Accrual and Payment of Sick Leave has Changed Federal Court Decision Likely to Provide Headaches for Payroll

The Full Federal Court of Australia has handed down a decision in Mondelez Australia Pty Ltd v AMWU [2019] FCAFC 138. The decision deals with the method of accruing and taking paid personal/carer’s leave for the purposes of the National Employment Standards and Awards under the Fair Work Act 2009.

Whilst this case primarily dealt with the accrual and payment of sick leave for shift workers, particularly those shiftworkers working beyond the normal 7.6 hour shifts, the decision also has ramifications for the accrual and payment of sick leave for part-time employees.

In essence, the majority of the Full Federal Court has determined:

•          Full-time and part-time employees are entitled to 10 working days of paid personal/carer’s leave for each year of employment regardless of how many hours the employees work per day or how many days are worked per week..

•          The leave must be calculated in working days, not hours, with a working day being described is the portion of a 24 hour period that an employee would otherwise be working.

•          An employee’s entitlement is expressly based upon time working for the employer and is expressly calculated in days. For example, every 5.2 weeks, an employee accrues an entitlement to another full day of leave.

•          For every day of personal/carer’s leave taken, an employer deducts 1 day from the employee’s accrued leave balance. If an employee takes a part-day of leave, then an equivalent part-day is deducted from the employee’s accrued leave balance.

So, in terms of part-time employees, the accrual of sick leave is no longer based on hours worked, but rather accrued at the rate of 1 day every 5.2 weeks. In our experience this means that many payroll systems will need to be altered to reflect the above. If an employee calls in sick on any particular day they are paid sick leave for the hours that they were rostered to work that day, and their sick leave accrual is debited by 1 day for that days sick leave. If an employee takes a part of day then the sick leave accrual is debited by that fraction of the day taken as sick leave.

Here are some examples:

Employee A is a shiftworker working 10 hour shifts. That employee is entitled to 10 days sick leave per annum. If that employee calls in sick for a day that he/she is working a 10 hour shift for that day, he/she is then paid the 10 hours for the day (the same amount as if they did work), and that person’s sick leave accrual is debited by 1 day (not 10 hours).

Employee B is a part-time employee. That employee is entitled to 10 days sick leave per annum regardless of the number of hours and shifts worked and accrues at the rate of 1 days sick leave per 5.2 weeks of service. That employee is due to work a 6 hour shift when they call in sick for that day. He/she is then paid the 6 hours for the day (the same amount as if they did work), and that person’s sick leave accrual is debited by 1 day (not 6 hours).

Employee C is a part-time employee as above. That employee is due to work a 6 hour shift on a particular day. After 3 hours of the shift worked, the employee is sick and take the rest of the shift as sick leave. The employee then is paid 6 hours (the same amount as if they did work the whole of the shift), and that person’s sick leave accrual is debited by .5 of a day (not 3 hours).

However, clients should be aware that this matter may be appealed to the High Court. We will keep our clients posted on any future outcomes.

In the meantime, please be aware that the Fair Work Ombudsman has now issued a new Fair Work Information Statement to be provided to all new staff to reflect this decision. The new amended Fair Work Information Statement can be found at the FWO website at www.fairwork.gov.au/employee-entitlements/national-employment-standards/fair-work-information-statement

By Greg Arnold

Director and Principal Consultant

Effective Workplace Solutions

employmentlaw, enterpriseagreement, payroll, payrolllaw, sickpayaccrual

Leave a Reply

Your email address will not be published. Required fields are marked *