This extract from a Fair Work Commission decision in an unfair dismissal case sets out the orthodox legal principles which are used to assess compensation for unfair dismissal.
“Remedy
[25] In the circumstances where I have found Mr Dimkovski was protected from unfair
dismissal at the time of being dismissed and that he has been unfairly dismissed, s.390 of the
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Act prescribes that a remedy is available. Accordingly, I am required to determine whether to
order the reinstatement of Mr Dimkovski or, if I am satisfied reinstatement is inappropriate, to
order the payment of compensation if I am satisfied that such an order is appropriate in all the
circumstances.11
[26] Mr Dimkovski advised he did not seek the remedy of reinstatement and submits that
there has been a loss of trust and confidence between himself and the Respondent. Noting this
and the Respondent’s failure to deal with the application in any substantive way, I am satisfied
that reinstatement is inappropriate (s.390(3)(a)).
[27] I must therefore consider whether it is appropriate in all the circumstances to make an
order for payment of compensation (s.390(3)(b)).
[28] Section 392 of the Act sets out the criteria for determining the amount of compensation
that may be ordered:
“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
(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.
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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 taken to
have been received by the employee for the period of leave in accordance with
the regulations.”
[29] In considering each of the criteria in s.392 of the Act, it is useful to refer to the
restatement of principles to be applied in the assessment of compensation in Mr Robert Johnson
v North West Supermarkets T/A Castlemaine IGA:
“[41] The well-established approach to the assessment of compensation under s 392 is to
apply the ‘Sprigg formula’, derived from the Australian Industrial Relations
Commission Full Bench decision in Sprigg v Paul Licensed Festival Supermarket. This
approach was articulated in the context of the current legislative framework in Bowden
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v Ottrey Homes Cobram and District Retirement Villages. Under that approach, the first
step to be taken in assessing compensation is to consider s.392(2)(c), that is, to determine
what the applicant would have received, or would have been likely to receive, if the
person had not been dismissed. In Bowden this was described in the following way:
“[33] The first step in this process – the assessment of remuneration lost – is a
necessary element in determining an amount to be ordered in lieu of
reinstatement. Such an assessment is often difficult, but it must be done. As the
Full Bench observed in Sprigg:
‘… we acknowledge that there is a speculative element involved in all such
assessments. We believe it is a necessary step by virtue of the
requirement of s.170CH(7)(c). We accept that assessment of relative
likelihoods is integral to most assessments of compensation or damages
in courts of law.’
[34] Lost remuneration is usually calculated by estimating how long the
employee would have remained in the relevant employment but for the
termination of their employment. We refer to this period as the ‘anticipated
period of employment’…”
[42] The identification of this starting point amount ‘necessarily involves assessments
as to future events that will often be problematic,’ but, as the Full Bench observed in
McCulloch v Calvary Health Care Adelaide, ‘while the task of determining an
anticipated period of employment can be difficult, it must be done.’
[43] Once this first step has been undertaken, various adjustments are made in
accordance with s.392 and the formula for matters including monies earned since
dismissal, contingencies, any reduction on account of the employee’s misconduct and
the application of the cap of six months’ pay. This approach is however subject to the
overarching requirement to ensure that the level of compensation is in an amount that is
considered appropriate having regard to all the circumstances of the case.” 12
(my emphasis – references omitted)
[30] The Sprigg formula was discussed and refined in Ellawala v Australian Postal
Corporation13 as follows:
“[31] The principles applicable to determining an amount to be ordered in lieu of
reinstatement are dealt with in Sprigg. In that case the Full Bench endorsed the following
approach:
Step 1: Estimate the remuneration the employee would have received, or have
been likely to have received, if the employer had not terminated the employment
(remuneration lost).
Step 2: Deduct monies earned since termination.
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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.
[32] Any amount provisionally arrived at by application of these steps is subject to
whether offsetting weight is given to other circumstances, including those that need now
to be taken into account under paragraphs 170CH(7)(a), (b) and (c). The legislative cap
on the amount able to be ordered is then applied pursuant to ss.170CH(8) and (9).
[33] The first step in this process – the assessment of remuneration lost – is a necessary
element in determining an amount to be ordered in lieu of reinstatement. Such an
assessment is often difficult, but it must be done. As the Full Bench observed in Sprigg:
“…we acknowledge that there is a speculative element involved in all such
assessments. We believe it is a necessary step by virtue of the requirement of
s.170CH(7)(c). We accept that assessment of relative likelihoods is integral to
most assessments of compensation or damages in courts of law.”
[34] Lost remuneration is usually calculated by estimating how long the employee
would have remained in the relevant employment but for the termination of their
employment. We refer to this period as the “anticipated period of employment”. This
amount is then reduced by deducting monies earned since termination. Only monies
earned during the period from termination until the end of the “anticipated period of
employment” are deducted. An example may assist to illustrate the approach to be taken.
[35] In a particular case the Commission estimates that if the applicant had not been
terminated then he or she would have remained in employment for a further 12 months.
