In what will be seen as a win for employers seeking certainty around personal leave obligations, the High Court has today overturned the full Federal Court Mondelez decision from August 2019 [1] dealing with calculation of personal leave entitlements.

The full Federal Court decision turned on the interpretation of a “day” under the Fair Work Act 2009 in determining an employee’s entitlement to “10 days” of paid personal leave each year. The Court had ruled that shift workers who were working 12-hour shifts were entitled to 10 calendar days of personal leave per year, amounting to 120 hours, instead of the 76 hours the employer (Mondelez International) believed applied under the NES (based on 38 ordinary hours per week).

The High Court rejected the interpretation adopted by the full Federal Court, finding that the entitlement to “10 days” personal leave “must be calculated by reference to an employee’s ordinary hours of work”. This can be calculated as one-tenth of the employee’s ordinary hours of work over a two-week period or, where work patterns are irregular or inconsistent, 1/26 of the employee’s ordinary hours over a period of one year.

What employers need to do

Following the full Federal Court decision in August last year, our recommendation to employers was to review your employment contracts and to include a provision that referred to personal leave “in accordance with NES entitlements” [2]. This provision allows the employer to apply the presiding interpretation of what those entitlements are.

Employers will also need to ensure their payroll systems are set up to account for the correct accumulation of personal leave and corresponding deduction when leave is taken, based on the method of calculation set out by the Hight Court.

Finally, employers can breathe a sigh of relief that there will be no additional financial liabilities in relation to personal leave entitlements for employees who have working patterns that differ from the usual 5 working days and 38-hour per week arrangement.