Calculating compensation for unfair dismissal; mitigation

Where an employee wins an unfair dismissal case, and the Commission decides not to order reinstatement of the employment as a remedy, the Commission may order compensation instead. That compensation is subject to a wholly arbitrary statutory cap of a sum equivalent to 6 months’ pre-dismissal remuneration.

The Commission is not allowed to order compensation other than for economic loss, and consequently the exercise to calculate the loss is essentially mathematical, and is generally quite easy with a calculator and the benefit of hindsight.

However there are several subjective elements involved in that process, one of which is the principle of mitigation of loss. That long recognized principle for the assessment of damages by the courts is to the effect that a wronged party is not permitted to sit back and do nothing to lessen the consequences of the loss on him or her, rather there is a legal duty by the wronged party to get cracking to reduce the loss; it is a fundamental principle of public policy.

Consequently, an employee who wins an unfair dismissal case, but who does not win a reinstatement verdict, most commonly on the basis that the element of trust which is intrinsic in a satisfactory employer/employee relationship cannot be restored, is required to demonstrate that he or she has made reasonable endeavours to lessen their loss, and if they cannot, the compensation to be awarded will be marked down.

Here is an example.

“The responsibilities and obligations on a person dismissed to mitigate loss was considered in Biviano v Suji Kim Collection  PR915963. (Biviano) where the Full Bench of the Australian Industrial Relations Commission, following a wide ranging consideration of decided cases, found:

It is apparent from the decided cases that the Commission has had regard to the circumstances of each case in determining whether an applicant has acted reasonably to mitigate their loss. In considering mitigation in the context of s.170CH the Commission has held that:

  • an applicant may discharge the obligation to take reasonable steps to mitigate loss flowing from termination of employment by establishing a venture on his or her own account. Where this is the case it may be appropriate to make some allowance for deferred income in the calculation of the amount to be ordered pursuant to s.170CH(7), particularly where income is not generated in the early stages of the venture;


  • the fact that the applicant is a single parent is a matter which may be taken into account in considering whether the efforts taken to mitigate his or her loss were reasonable;


  • it is reasonable for an applicant to undertake a training course to enhance their employment prospects as a means of mitigation; and


  • it is not unreasonable for an applicant to refuse re-employment in circumstances where the employment relationship had broken down………


These principles were appropriately applied in the decision in Simpson v KAP Motors Pty Ltd T/A Kerry’s Automotive Group [2016] FWC 5019 (Simpson) in which I found that the award of compensation should be reduced because the applicant in that matter had failed to seek out work she could do, even where that work was not of the same kind as that work she had done with her previous employer. Whilst the applicant in Simpson had an injury that meant she could not perform the same work she had performed with her previous employer there was no reason she could not seek other work.

In this case I am not convinced Mr Renton has taken reasonable steps to mitigate his loss. At the time of hearing, nearly four months after his dismissal he had done little to find alternative employment. Even though he believed, at that time, that he would have difficulty gaining employment without medical endorsement, Mr Renton has done nothing to obtain such endorsement.

Now, some six months after his dismissal, in the knowledge that he would not be reinstated to Bendigo Health Michael Renton v Bendigo Health Care Group [2016] FWC 9089 at [151] and knowing that medical endorsement would enhance his chances of gaining employment as an Enrolled Nurse, Mr Renton has done nothing either to gain such endorsement or to set his sights on some alternative employment, even if it is, for a time, not as an Enrolled Nurse.

Mr Renton seems to be of the view that the only thing he needs to do to demonstrate mitigation is to look for jobs equivalent to the one he previously held. Having
found this may be difficult, he has done nothing to seek other employment. That is, he has not made any effort to mitigate his loss.

For this reason, I do not consider that Mr Renton has made a reasonable effort to mitigate his loss.

I have therefore applied a discount of 30% to his lost remuneration.”

Renton v Bendigo Health Care Group (2017) FWC 2017 delivered  20 February 2017 per Bissett C