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Federal Court rules on cashing out personal leave

AREEA principal adviser – workplace policy, Lisa Matthews, provides this overview of a Federal Court ruling that a group of employees on 12.5 shifts should have been paid their cashed-out personal / carer’s leave in days rather than hours as that is how it would have been applied if the leave was taken during employment.

Lisa Matthews
Lisa Matthews

IN his 9 June 2016 decision, Justice Robert Buchanan noted that the question was not whether the employees in this situation were allowed to ‘cash out’ their paid personal / carer’s leave, as their enterprise agreement allowed for this.

Rather, the question was whether the employees, who worked longer than the standard 8.5 hour day, should have been able to cash out their leave to the tune of 15 days at 12.5 hours given the shifts they normally worked, or at 15 days at 8.5 hours, which was the standard shift.


In the decision at first instance, the Federal Circuit Court of Australia (FCCA) found that the cashing out should happen at the 8.5 hour rate rather than the 12.5 hours the employees in question normally worked. This was despite the fact that when the workers took personal leave during work time, they were provided with a whole day off rather than 8.5 hours.

Justice Buchanan noted that, as was the case with annual leave, the Fair Work Act required the cashing out of personal and carer’s leave to happen at the rate employees would have been paid had the leave been taken during their employment. If an enterprise agreement term was inconsistent with that, it was deemed to have no effect, he said.

The aim of the enterprise agreement in this case was to commit the parties to ‘minimising unplanned absenteeism at the Drayton Mine while recognising that an employee who is absent from work due to the above reasons will be entitled to paid personal / carer’s leave’ subject to conditions and limitations.

All but one of the employees affected by the decision sought to cash out all the available annual credit, which was 15 days, with one worker seeking to cash out 14 days’ leave.

The union’s argument, which the FCCA rejected at first instance, was that the payments should have been calculated in all but one case on the basis of 187.5 hours (equivalent to 15 shifts of 12.5 hours) and in the remaining case on the basis of 175 hours (equivalent to 14 shifts of 12.5 hours).

On appeal to the Federal Court, the CFMEU sought a declaration that the above calculations should have applied.

The appeal decision

In his appeal decision, Justice Buchanan said the FCCA had ‘misunderstood’ the effect of the underlying statutory scheme and had erred in its construction of the enterprise agreement, thereby failing to find that the employer had breached the terms of the agreement.

Justice Buchanan said it appeared to him that the terms of the agreement were to ensure that all employees covered by it had effectively the same number of days of paid personal / carer’s leave available to them, regardless of shift length, while at the same time ensuring that any absence was paid as though it was time worked.

He rejected the company’s argument that, in providing full days off to 12.5-hour shift workers when they took leave during employment, as well as applying a site allowance to the payments, the company was being ‘more generous’ than required.

“I do not accept that the current practice is more generous than the enterprise agreement requires,” the judge said. He did not accept that on leave taken during the employment relationship the company was making a ‘voluntary’ payment.

He found it was appropriate that the declarations sought by the CFMEU be made, and that the employees receive cashed out amounts equivalent to 14 days and 15 days respectively at the length of shift they would have worked while employed (i.e. 12.5 hours).

Implications for employers

This decision reaffirms the statutory requirement that cashing out of leave should provide an entitlement equivalent to what would have been received if the leave was taken during employment.

The court has interpreted leave as a daily rate based on the normal shift length rather than an hourly rate for a standard 8.5 hour day.

Click here for the decision.

For advice on including terms for the cashing out of leave in enterprise agreements, or for calculating cashed out of leave, contact an AREEA consultant near you.

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