The applicant has earned $3,000 a month for the 18 months since termination, that is
$54,000. Only the money earned in the first twelve months after termination – that is
$36,000 – is deducted from the Commission’s estimate of the applicant’s lost
remuneration. Monies earned after the end of the “anticipated period of employment”,
12 months after termination in this example, are not deducted. This is because the
calculation is intended to put the applicant in the financial position he or she would have
been in but for the termination of their employment.
[36] The next step is to discount the remaining amount for “contingencies”. This step is
a means of taking into account the possibility that the occurrence of contingencies to
which the applicant was subject might have brought about some change in earning
capacity or earnings.
…
[45] In relation to the fourth step set out in Sprigg we note that the usual practice is to
settle a gross amount and leave taxation for determination.”
(my emphasis, references omitted)
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[31] In Balaclava Pastoral Co Pty Ltd t/a Australian Hotel Cowra v Darren Nurcombe,
14 the
Full Bench stated that in quantifying compensation, it is necessary to set out with some
precision the way in which the various matters required to be taken into account under s.392(2)
(and s.392(3) if relevant), and the steps in the Sprigg formula, have been assessed and
quantified. The Full Bench also proffered that the way in which a final compensation amount
has been arrived at should be readily apparent and explicable from the reasons of the decisionmaker.
[32] I consider it is appropriate in all the circumstances to make an order for payment of
compensation and will assess compensation having regard to these considerations.
Remuneration that would have been received if the dismissal had not occurred – s.392(2)(c)
[33] This factor requires a speculative assessment of what might have occurred had Mr
Dimkovski not been dismissed on 17 November 2022 and how long he might otherwise have
remained employed by the Respondent. I have noted that in the 10 months of his employment,
Mr Dimkovski had no shortage of work and it would appear he had been asked by Mr Atay to
work at three different sites. I have also noted Mr Dimkovski was placed at Union Square and
that Mr Atay appears to have reacted negatively to Mr Dimkovski’s reluctance to continue
working at Leo’s. I am not persuaded by the submission from Mr Dimkovski that he would
have continued working for the Respondent for a further 10 years until his retirement. While I
accept Mr Dimkovski liked working at the Union Square location, I have formed the view,
based on the material before the Commission, that the Respondent is a very poor employer.
15 It
would appear the Respondent operated an opaque, irregular sub-contracting business model and
that Mr Atay applied whatever rates of pay he pleased, paying scant regard to both his
contractual obligations to Mr Dimkovski and the terms and conditions of the Cleaning Services
Award 2020. The account Mr Dimkovski gave of his interactions with Mr Atay and the
complete failure of Mr Atay to engage with the Commission’s processes leave the impression
that Mr Atay is an unimpressive and unscrupulous business operator. I am not persuaded that
Mr Atay’s treatment of Mr Dimkovski would have remained tolerable for much longer, let alone
10 years. Certainly I do not consider their ongoing working relationship was at all sustainable.
I also cannot be certain that the Respondent would have retained the Union Square work for
that period. Therefore, I am only prepared to find that Mr Dimkovski would have been
employed for another 6 months/26 weeks at most.
[34] The Respondent does not appear to have applied the correct Saturday and Sunday rates
when paying Mr Dimkovski for his work at Union Square. Applying them,16 I calculate 26
weeks paid at $259.44 gross per week (3 hours x $37.55 plus 3 hours x $48.93) produces a total
of $6,745.44 gross and find this to be the starting point of my calculation of appropriate
compensation.
Remuneration earned – s.392(2)(e) and income reasonably likely to be earned – s.392(2)(f)
and (g)
[35] Remuneration earned from the date of dismissal to the date of any compensation order
is required to be taken into account under s.392(2)(e) of the Act. Remuneration reasonably
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likely to be earned from the date of any compensation order to the date the compensation is
paid is also to be taken into account (under s.392(2)(f) of the Act).
[36] Mr Dimkovski produced evidence that he had earned remuneration from employment
totalling $421.07 since being dismissed,
17 which comprised $355.63 earnings from work for
Premier Cleaning Services Pty Ltd and $65.44 for work on 3 March 2023 with Borg Property
Services. Mr Dimkovski commenced his employment with Borg Property Services on 3 March
2023 for 12.5 hours per week on a 4pm – 6.30pm shift at the part time level 1 Cleaner rate of
pay (which is currently $29.59).18 At the time of the hearing, Mr Dimkovski was imminently
expecting a further payment for the pay period from 6 March 2023 – 19 March 2023. I calculate
his earnings for the 6-19 March 2023 pay period to be $739.75 and I further calculate that there
would be another $369.87 payable for the additional week worked immediately prior to the date
of this decision. These three components produce a total of $1,530.69. As to the consideration
in s.392(2)(f) of the Act, for the period until the actual compensation pursuant to the order I
intend to make, Mr Dimkovski would earn an additional $739.75 from his employment with
Borg Property Services. Adding the s.392(2)(e) and s.392(2)(f) components together produces
a total of $2,270.44.
Viability – s.392(2)(a)
[37] There was no evidence before me that would support a finding that an order for
compensation will affect the viability of the Respondent in any material way and as such, there
will be no deduction made having regard to this factor.
