Key Insights from the Latest High Court Decision Affecting Employers

What has happened?

On Thursday 13 August, the High Court delivered its decision in relation to how employers should accrue all employees personal leave. The decision reverses the decision of the Full Federal Court in Mondelez v AMWU [2019] FCAFC 138, and several earlier decisions of the Fair Work Commission and the Federal Court, which have been ‘problematic’ for employersseeking to comply with their obligations under the Fair Work Act 2009 (Cth) and National Employment Standards (NES) and created inequitable personal leave outcomes for employees.

The previous decision fundamentally altered the long-standing way in which personal leave was accrued and debited for employees working shifts greater than or less than the standard daily working hours. In its decision last Thursday, the High Court rejected the previous decision entirely, recognising the impossible situation it placed employers in and the inequitable and unfair outcomes it produced for employees.

This means that employees will accrue 10 days of personal/carer’s leave based on their hours of work, not days. 10 days of personal leave can be calculated as 1/26 of an employee's ordinary hours of work in a year. Deductions for any approved absence is thenbased on their ordinary rostered hours for that day.

What does this mean for employers?

Following the decision of the Fair Work Commission and the Federal Court, employers were required to accrue 10 days personal leave per annum regardless of the ordinary hours of work for their employees. This decision meant that most employers to needed to create manual work arounds in their payroll systems to enable the interpreted personal leave accrual calculations to be made, with many of the calculations being made post the leave being taken (particularly for those employees who work irregular shift lengths during the week).

While many employers opted to implement these measures only for those employees with low levels of accrued personal leave credits or for employees who work irregular shift lengths, the reversal of the previous decision does raise a residual question. How should the adjusted accruals now be managed?

As most employers can appreciate, there is no single ‘right’ answer to this question and requires consideration of both the workplace and the need to meet the minimum standards consistent with the clarity now provided by the High Court decision. However, it is critical that all employers first identify what accrual issues they need to address and how their employees are impacted.

Therefore, the first step will be to assess your potential risk exposure by auditing the relevant employee files, determine the various effects on employee entitlements based on their individual working and leave patterns since implementing the previous Federal Court decision and then consider the possible options to deal with any anomalies before deciding on the best way forward.

With 23 years in workplace relations and human resources , HBA Consulting have conducted numerous audits of employee entitlements, the development of associated cost modelling and analysis and identification of available options. If you are unsure where to start or what to do next, you can contact us on 02 62474490 or via our website www.hbaconsulting.com.au