Federal Court rules on the payment of personal leave during COVID19 stand-down

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Introduction

The Federal court of Australia has handed down an expedited decision in response to an application by unions for paid personal leave during period of stand down. Whilst no surprises, there are some very good historical references in relation to payment and work obligations, and the perplexing decision that a “working day” x 10 is the entitlement to personal leave and it also requires that overtime that would normally be worked also be paid.

Preamble

This decision involved two applications from multiple unions in the face of huge stand-downs by Qantas. The Federal Court decided to merge the applications into a single matter and, due to the “urgency” of the issue handed down its decision in a very timely manner.

Oh, by the way if you cannot wait until the end, the answer is “no”. Employees are not entitled to personal leave whilst they have been properly stood down.

Background

One of the commercial victims of the COVID-19 pandemic has been Qantas Airways Limited (“Qantas”) and its employees. In mid-March 2020 Qantas announced its intention to stand down approximately two-thirds of its 30,000 employees.

Of present concern is the entitlement of Qantas’ employees to access paid personal/carer’s leave or compassionate leave during their stand down. A number of Unions, on behalf of Qantas’ employees, claim that stood down employees are entitled to access such leave entitlements. Qantas denies this entitlement.

The stand down

There was no dispute between the unions and QANTAS that the stand downs were anything but lawful. The focus was specifically on whether the stood-down employees were entitled to personal/compassionate leave because of a global pandemic alternatively known as Coronavirus or COVID-19.

No common law right to stand down employees

There is no common law right of an employer to stand down an employee without pay in circumstances where there is no work the employee can usefully perform. At common law, an employee who is stood down is entitled to be paid even though they cannot usefully perform any work.

That is why the Fair Work Act 2009, awards, and enterprise agreements (and contracts of employment) have stand-down clauses that express that employees can be stood down for reasons outside of the employer’s control.

In particular, Section 525 of the Fair Work Act provides as follows:

“Employee not stood down during a period of authorised leave or absence

An employee is not taken to be stood down under subsection 524(1) during a period when the employee:

(a)         is taking paid or unpaid leave that is authorised by the employer; or

(b)         is otherwise authorised to be absent from his or her employment.

Note:   An employee may take paid or unpaid leave (for example, annual leave) during all or part of a period during which the employee would otherwise be stood down under subsection 524(1)”.

In this present matter, Justice Flick quoted (later apologising that due to limited time) he could not add another 100 pages of case law (I might have exaggerated that bit) in going to Application by Building Workers’ Industrial Union of Australia (1979) 41 FLR 192 at 194. Justice J B Sweeney was there considering an award provision which entitled an employer “to deduct payment for any day an employee cannot be usefully employed” and observed:

“…There was no existing right in the employer to deduct payment in the circumstances set out at common law. Halsbury’s Laws of England (3rd ed.), vol. 25, at p. 468 says:

‘Where, however, a written agreement, which appears on the face of it to include all the terms agreed to by the parties, provides only for the payment of wages or salary at certain times, no implied obligation to find work for the servant will be added, and he is not entitled to damages for not being given employment, although, if he remains ready to perform his services during the period covered by his contract, he is entitled to the agreed wages…”

Stand down provisions, Gaudron J has observed, are invoked as a last resort, and attempt to preserve “as many facets of the employment relationship as possible”: Foods Preservers Union of Australia and All States Ready Foods (1976) 182 CAR 391 at 392. Her Honour there said:

“The purpose of a stand down clause ought no longer to be seen as an automatic, albeit partial, safeguard for the employer against economic loss. Society now claims and expects reasonable economic security for the wage earner and recent decisions of this Commission illustrate the growing trend to grant stand down clauses only as a variation of an award to deal with specific situations and then as a last resort so as to preserve as many facets of the employment relationship as possible. Where such stand down clauses have been granted, there has also been a tendency to provide some relief to the employee by granting the right to take annual leave and/or to terminate on short notice”.

The object and purpose of compassionate leave 

Sections 96 and 105 of the Fair Work Act both are to be found in Part 2-2 of the Fair Work Act, namely that Part of the Act which sets forth the National Employment Standards.

Section 99 provides that if an employee takes such leave, the employer must pay the employee at the employee’s base rate of pay. Section 107 provides for the giving of notice by an employee to the employer. 

