Calculating compensation for unfair dismissal

This portion of a Fair Work Commission unfair dismissal decision contains a summary of the procedure used by the Fair Work Commission to calculate compensation for unfair dismissal.

“Compensation – how is the amount to be calculated?

[21] As noted by the Full Bench, “[t]he well-established approach to the assessment of

compensation under s.392 of the FW Act… is to apply the “Sprigg formula” derived from the

Australian Industrial Relations Commission Full Bench decision in Sprigg v Paul’s Licensed

Festival Supermarket (Sprigg).6 This approach was articulated in the context of the Act in Bowden

v Ottrey Homes Cobram and District Retirement Villages.”

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[22] The approach in Sprigg is as follows:

Step 1: Estimate the remuneration the Applicant would have received, or have been

likely to have received, if the Respondent employer had not terminated the employment

(remuneration lost).

Step 2: Deduct monies earned since termination.

Step 3: Discount the remaining amount for contingencies.

Step 4: Calculate the impact of taxation to ensure that the employee receives the actual

amount he or she would have received if they had continued in their employment.

Step 1

[23] I have estimated the remuneration the Applicant would have received, or would have been

likely to have received, if the Respondent had not terminated her employment to be $14,678.04

[2023] FWC 1387

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on the basis of my finding that it is likely the Applicant would have remained in employment for

a further period of six months. This estimate of how long the Applicant would have remained in

employment is the “anticipated period of employment”.

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Step 2

[24] I have found that the Applicant has not earned any amount of remuneration since the date

of her dismissal, and that she is unlikely to earn any remuneration between the making of the order

for compensation and the payment of compensation.

[25] Only monies earned since termination for the anticipated period of employment are to be

deducted. Consequently, no deductions are to be made for earnings. I have also found that the

Applicant has taken reasonable steps to mitigate her losses and consequently no deduction in this

regard is to be made to the amount of $14,678.04.

Step 3

[26] I now need to consider the impact of contingencies on the amounts likely to be earned by

the Applicant for the remainder of the anticipated period of employment.9

[27] I do not consider it appropriate to make any deduction for contingencies.

Step 4

[28] I have considered the impact of taxation but have elected to settle upon a gross amount

of $14,678 which is to be subject to normal taxation.

Compensation and all the circumstances of the case

[29] Having applied the formula in Sprigg, I am nevertheless required to ensure that “the level

of compensation is an amount that is considered appropriate having regard to all the circumstances

of the case.”

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[30] I am satisfied that the amount of compensation that I have determined above takes into

account all the circumstances of the case as required by s.392(2) of the Act.

Compensation – how does the compensation cap apply?

[31] Section 392(5) of the Act provides that the amount of compensation ordered by the

Commission must not exceed the lesser of:

  1. the amount worked out under section 392(6); and
  2. half the amount of the high income threshold immediately before the dismissal.

[32] The amount worked out under section 392(6) is the total of the following amounts:

(a) the total amount of the remuneration:

[2023] FWC 1387

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(i) received by the Applicant; or

(ii) to which the Applicant was entitled;

(whichever is higher) for any period of employment with the employer during the 26 weeks

immediately before the dismissal; and

(b) if the Applicant was on leave without pay or without full pay while so employed

during any part of that period – the amount of remuneration taken to have been

received by the Applicant for the period of leave is in accordance with the

regulations.

[33] The gross amount of $14,678.04 is less than the compensation cap. No further

adjustment of the amount is necessary.

Conclusion

[34] I am satisfied that the amount of compensation that I have determined to be awarded to the

Applicant (and paid by the Respondent) takes into account all the circumstances of the case as

required by s.392(2) of the Act, and that the figure of $14,678.04 (plus 10.5 percent superannuation

on that amount), in all the circumstances of this case, does not yield an amount that is clearly

excessive or clearly inadequate.

[35] I am equally satisfied that my finding as to the Applicant’s dismissal being unfair, and the

amount of compensation to be awarded to the Applicant, ensures that a fair go all round has been

afforded to both the Applicant and the Respondent in this case.11

[36] I will make an order that the Respondent pay the Applicant (in lieu of reinstatement)

$14,678.04 (less applicable taxation as required by law), plus 10.5 percent superannuation on that

amount, within 14 days of the date of this decision. Orders to this effect will be issued

contemporaneously with this decision.

[37] It is unfortunate that the Respondent has failed to properly engage with these proceedings.

I note that the Respondent has equally not engaged with the underpayment of wages matters raised

by the Applicant and her Mother. It is therefore my intention to refer these underpayment matters

for investigation to the Fair Work Ombudsman.”

 

McGinty v Hair & Co Pty Ltd [2023] FWC 1387 delivered 15 June 2023 per Boyce DP