Compensation in the fair work system

How does the Fair Work Commission assess compensation?

Here is an extract from a caser which begins to answer that question.

“We consider that the Deputy President’s approach in assessing the “first step” of compensation was consistent with section 392(2)(c) and the authorities concerning the Sprigg formula. Section 392(2) requires a conclusion to be reached as to what would have been the most likely outcome in terms of remuneration received had the dismissal occurred. In reaching this conclusion, it is of course necessary to take into account the competing possibilities as to what might have occurred. But once a firm conclusion is reached, as the Deputy President did here, that a particular outcome would most probably have transpired, then the “first step” in the assessment must involve a quantification of the remuneration that would have been earned pursuant to that outcome. That is an approach consistent with that taken by the Full Court of the Industrial Relations Court of Australia in Kenefick v Australian Submarine Corporation (No 4) 14 (underlining added):

“As to the question of valuing the loss, it is inescapable that, in order to properly determine the loss (if any) sustained by each appellant, there should be brought into consideration the chance that he would in any event have had his employment very soon terminated. That is logically so because what is really being compensated is each appellant’s loss, predicated upon the chance that his employment would not have been so terminated had the employer obeyed the law. A chance that his employment would not have been terminated, but for the unlawful termination, cannot be separated from the chance that his employment would have been so terminated. The evaluation of those chances results in an assessment of whether the employment would probably have been otherwise terminated or not.”

We do not consider that there is any warrant for taking an approach whereby, for example, an assessment is made that the employee would have had a 20% chance of staying in employment for another 12 months, and thereby 20% of the remuneration for a 12 month period is added to the starting point amount. We note that such an approach was deprecated by Brennan and Dawson JJ in Malec v JC Hutton Pty Ltd in the following terms:

“Although we agree with the general thrust of the reasoning on this point in the judgment of Deane, Gaudron and McHugh JJ., we think it undesirable for damages to be assessed on the footing of an evaluation expressed as a percentage. Damages need not be assessed by first determining an award on the footing that the hypothetical situation would have occurred and then discounting the award by a selected percentage. Damages founded on hypothetical evaluations defy precise calculation. We should add that we would not favour the use of the term “probability” to describe the possibility of occurrence of a situation when the possibility is minimal.” 15

Whatever be the correct position for the assessment of damages at common law, we consider that the posited approach is inconsistent with s.392(2)(c). In unfair dismissal cases, compensation is necessarily assessed in accordance with the framework of s.392.”

Cvejic v Academy Services Pty Ltd (2015) FWCFB 8264 delivered 17 December 2015 per Hatcher VP, Bull DP and Roberts C