What follows is a classic explanation of how to calculate compensation for unfair dismissal in a passage from a Fair Work Commission decision.
“[82] Having regard to the matters in s.390(3)(a), the Applicant does not seek reinstatement.
Accordingly, I am satisfied that reinstatement is inappropriate.
[83] Having regard to s.390(3)(b), I consider an order for compensation is appropriate in all
the circumstances of the case. The matters to be taken into account in making an order for
compensation are set out in s.392 of the Act as follows:
392 Remedy—compensation
Compensation
(1) An order for the payment of compensation to a person must be an order that
the person’s employer at the time of the dismissal pay compensation to the
person in lieu of reinstatement.
Criteria for deciding amounts
(2) In determining an amount for the purposes of an order under subsection (1),
the FWC must take into account all the circumstances of the case including:
(a) the effect of the order on the viability of the employer’s enterprise; and
[2023] FWC 382
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(b) the length of the person’s service with the employer; and
(c) the remuneration that the person would have received, or would have been
likely to receive, if the person had not been dismissed; and
(d) the efforts of the person (if any) to mitigate the loss suffered by the person
because of the dismissal; and
(e) the amount of any remuneration earned by the person from employment or
other work during the period between the dismissal and the making of the
order for compensation; and
(f) the amount of any income reasonably likely to be so earned by the person
during the period between the making of the order for compensation and
the actual compensation; and
(g) any other matter that the FWC considers relevant.
Misconduct reduces amount
(3) If the FWC is satisfied that misconduct of a person contributed to the
employer’s decision to dismiss the person, the FWC must reduce the amount it
would otherwise order under subsection (1) by an appropriate amount on
account of the misconduct.
Shock, distress etc. disregarded
(4) The amount ordered by the FWC to be paid to a person under subsection (1)
must not include a component by way of compensation for shock, distress or
humiliation, or other analogous hurt, caused to the person by the manner of
the person’s dismissal.
Compensation cap
(5) The amount ordered by the FWC to be paid to a person under subsection (1)
must not exceed the lesser of:
(a) the amount worked out under subsection (6); and
(b) half the amount of the high income threshold immediately before the
dismissal.
(6) The amount is the total of the following amounts:
(a) the total amount of remuneration:
(i) received by the person; or
(ii) to which the person 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 employee was on leave without pay or without full pay while so
employed during any part of that period—the amount of remuneration
[2023] FWC 382
22
taken to have been received by the employee for the period of leave in
accordance with the regulations.
[84] As noted by the Full Bench in Double N Equipment Hire Pty Ltd t/a A1 Distributions v
Humphries,
23 the well-established approach to the assessment of compensation under s.392 of
the 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).24 This approach was articulated in the context of the Act in Bowden v Ottrey Homes
Cobram and District Retirement Villages.
25
The effect of the order on the validity of the employer’s enterprise – s.392(2)(a)
[85] There was no submission that there would be any effect of the order on the viability of
the employer’s enterprise.
The length of the person’s service with the employer – s.392(2)(b)
[86] The Applicant’s period of employment was just over three years. The Applicant’s length
of service does not weigh in favour of reducing or increasing the amount of compensation
ordered.
The remuneration that the person would have received, or would have been likely to
receive, if the person had not been dismissed – s.392(2)(c)
[87] The assessment of the length of continued employment is a discretionary decision.
It is clear that by the time of the Applicant’s dismissal the relationship between the Applicant
and Respondent had seriously deteriorated, to the extent that it was unlikely to continue
thereafter. Added to that deterioration was the knowledge gained by the Respondent around
that time of the Taumalolo Email, and the Giannaros comment.
[88] The Applicant submitted initially that the Applicant would have remained in
employment for a year, and in final submissions submitted he would have remained until
retirement. Those submissions completely disregarded the evidence of the Applicant’s conduct
and the friction within the workplace, and were seemingly advanced as a means of somehow
securing a large compensation figure in circumstances where the Applicant had, as
acknowledged at the commencement of the hearing of the matter, almost completely mitigated
his loss. I reject those submissions.
[89] In those circumstances, the Applicant’s employment would only have continued for a
period to allow for procedural fairness to be afforded to the Applicant. I estimate that the
Applicant’s employment would have continued for a further two weeks. which would allow for
sufficient time for the Respondent to notify the Applicant of the reason for dismissal, provide
an opportunity for him to respond and to give him notice of his dismissal.
[2023] FWC 382
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Mitigation/Remuneration Earned – s.392(2)(d) and (e)
[90] As noted above, shortly after his employment was terminated, the Applicant
commenced new employment on an annual salary of approximately $5,000.00 less per annum.
It was agreed that the difference in salary was $100.00 per week.
Other Matters Relevant – 392(2)(g)
[91] It was eventually agreed that, notwithstanding the dismissal was for serious misconduct,
the Applicant received 3 weeks pay in lieu of notice. I make no deduction because of that
payment as I consider that the Respondent would have made such notice payment after having
accorded procedural fairness to the Applicant.
Misconduct reduces amount – 392(3)
[92] Section 392(3) of the Act provides:
(3) If the FWC is satisfied that misconduct of a person contributed to the employer’s
decision to dismiss the person, the FWC must reduce the amount it would
otherwise order under subsection (1) by an appropriate amount on account of the
misconduct.
[93] In Butterfly Systems Pty Ltd v Sergeev,
26(Sergeev) the Full Bench of the Commission
found:27
Two relevant considerations arise from the terms of the provision. Firstly, the specific
use of the term “misconduct”, as opposed to “serious misconduct”, indicates that
conduct of less severity than that encompassed in the definition of serious misconduct in
Regulation 1.07 of the Fair Work Regulations 2009, is within the purview of the provision.
Secondly, the provision requires the Commission to reduce the amount of compensation
it would otherwise order by an appropriate amount, on account of misconduct, if satisfied
that the misconduct contributed to the employer’s decision to dismiss.
[94] The conduct of the Applicant constituting valid reasons satisfies the definitions of either
misconduct or serious misconduct, and contributed to the decision of the Respondent to dismiss
him. I consider it appropriate that compensation ordered should be reduced by 50%.
Conclusion and order as to remedy
[95] I consider that reinstatement is not an appropriate remedy and that an award of
compensation is appropriate. I estimate the Applicant would have received a further two weeks
remuneration had he not been terminated.
[2023] FWC 382
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[96] I deduct from the two weeks pay monies earned since termination, leaving $200.00,
being two weeks pay less mitigation. I make no deduction for contingencies, and consider the
impact of taxation on the amount needs no accommodation.
[97] The $200.00 is reduced by 50% as a result of misconduct, leaving $100.00 gross, subject
to deduction of taxation (the Compensation Payment).
[98] The Compensation Payment, less any required deduction in taxation, is to be made
within 21 days of this decision. An order to that effect is separately published.”
Lanzafame v Artisan People Pty Ltd [2023] FWC 362 delivered 1 March 2023 per Cross DP