Employers have warned that a landmark Federal Court decision will increase the cost of personal leave for anyone working longer than eight hours a day and disrupt a widespread industry practice.
A majority of the Federal Court on Thursday found that the Fair Work Act’s minimum 10 days’ paid personal leave should be calculated at the ordinary hours that a person works a day rather than just a set 7.6 hours.
The decision has implications for more than a million employees who work shift work, particularly in the manufacturing and nursing sectors, and could see huge back pay bills for employers.
The case centred on 12-hour shift workers at Mondelez’s Cadbury chocolate plant in Tasmania.
Unions argued the shift workers should be entitled to 120 hours of personal leave a year, based on the National Employment Standards’ 10-day minimum.
Justices Mordy Bromberg and Darryl Rangiah supported that interpretation and held that a day in the NES means the “portion of a 24-hour period that would otherwise be allotted to work”.
However, in dissent, Justice David O’Callaghan said the majority’s interpretation clashed with the examples of personal leave set out in the Fair Work Act’s explanatory memorandum.
“Those examples, in my respectful view, reinforce the expression of the determination of Parliament that the amount of personal/carer’s leave to be accrued is not to be affected by any different spread of an employee’s ordinary hours of work in a week, and is designed to achieve what senior counsel for the applicant, correctly in my view, described as ‘equity as between different classes of employees’,” he said.
“In my view, the position advanced by the [unions] produces an outcome that creates inequities between different classes of employees that Parliament did not intend.”
The majority decision is the highest court ruling on the controversial issue, which also saw the intervention of the Morrison Government on the side of the employers.
It follows a Fair Work Comission ruling last year that also backed calculating personal leave pay on a worker’s typical shift.
Australian Industry Group, which represented Mondelez, argued that the decision would have far-reaching implications.
“The majority’s decision is inconsistent with the widespread industry practice and will have substantial cost implications for a large number of employers, if the decision stands,” AiGroup chief executive Innes Willox said.
But Australian Council of Trade Unions secretary Sally McManus slammed the Morrison government for its intervention in the failed case.
“If Mondelez and the federal government had been successful in their case it would have undermined a basic workplace right for thousands of shift workers,” she said.
“Working people deserve a Government that is on their side – not one that sides with big business to undermine basic rights like sick leave.”
Industrial Relations Minister Christian Porter said the government had sought to make submissions about an “area of confusion” in Labor’s Fair Work Act.
“While a review of the judgment and its broader implications is undertaken, employers should review their own payroll systems in light of the decision,” he said.
Mondelez is understood to be considering the judgment before determining its next steps.