question would have practical consequences.

There are many different types of workers. Some examples include:

  1. employees who work the same number of hours each day over a five-day week – your average 9am to 5pm,
  2. employees who work shifts that compress their weekly hours into a shorter number of days (longer than then usual 7.6 hours per day),
  3. employees who work different hours on different days of the week which is common in retail and hospitality industries.

On Cadbury’s view of a “day”, each employee is entitled to accrue 76 hours of paid personal/carer’s leave over a year; but a 7.6-hour employee’s entitlement will be used up over ten calendar days, whereas a 12-hour employee’s entitlement will be used up over six calendar days. On Cadbury’s construction, a 12-hour employee who is unable to work after the sixth day would lose income, whereas a 7.6-hour employee would not. Although, those who work short shifts, say 4 hours per day, might have been better off on Cadbury’s view potentially giving them 19 sick days in the year (demonstrating one of the flaws in Cadbury’s argument).

On the Union’s view, the 12-hour employee is entitled to more hours of paid personal/carer’s leave than the 7.6-hour employee, but neither would lose income over a period of ten calendar days from each workers own perspective.

The Federal Court reached the following conclusions (among others):

The Federal Court ultimately decided that the employees of Cadbury are each entitled to accrue ten days paid personal/carer’s leave for each year of service. Their entitlement to a day’s paid personal/carer’s leave is an entitlement to be absent from work for the portion of a 24 hour period that would otherwise be allotted to work. For those long shift workers, that is 12 hours, they are each entitled to ten such periods for each year of service. That is equivalent to ten x 12-hour shifts (or 120 hours per year).

This was the decision of two of the three sitting Judges. The third Judge came to a different view, but majority rules.

The case simply put:

Simply put, if Cadbury was correct, a long shift worker would have less sick leave days per year compared to a 9am to 5pm worker. For these particular workers, they would only have had the benefit of 6 days per year instead of 10.

If we break the personal/carer’s leave entitlement down to hours, for a worker who works 7.6 hours per day, the total hours that can be paid for personal/carer’s leave is 76 hours per year.

For a long shift worker – who might work 12 hours per day – the total hours that can be paid for personal/carer’s leave is 120 hours per year.

For those who work short shifts, say 4 hours per day, their total hours for personal/carer’s leave is 40 hours per year.

Cadbury lost their Application and with reliance on this Federal Court decision we are of the view that it is safe to say that in all three of those examples the workers are entitled to 10 days personal/carer’s leave per year, with each day based on each of their own ordinary hours worked in a day (12 hours vs 7.6 hours vs 4 hours).

Importantly, the daily hours are based on the ordinary hours that a worker has been contracted to work. The daily hours do not include overtime that a worker may work, even if those overtime hours are worked on a regular basis. For those workers that are contracted to work 38 hours per week, but perform overtime everyday, their personal/carer’s leave entitlement remains at 7.6 hours per day.

For those workers that are contracted to work 50 hours per week (10 hours per day), and perform overtime everyday, their personal/carer’s leave entitlement remains at 10 hours per day.

In consideration of this decision it is our view that most employers likely pay the personal/carer’s leave entitlement correctly at the ordinary hours worked.  Most employees should not expect any changes on their workplace’s sick leave practices.

If you are an employee and believe your employer is underpaying your personal/carer’s leave entitlements, or an employer seeking advice on your payroll systems, contact one of our employment lawyers for further information.