Compensation for unfair dismissal

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

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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.

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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.

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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