Some employers are persuaded to agree to personal/carer’s leave being cashed out, but there can be a catch. The correct way to cash out unused personal leave where long shifts are worked can deliver an unexpected and unwelcome result – it can cost a lot more than it should.  

A mining company operating 12 hour shifts assumed when employees wanted to cash out leave that the actual amount it would have to pay would be based not on a 12 hour day, but a standard day. This was because the entitlement to sick leave is expressed as 10 days a year. It assumed, like most employers, that the entitlement was founded on the standard 38 hour week, or the roughly equivalent, eight hour day. This is where the trouble started – the question then became, what is a “day” for these purposes in this situation. 

The union argued employees should be paid at the 12 hour rate and took the matter to court, but at first instance, lost. The original judgment came down on the side of fairness, namely that the intention was for 10 days leave with the assumption that the typical day is around eight hours in most situations. So if the cashing out was based on a 12 hour day, then that wouldn’t be fair when compared to the norm. 

But on appeal, this was overturned by the Federal Court, which basically said that the typical day for these workers was 12 hours. So that is what they should get when cashing out any of that leave. The company went to the High Court, but could not persuade it there was sufficient merit in the argument to even go to a full hearing. The company’s case was dismissed. 

The essence of the issue is that leave is expressed in days and hours. The Fair Work Act expresses the entitlement in days, accruing in line with ordinary hours. But the habits and systems of employers and employees, is to keep track of hours - both used and remaining available.  

The problem lies in the legislative requirement that a cashing out episode requires the employee to be paid what “would have been payable to the employee had the employee taken the leave that the employee has forgone”. This means if an employee, who works a long day like these miners, wants to cash out a “day”, then the starting point has to be, ‘what would the employee have been entitled to if the day was taken as a sick day?’. In that case, it would be the full 12 hours. So it has to be the same when cashed out. 

These problems could also be encountered with cashing out annual leave. Wording about the employee being paid the same as if they were taking the leave is in the legislation for cashing annual leave as well. There is a difference between the two areas however: annual leave entitlement is expressed as “four weeks” whereas sick leave is expressed as “10 days”. There is more likelihood of differences between employees on a daily basis than over a week or four weekly cycle, hence the problem tends to be less acute with annual leave.  

Employers need to be wary of these arrangements and how they are expressed in industrial instruments. Situations which create a windfall for only some employees ought to be avoided.

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