Mitigation efforts – s.392(2)(d)
[38] In considering whether Mr Dimkovski has taken steps to mitigate the loss suffered as a
result of the dismissal, I note that Mr Dimkovski made enquiries on ‘industry job boards’ and
with his contacts and applied for 5 jobs on Seek before securing alternative employment.
19 I
consider his job searching was likely punctuated by the Christmas/New Year holiday period
and note that he is limited to working part time.20 Having regard to these matters, I am not
inclined to make any adjustment that would reduce an award of compensation.
Length of service – s.392(2)(b) any other matters – s.392(2)(g)
[39] Mr Dimkovski was employed for 10 months. This is not an extensive period of time and
there will be no adjustment either way on account of this factor.
[40] A distinguishing feature of this case is that on 3 March 2023, Mr Dimkovski commenced
employment with a new employer in a position from which he derives a weekly wage that is
almost twice as much as his weekly earnings for his work at Union Square for the Respondent.
Any remuneration likely to be earned after the date of actual compensation (s.392(2)(f)) date to
the end of the period of anticipated employment determined for the purpose of s.392(2)(c) is a
relevant amount to be taken into account under s.392(2)(g) in accordance with the Sprigg
formula.21 Continuing in the new role during the 6-week balance of the 26-week period I have
determined that Mr Dimkovski would have remained in employment with the Respondent
would see Mr Dimkovski earning $369.87 gross per week and an additional total of $2,219.22.
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[41] Adding this $2,219.22 to the actual and likely income for Mr Dimkovski for the period
from the date of his dismissal until the actual compensation ($2,270.44)
22 produces the total of
$4,489.66. Deducting this from the $6,745.44 starting point would leave $2,255.78
compensation.
[42] I observe that Mr Dimkovski is 57 years old and served in his position without
performance or conduct issues until he was terminated. I accept Mr Dimkovski held the
expectation that he would have remained employed, although I disagree this would have been
for 10 years for the reasons I have outlined above.
Misconduct – s.392(3)
[43] I am not persuaded there is evidence of misconduct and as such, this factor does not
arise in the case.
Compensation cap – s.392(5)&(6)
[44] Section 392(5) of the Act dictates that the compensation available to the applicant is
capped at the lesser of the following two figures.
- half of the high income threshold at the time of the dismissal (i.e. $81,000.00); or
- the higher of total amount of remuneration that Mr Dimkovski either received or to
which he was entitled, during the 26 weeks of his employment immediately before his
dismissal.
[45] Having regard to the payslips he produced,
23 I have calculated the total amount of
remuneration to which Mr Dimkovski was entitled in the 26 weeks immediately before the
dismissal (19 May 2022 – 16 November 2022) was $7070.50.
24 Since this amount is less than
half of the income threshold at the time of the dismissal ($81,000.00), the compensation cap for
Mr Dimkovski is $7,070.50 gross.
[46] The amount of compensation I intend to order does not exceed the compensation cap.
Instalments – s.393
[47] There having been no submissions made on this point, I do not consider that there is any
reason for compensation to be made by way of instalments.
Shock, Distress – s.392(4)
[48] The amount of compensation calculated must not and will not include a component for
shock, distress, humiliation or other analogous hurt caused to Mr Dimkovski by the manner of
his dismissal.
Conclusion
[49] I am satisfied that Mr Dimkovski was protected from unfair dismissal, that the dismissal
was unfair and that order for compensation is an appropriate remedy in all the circumstances.
[2023] FWC 726
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In this case, I have noted that the Respondent appears not to have paid Mr Dimkovski notice on
termination, his annual leave accrual and his wages for the work at Leo’s on 31 October 2023.
I also note that it would appear the Respondent did not apply the correct penalty rates to Mr
Dimkovski’s work at Union Square. These are not matters about which the Commission can
make orders when determining an unfair dismissal application. Mr Dimkovski will need to
pursue such entitlements for non-payment and underpayment in a Court of competent
jurisdiction.
[50] The overarching requirement in assessing compensation is to ensure that the level of
compensation is in an amount that is considered appropriate having regard to all the
circumstances of the case.25 It has been observed by previous Full Benches of the Commission,
that if the application of the Sprigg formula ‘yields an amount which appears either clearly
excessive or clearly inadequate’ then the Commission should reassess the assumptions made or
reached.
26
[51] My assessment is that in all the circumstances of this case, it is appropriate to award
compensation to Mr Dimkovski for the 15-week period between his dismissal and his
commencement with Borg Property Services on 3 March 2023 based upon the rates of pay in
the Cleaning Services Award 202027 less the only remuneration he earned during that time
($355.63).
28 This amount totals $3,535.97 and is calculated as follows:
- 15 weeks x $259.44 (3 hours x $37.55 plus 3 hours x $48.93) = $3,891.60 minus
$355.63.
[52] To this $3,535.97, I will add 10.5% superannuation, which gives a gross figure of
$3,907.24.
[53] An order29 requiring the payment of $3,907.24 less taxation as required by law before 8
April 2023 will be issued with this decision.”
Dimkovski v Majorsite Property Group Pty Ltd [2023] FWC 726 delivered 27 March 2023 per Clancy DP