Significant changes to payment for Personal Leave


On 21 August 2019, the Full Federal Court handed down a decision that will have widespread implications for employers, particularly those who employ shift workers and part-time employees.

The National Employment Standards require that workers receive 10 ‘days’ of paid personal leave annually. The recent decision in Mondelez v AMWU & Ors [2019] FCAFC 138 concluded that ‘days’  means 10 “working days” of paid personal leave.  The Court found, against opposition from various industry groups, “working day” means the hours the employee would have worked but for the absence due to need for personal leave.   In the Mondelez case, employees were working 12 hour shifts.  The Court found that those employees were entitled to be paid for 12 hours in respect of any ‘day’ of personal leave, and in turn were entitled to 120 hours of paid personal leave per year. The result of this decision is that an employee who takes a day of personal leave will be paid for the hours they would have worked on that day but for their absence and a day will be deducted from their 10-day entitlement.

The Federal Court decided that the primary purpose of paid personal leave is as a form of income protection for employees during periods of illness, injury or an unexpected emergency. If employees are not paid personal leave for the full ordinary hours they would have worked on that day, this does not fulfil the purpose of income protection.

In addition, the Federal Court also held that the entitlement applied to all part-time and full-time national system employees. Previously, section 96(2) of the Fair Work Act had been understood to mean that a part-time employee would only accrue personal leave on the basis of their ordinary hours of work, meaning they would accrue less than a full-time employee. However, the Federal Court held that this section was actually to distinguish ordinary hours from overtime hours, so that an employee will not receive paid personal leave for overtime hours they would have worked.

What does this mean for employers?

Employers will need to review the way that they pay their employees personal leave, particularly shift workers and part-time employees. A review of payroll systems may also be needed, to ensure that personal leave is being accrued correctly. It is not clear yet whether Mondelez will appeal the decision. In the meantime, employers will need to ensure that they are calculating personal leave on the basis of each employee’s particular “working day”.

This article was co-written by Employment / Industrial Relations Lawyer, Emma Sheen.

This article is not legal advice.  It is intended to provide commentary and general information only.  Access to this article does not entitle you to rely on it as legal advice.  You should obtain formal legal advice specific to your own situation.  Please contact us if you require advice on matters covered by this article.