Fair Work Ombudsman v Grouped Property Services Pty Ltd [2016] FCA 1034 at [344] to [346], (2016) 152 ALD 209 at 266-267 per Katzmann J. The entitlement to take such leave, it may be noted, is not contingent upon obtaining the employer’s consent: Trustee for The MTGI Trust v Johnston [2016] FCAFC 140 at [8]. Siopis, Collier and Katzmann JJ there observed:

“[8]       The entitlement to take leave is not contingent upon obtaining the employer’s consent, either in advance of taking the leave or at all. It is, however, contingent on the employee complying with s 107. Section 107 imposes obligations on an employee to give his or her employer notice as soon as practicable (which may be a time after the leave has started), and to advise the employer of the period, or expected period, of the leave. If required to do so by the employer, the employee must also give the employer evidence that would satisfy a reasonable person that the leave is taken for a reason specified in s 97”.

Form of income protection

According to Flick, J, the leave entitlement conferred by s 96 is a “form of income protection”. In Mondelez v Australian Manufacturing Workers Union [2019] FCAFC 138 at [148], (2019) 289 IR 29 at 57 (“Mondelez”). Bromberg and Rangiah JJ there observed (and this decision survived appeal):

“[147]   The entitlement to paid personal/carer’s leave involves two components. The first is that ss 96(1) and 97 authorise the employee to be absent from work when the employee is unable to work because of a relevant illness or injury to the employee, or illness, injury or unexpected emergency affecting a member of the employee’s immediate family or household. The second is that s 99 confers an entitlement upon the employee to be paid for such absences. In contrast, while s 352 prohibits dismissal of an employee who is temporarily absent from work because of illness or injury of a kind prescribed by regulation, that provision does not authorise the employee’s absence, nor does it require that such an employee be paid.

“[148]   Section 96(1) of the FW Act must be understood as establishing a statutory form of income protection for all national system employees, other than casual employees. That protection is provided by authorising employees to be absent from work during periods of illness or injury and requiring employers to pay employees as if they had not been absent. The legislative purpose is to protect employees against loss of earnings when unable to work due to relevant illness, injury, or unexpected emergency.

“[149]   However, there are limits upon the entitlement to paid personal/carer’s leave. Section 96(1) itself limits the entitlement in two ways: firstly, it is limited to the number of days of leave that an employee has accrued; and secondly, the rate of accrual is limited to ten days for each year of service. Section 97 limits the purposes for which the leave may be taken. Section 99 limits payment to the base rate for the employee’s ordinary hours of work in the period. The exercise of the entitlement is subject to the notice and evidence requirements imposed by s 107”.

An entitlement to leave whilst stood down

The learned judge noted that the application put the right to stand down and the right to take personal leave were at the cross purposes for the purposes of the application.

In determining that an employee is unable to access personal/compassionate leave whilst stood down, because such leave entitlements are an entitlement on the part of the employee to take leave from otherwise performing the work they are required to perform.

“It is the very characterisation of the leave entitlement conferred by s 96 as a ‘form of income protection’ which presupposes that an employee is in receipt of income. As Qantas has repeatedly submitted, and correctly so, ‘income’ is not being protected if there is no available or required work from which to derive income in the first place”.

What is a “working day”?

GR: I am not sure why this was included in the decision, as is it is “off subject” and is currently subject to a High court challenge.

“When concluding that the “working day” construction of s 96(1) was to be preferred and rejecting a submission put forward by Mondelez that the “calendar day” construction would “lead to serious anomalies and unreasonable results that [could not] have been intended” (at para [135]), Bromberg and Rangiah JJ reasoned in part as follows:

‘[150]   The ordinary, or “working day”, construction of s 96(1) of the FW Act, is consistent with the purpose of providing, within the delineated limits, income protection for all part-time and full-time national system employees. Under that construction, all part-time and full-time employees, whatever their pattern of shifts, are entitled to payments reflecting the income they would have earned had they been able to work. To return to the example of employees who work 36 ordinary hours per week, whether an employee works 7.2 hours every day over five days, or 12-hour shifts over three days, under the “working day” construction, both will be paid at their base rate for the ordinary hours they would have worked if not for the illness or injury. Neither will lose that income. Further, the leave balance for each will be debited with one “working day” for each day of leave taken. The effect of this construction is that, subject to the delineated limits, no employee who is unable to work because of illness or injury will lose income...

‘[155]   The recognition of paid personal/carer’s leave as a form of income protection against loss of earnings during periods when employees are unable to work because of illness or injury supports the “working day” construction. That purpose demonstrates that the “anomalies” suggested by Mondelez are not unintended outcomes, but predictable consequences of the intended operation of s 96(1) of the FW Act.

