Controversial Fair Work Commission decision on sick leave could lead to grave consequences for small business

Insolvency advisors

A recent decision by the Fair Work Commission could have widespread ramifications on how sick leave for shift workers is calculated and lead to millions of dollars in backpay, putting “thousands” of businesses in danger, according to the peak body representing the small business community.

As reported by Fairfax, a decision passed down by the Fair Work Commission last week centred on a personal/carer’s leave dispute between the Australian Workers Union (AWU) and pharmaceuticals company AstraZeneca.

The dispute was over how shift workers at AstraZeneca accrued personal/carer’s leave and if it was in line with the National Employment Standards.

Currently, full-time employees who work standard 38-hour work weeks are entitled to 10 days worth of personal/carer’s leave, or sick leave, per year as per the Fair Work Act. This comes out to a total of 76 hours, based off a standard 7.6 hour work day.

However, the AstraZeneca dispute challenged how those 10 days worth of sick leave are calculated, with the AWU claiming the entitlement should be calculated based on the length of shifts completed by shift workers who work 12-hour or greater shifts.

This would mean the total annual sick leave for shift workers would instead accrue to 120 hours, due to the standard ‘day’ for one of these workers being 12 hours.

This interpretation was upheld by the Fair Work Commission, with deputy president Lyndall Dean finding employees are entitled to 10 days of sick leave per annum, and AstraZeneca workers on 12-hour and 10-hour shift rosters should have their sick leave entitlements calculated on the basis of these ‘typical’ work days.

“I cannot accept AstraZeneca’s submission that the entitlement to 10 days of paid personal/carer’s leave means an entitlement to payment equal to the time that would have been worked on 10 ordinary or standard days of averaged ordinary hours, i.e. of 7.2 or 7.6 hours duration,” Dean said.

“Wait and see” scenario

However, a separate case currently before the Australian Federal Court is looking to effectively overturn the decision made by the Commission, seeking clarification around the correct interpretation of personal/carer’s leave when it comes to shift workers.

The second case revolves around an enterprise agreement made at Mondelez Australia’s manufacturing plant, which provides shift workers with 96 hours of personal/carer’s leave per year, keeping in line with the 10-day rule but above the usual 76 hours provided to most Australian workers.

In April, AI Group, acting on behalf of Mondelez, attempted to have the case referred to the full bench of the Federal Court to receive clarification on previous “inconsistent decisions” by members of the Fair Work Commission and previous full bench decisions relating to other similar cases.

Small Business Minister Craig Laundy also intervened, seeking a full bench decision on the Mondelez agreement as it was “critically important for employers, employees and their representatives”.

The initial application for a full bench decision was denied by the Commission, however a hearing before the Federal Court is scheduled for September 6, at which time the company will argue for the case to be referred to the full bench.

Speaking to SmartCompany, workplace lawyer Peter Vitale says it’s effectively a “wait and see” scenario, with the forthcoming hearing by the Federal Court being crucial to how the 10-hour rule in the NES is interpreted.

“The decisions of the Fair Work Commission are influential and persuasive but they are not binding on the Federal Court. They could reach a different conclusion, and their conclusion would be binding and could effectively overturn the AstraZeneca case,” he says.

“It’s hard to predict how the Federal Court will rule on this though.”

Thousands of SMEs would be affected

What’s not hard to predict is the effect the change could have on Australia’s small businesses who employ shift workers, with Vitale saying many will have to fully recalculate leave entitlements, and claims for backpay could also be made.

“People who ran out of leave in a year and took unpaid leave could subsequently find themselves entitled to more paid leave,” he says.

Peter Strong, chief executive of the Council of Small Business Organisations Australia (COSBOA), says he was shocked by the decision in the AstraZeneca case. He believes if it is upheld by the Federal Court, the fallout would cause grave ramifications for local businesses.

“This would … [if upheld] lead to thousands of SMEs going bankrupt instantly. That would mean employees wouldn’t get anything, and they’d just lose their jobs,” he says.

Such a decision, if it goes ahead, would be “completely disconnected from reality and the Australian community”, argues Strong.

Strong claims that if the Commission’s decision is upheld, SMEs will be further restricted as to who and how they can hire, believing unions in Australia don’t want employees to work anything other than a standard 38-hour week.

“This would make it close to impossible to employ anyone unless they’re on a standard 38-hour week,” he says.

In a statement to SmartCompany, a spokesperson for Minister Laundy said the Minister had “made an application to intervene in the Mondelez matter because of the broader significance of the correct interpretation of the paid personal/carer’s leave provisions in the Fair Work Act“.

“Given that this matter is currently before the Federal Court, it would not be appropriate to comment further at this time,” the spokesperson said.

A spokesperson for the Fair Work Ombudsman told SmartCompany the ongoing legal proceedings “may impact upon the FWO’s advice on these matters”, while a spokesperson from the Fair Work Commission said the Commission would not be making any further statements on the matter.

NOW READ: Fair Work Commission report by Bruce Billson recommends overhaul and ‘triage’ system for SME unfair dismissals

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