Express law No. 289

Background

Mondelez operates food manufacturing plants. Under an enterprise agreement, Mondelez employees who work three 12-hour shifts per week (for a total 36-hour working week) are entitled to 96 hours of paid personal/carer's leave (PPCL) per annum.

A dispute arose between Mondelez and AMWU about whether this PPCL entitlement is consistent with s 96 of the FW Act, which provides:

1. for each year of service with his or her employer, an employee is entitled to 10 days of paid personal/carer's leave
2. an employee's entitlement to paid personal/carer's leave accrues progressively during a year of service accruing to the employee's ordinary hours of work, and accumulates from year to year.

Mondelez took the position that the EA entitlement of 96 hours per annum exceeded the entitlement specified in s 96, which equated to 72 hours per annum (10 average working days of 7.2 hours). The AMWU took the position that the s 96 entitlement equated to 120 hours per annum (10 x 12-hour working days, not averaged), and therefore prevailed over the EA. The matter was heard and determined in the first instance by a Full Court of the Federal Court. The Federal Court held by majority that the entitlement under s 96(1) consists of 10 working days, of whatever duration of ordinary hours would have been worked by the worker on the day leave is taken (the 'working day construction'). On this construction, a 12-hour shift worker (who works 36 hours per week) accumulates 120 hours of leave each year, whereas an ordinary full-time worker only accrued 72 hours per annum. The Federal Court outcome was a significant win for the shift-workers and some other employees with non-standard working patterns and exposed a number of employers across Australia to liability for the under-provision of leave entitlements. It also meant that where 2 employees worked the same number of hours for the same employer, but did so by working different patterns of hours, they would accrue different amounts of PPCL each year.

By a 4:1 majority (Kiefel CJ, Nettle, Gordon and Edelman JJ, Gageler J dissenting), the High Court allowed the appeals of the Minister and Mondelez. The High Court declared that:

• the expression '10 days' in s 96(1) means an amount of PPCL accruing for every year of service equivalent to an employee's ordinary hours of work in a week over a two-week period, or 1/26th of the employee's ordinary hours of work in a year
• a 'day' for the purposes of s 96(1) refers to a 'notional day' consisting of one-tenth of the equivalent of an employee's ordinary hours of work in a two-week (fortnightly) period (the 'notional day construction').

The High Court favoured a 'notional day' construction instead of the 'working day' construction adopted by the Federal Court. The 'notional day' construction means that a shift-worker who works three 12-hour shifts per week (36 hours) would accumulate 72 hours, or 6 full shifts worth, of PPCL in a year (not 120 hours or 10 full days).

The reasons of the plurality (Kiefel CJ, Nettle & Gordon JJ) closely follow the submissions made by the Minister. Their Honours reasoned that the 'notional day' construction of s 96 is (i) supported by the text of various related provisions in the FW Act, legislative purpose, extrinsic materials and legislative history, and (ii) avoids a number of absurd results and inequitable outcomes attending the 'working day' construction.

Edelman J delivered a separate judgment which, while acknowledging that the construction preferred by the plurality might initially come as a surprise to the reasonable reader, nevertheless agreed with the plurality. His Honour said that the 'notional day' construction was 'the only conclusion that can give effect to the meaning that a reasonable, informed reader would understand Parliament to have intended by the words used in their context.'

Gageler J dissented and preferred the 'working day' construction (in effect agreeing with the approach taken by the majority of the Full Federal Court).

Implications

The approach of the majority represents a purposive approach to statutory construction, commencing with an examination of statutory text but also taking into account the express objects of the Fair Work Act, extrinsic materials and legislative history. The majority's judgment is notable for the extent to which it quoted from, and relied upon, the explanatory memorandum for the Fair Work Bill 2008. The majority expressly considered absurdities and inequities in the 'working day' approach as relevant to the question of statutory construction. The objects of the FW Act of 'fairness, flexibility, certainty and stability' compelled that approach.

The decision means that employers and employees will be able to calculate the accrued balance of an employee's PPCL credit at any point in time. It also ensures that all national system employees working the same overall number of ordinary hours per week (or per fortnight), in whatever patterns, receive exactly the same PPCL hourly entitlement per annum, and accrue their leave at exactly the same rate (by reference to the number of ordinary hours progressively worked).

The decision provides certainty for employers and employees in relation to the operation of s 96 of the FW Act, and ensures equity and fairness as between employees who work the same number of hours in a period in different patterns.

Text of the decision is available at: http://www8.austlii.edu.au/cgi-bin/viewdoc/au/cases/cth/HCA/2020/29.html

Tom Howe QC and Irene Sekler of AGS appeared for the Minister.

Craig Rawson, Senior Executive Lawyer, Catherine Mann, Senior Executive Lawyer, and Henry Chang, Senior Lawyer, acted for the Minister.