‘[156]   Mondelez’ submission that it is “inequitable” that an employee who works fewer, longer shifts effectively gets more personal/carer’s leave than an employee who works a standard five-day week cannot be accepted. If both employees are able to take an equal number of “working days” of paid personal/carer’s leave and neither loses income, how can there be inequity or unfairness to one of them? Neither has had to work on the relevant days. Neither has suffered a loss of earnings as a consequence of not working.

‘[157]   Mondelez’ submission that the “working day” construction makes the treatment of the five standard day employee inequitable may also be tested in another way. Illness and injury generally strike randomly. On that basis, there is a greater chance that an employee who works a standard five-day week will fall ill on a day of work and have to take personal/carer’s leave than an employee who works three days of longer shifts. Is it inequitable to the three-day employee that he or she is less likely than the five-day employee to use his or her accrued entitlement to paid personal/carer’s leave? Since the leave is intended to act as a form of income protection during periods of inability to work due to illness or injury, rather than a mere entitlement to paid time off work, there is no inequity.

‘[158]   Mondelez’ submission that the “working day” construction makes the treatment of the standard five-day employee inequitable is, in part, based upon a misconception of the nature of the entitlement under s 96(1) of the FW Act. Mondelez submits that, “An employee who works longer shifts effectively gets more personal/carer’s leave than an employee who works a standard five-day week”. The entitlement of employees under s 96(1) is to ten days personal/carer’s leave for each year of service. It is not an entitlement to take ten days paid personal/carer’s leave. The entitlement to take the leave arises only if one of the conditions in s 97 arises. Therefore, it cannot be said that any employee will necessarily “get” more personal/carer’s leave than others. As we have said, randomness is inherent in the concept of personal/carer’s leave. The leave may only be taken if the employee or a member of his or her family or household is ill or injured or there is an unexpected emergency. There may be almost as many variations in the need to take personal/carer’s leave as there are employees. Under the “working day” construction of s 96(1), each employee accrues an entitlement to the same number of working days of paid personal/carer’s leave for each year of service. That entitlement to leave may or may not eventually be used, and if used, it is uncertain whether it will be used in full or in part, and what part. Therefore, the mere entitlement of some employees to what may amount to a greater number of hours of paid personal/carer’s leave than other employees, will not necessarily translate to a difference in the entitlement to take leave. However, each employee will be equally protected against his or her loss of earnings should the need to take leave arise. That does not seem inequitable.

‘[160]   Mondelez submits that the “working day” construction leads to anomalies when accounting for part-days of paid personal/carer’s leave. Mondelez submits that under that construction, if an employee has accrued a half-day of paid personal/carer’s leave, then he or she is entitled to be absent for a whole shift while using only a half-day of leave. The basis of this argument is unclear….

‘[161]   The purpose of paid personal/carer’s leave is as a form of income protection during periods when employees are unable to work because of illness or injury. That purpose supports the “working day” construction, and demonstrates that the “anomalies”, “inequities” and “unreasonable results” that Mondelez submits are produced by that construction are not only anticipated consequences but are more apparent than real.

Overtime is payable when on a “sickie”

Incredibly, the Court’s decision included overtime into the normal day of a sick or otherwise incapacitated employee:

And, similarly, their Honours further reasoned:

[195]    The overtime that an employee may otherwise have been required to work assists to explain why the accrual of paid personal/carer’s leave under s 96(1) of the FW Act is expressed in terms of “days” and not “hours”. As has been discussed, the entitlement to take such “leave” is an authorisation to be absent from work in the circumstances described in s 97. Since the basis of the entitlement is an inability to work because of illness, injury or unexpected emergency, the legislative intention must be to authorise employees to be absent, not only for their ordinary hours of work, but also any overtime hours they would otherwise have been required to work. That intention is given effect by the expression of the entitlement under s 96(1) in terms of “days”. In other words, the employee is authorised to be absent from work for the portion of a 24-hour period that would otherwise be allotted to work — irrespective of whether that work is ordinary time, or overtime”.

Back to the stand down

“In circumstances where an employee has been lawfully stood down, and thus in circumstances where there is no work which the employee can perform and thereby derive income, an employee is not entitled to access the leave entitlements conferred by ss 96 or 105. To enable the employee to do so would go against the very object and purpose of conferring those entitlements – namely an entitlement to be relieved from the work which the employee was otherwise required to perform. If there is no work available to be performed by the employee, there is no income and no protection against that which has not been lost. Conversely, to expose the employer to a liability to pay leave entitlements after lawfully having invoked the power to stand down an employee would defeat one of the two principal purposes of standing the employee down – namely, to protect the employer against such claims”.