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    Major changes to sick leave accrual system

    Aug 21, 2019 4:47:27 PM

    In the decision of Mondalez v AMWU [2019] FCAFC 138 handed down 21st August 2019, the Court has fundamentally changed the way many Australian employees are entitled to accrue sick leave. 

    Section 96 of the Fair Work Act states:

    Amount of leave

    (1)  For each year of service with his or her employer, an employee is entitled to 10 days of paid personal/carer's leave.

    Accrual of leave

    (2)  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.

    In most standard payroll systems, leave entitlements are recorded in hours, not in days – and these entitlements are calculated based on the ordinary hours that an employee works. This means, an employee who works 38 hours per week (equivalent to 7.6 hours per day) is typically credited 76 hours per year (i.e. 7.6 hours x 10), regardless of whether their ordinary hours are arranged on the basis of 7.6, 8, 9 or 12 hours per day.

    In the Mondalez case the Full Bench of the Federal Court has determined that the word ‘day’ in section 96 means just that, ‘a day’ and not 7.6 hours. Therefore, if a shift worker’s ordinary day consists of 12 hours work, the employee will be entitled to 120 hours of sick leave per year.

    Whilst the decision in Mondalez is primarily about the interpretation and accrual of sick leave in the Mondelez Australia Pty Ltd, Claremont Operations (Confectioners & Stores) Enterprise Agreement 2017, there is no doubt the Full Bench decision is likely to apply to the accrual of sick leave in general and will have implications for most employers in Australia.

    To make matters worse, the Fair Work Ombudsman for years has advised (and published on their website) that the minimum entitlements were 76 hours per year, regardless of the hours worked per day on a shift roster. The Ombudsman only recently changed the website and stated that the matter was ‘subject to legal proceedings’.   

    Industry groups have warned that the decision may result in instantly bankrupting some businesses as employers who have followed the Ombudsman guidelines could be liable for backpay stretching more than six years.     

    Frank Law is in the process of analysing the decision more closely and considering ways in which businesses could respond to this new development.

    If you have further questions, please contact Philip van den Heever at philip@franklaw.com.au.

    This is not legal advice.