Recap on Mondelez decision
It's been nearly five months since the High Court handed down its landmark decision in the matter of Mondelez.1
The decision provided employers with a collective sigh of relief when, by a majority of 4:1, the High Court reversed an earlier decision of the Full Court of the Federal Court.
The High Court decided that a "day" referred to in section 96(1) of the Fair Work Act 2009 (Cth) (Act) for the purpose of paid personal/carers leave was a "notional day" by reference to the employee's ordinary hours worked. This means that if an employee's ordinary hours are 38 hours per week, irrespective of how those hours are arranged each day, the employee is entitled to 76 hours (or 10 notional days) of personal leave.
The High Court's decision overturned the decision of the Full Federal Court which had effectively enabled the value of a "day" for the purposes of calculating an employee's personal leave entitlement to vary, depending on the number of hours worked by an employee. For example, if an employee worked their 38 hours spread over 12-hour shifts, their personal leave entitlement would be greater (10 days of 12-hour shifts, amounting to 120 hours) than an employee working 7.6 ordinary hours each day (10 days of 7.6-hour shifts amounting to 76 hours).
Can Mondelez be applied to other leave entitlements?
The High Court's decision raises the question of whether the High Court's reasoning in Mondelez can be extended to the calculation of leave entitlements other than personal leave.
Mondelez considered by the Fair Work Commission
In a recent decision of the Fair Work Commission in Australian Workers' Union, The - Queensland Branch v Cleanaway Operations Pty Ltd T/A Cleanaway [2020] FWC 6907, Commissioner Spencer turned to Mondelez for guidance when deciding whether a waste management company had been correctly calculating and deducting annual leave entitlements.
Background
The dispute before the Fair Work Commission arose under the Cleanaway Brisbane Resource Recovery Innovation Alliance Greenfields Agreement 2018 (Agreement) against the employer, Cleanaway Operations Pty Ltd (Cleanaway).
The 69 employees who were the subject of the dispute worked a four day on/four day off roster over an eight-week cycle, working 11.5 hours per shift. This meant that in the first four weeks of the cycle, an employee worked 46 hours each week and 34.5 hours per week in the following four weeks. Over the course of a year, employees would accrue 161 hours in annual leave, calculated by reference to an average work week of 40.25 hours rather than the actual hours worked. It was Cleanaway's practice to deduct annual leave based on actual hours worked.
The AWU, relying on the decisions of RACV2 and Glendell Mining3 argued that Cleanaway was incorrectly accruing and deducting annual leave and that this was not in accordance with clause 25.2 of the Agreement nor section 87(1) of the Act. For example, the AWU argued that based on Cleanaway's practice of deducting annual leave for actual hours worked, if an employee took annual leave in the first four weeks of their roster, their annual leave accrual of 161 hours would be inadequate.
Cleanaway, on the other hand, argued that for employees working a four day on/four day off roster, annual leave should be deducted based on ordinary hours. On that basis, Cleanaway argued that the annual leave accrual of 161 hours meets the entitlement to annual leave provided for under the National Employment Standards (NES) in all circumstances for employees working the four day on/four day off roster pattern.
What did the FWC say?
The Commissioner sought guidance from the High Court decision in Mondelez. Whilst the High Court in Mondelez did not specifically deal with the issue of annual leave, the Commissioner considered that the matters before her were so closely analogous to the issues considered in Mondelez that it was highly persuasive to her determination.
Specifically, the Commissioner considered that the schemes in the Act establishing the entitlement to paid leave (whether it be annual leave or paid personal leave) are almost identical in terms of the amount of leave, the accrual of leave expressed in terms of ordinary hours and the payment for each type of paid leave which is expressed in terms of the base rate of pay.
The Commissioner concluded that an employee's annual leave entitlement under section 87(1) of the Act is to be calculated in relation to an employee's ordinary hours of work (see paragraph [98]).
When applied to the matter before her, the Commissioner considered that the average 161 hours accrued by Cleanaway did not fail to meet how annual leave should be accrued pursuant to section 87(1) of the Act and therefore did not breach the Agreement or the NES.
Key learnings for employers
The decision provides clarity and should give employers confidence to accrue and deduct annual leave on a basis aligned with how the High Court dealt with paid personal leave in Mondelez, i.e. based on ordinary hours and not in reference to the length of a shift that may occur over a 24-hour period.
Employers should consider whether the reasoning in Mondelez can be applied to other leave entitlements being calculated by reference to the actual hours worked on a particular shift rather than an employee's ordinary hours.
Authors: Sally Moten, Partner and Ben Baumgarten, Lawyer.
[1] Mondelez Australia Pty Ltd v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union; Minister for Jobs and Industrial Relations v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union [2020] HCA 29.
[2] RACV Road Service Pty Ltd v Australian Municipal, Administrative, Clerical and Services Union [2015] FWCFB 2881.
[3] Construction, Forestry, Mining and Energy Union v Glendell Mining Pty Limited [2017] FCAFC 35.
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