Compensation for unfair dismissal

This interesting extract from a Fair Work Commission decision contains the principles used to determine the value of compensation for unfair dismissal.

“Compensation – how is the amount to be calculated?

[47] 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).11 This approach was articulated in the context of the FW Act in

Bowden v Ottrey Homes Cobram and District Retirement Villages12

.

13

[48] The approach in Sprigg is as follows:

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. Workers’ compensation payments are

deducted but not social security payments. The failure of an applicant to mitigate his or

her loss may lead to a reduction in the amount of compensation ordered.

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

[49] I have estimated the remuneration Ms Giblin would have received, or would have been

likely to have received, if the Club had not terminated the employment to be $88,718.16 on the

basis of my finding that Ms Giblin would likely have remained in employment until 18

November 2024. This estimate of how long Ms Giblin would have remained in employment is

the ‘anticipated period of employment’.

14

Step 2

[50] I have found that the amount of remuneration earned by Ms Giblin from the date of

dismissal was $9,836.20, and that the amount of income reasonably likely to be earned by Ms

Giblin between the making of the order for compensation and the payment of compensation is

$983.62.

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

be deducted.15 I therefore deduct the sum of $10,819.82 from $88,718.16 which leaves an

amount of $77,898.34

[52] Ms Giblin’s evidence at the hearing is that she is continuing to look for employment

including roles related to her studies. Ms Giblin is likely to have a break from her studies during

the period from the conclusion of her placement on 15 December 2023 until university resumes

in February/March 2024. In these circumstances, Ms Giblin’s availability to work at the Hotel

is likely to increase. Taking these matters into account, I believe that it is likely that Ms Giblin’s

earnings will return to a similar level to that which she was receiving while employed at the

11 (1998) 88 IR 21.

12 [2013] FWCFB 431.

13 Double N Equipment Hire Pty Ltd t/a A1 Distributions v Humphries [2016] FWCFB 7206, [16].

14 Ellawala v Australian Postal Corporation Print S5109 (AIRCFB, Ross VP, Williams SDP, Gay C, 17 April 2000), [34].

15 Ibid.

Club from 16 December 2023, increased by 5.75% to take account of the Annual Wage Review

increase from 1 July 2023.

[53] There are 48 weeks remaining of the anticipated employment period from 16 December

2023 to 18 November 2024. I believe that Ms Giblin is likely to earn an average weekly amount

of $1,115.04 from 16 December 2023, which is the average weekly earnings that Ms Giblin

was receiving during the six months prior to the dismissal increased by 5.75% in accordance

with the 2023 Annual Wage Review decision.16 Ms Giblin is therefore likely to earn the sum

of $53,521.92 during the period from 16 December 2023 to 18 November 2024, which is

calculated by multiplying $1,115.04 by 48.

[54] I have deducted an amount of $53,521.92 from $77,898.34 which leaves an amount of

$24,376.42.

Step 3

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

by Ms Giblin for the remainder of the anticipated period of employment.17

[56] There is no evidence before me which establishes the occurrence of contingencies

which might have brought about some change in earning capacity or earnings by Ms Giblin

during the anticipated period of employment. The effect of my decision is that I found that

there Ms Giblin is unlikely to experience ongoing future economic loss with respect to the

period beyond 15 December 2023. The Commission has evidence before it of the amounts

earned by Ms Giblin during the period from 26 June to 5 November 2023, so it has been

necessary to make assumptions about future economic loss in respect of only a very limited

period from 6 November to 15 December 2023. Such assumptions have been based upon

evidence of considerable probative value including Ms Giblin’s roster for the period from 31

October 2023 to 28 November 2023 and her average weekly earnings for a period of more than

4 months. I therefore do not consider there to be any evidentiary basis or that it is otherwise

appropriate to deduct any amount for contingencies.

Step 4

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

$24,376.42 and leave taxation for determination.

[58] 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,’

18 including my findings that:

  • It is likely that Ms Giblin would have remained employed by the Club until she finished

her university studies in November 2024 if she had not been dismissed;

  • Ms Giblin took reasonable steps to mitigate her loss by applying for at least ten jobs

after the dismissal;

16 [2023] FWCFB 3500.

17 Enhance Systems Pty Ltd v Cox PR910779 (AIRCFB, Williams SDP, Acton SDP, Gay C, 31 October 2001), [39].

18 Double N Equipment Hire Pty Ltd t/a A1 Distributions v Humphries [2016] FWCFB 7206, [17].

  • Ms Giblin was unemployed for a period of approximately 2 months following the

dismissal;

  • Ms Giblin’s average weekly income since obtaining alternative employment is $491.81

gross which is significantly lower than her average weekly earnings of $1,054.41 prior

to the dismissal;

  • Ms Giblin’s financial loss has been compounded by the reasons for her dismissal;
  • Ms Giblin is likely to continue to earn an average weekly amount of $491.81 gross until

15 December 2023;

  • After 15 December 2023, Ms Giblin’s earnings are likely to return to their pre-dismissal

level.

[59] I have also taken into account Ms Giblin’s evidence at the hearing on 11 August 2023

that both the Glasshouse Hotel and the Coogee Diggers did not proceed with offering her

employment after initially indicating verbally that they would do so and had hours that suited

Ms Giblin’s university commitments.

[60] 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 FW Act and that it does

not include a component compensating for shock, distress and humiliation.

Compensation – is the amount to be reduced on account of misconduct?

[61] If I am satisfied that misconduct of Ms Giblin contributed to the employer’s decision to

dismiss, I am obliged by section 392(3) of the FW Act to reduce the amount I would otherwise

order by an appropriate amount on account of the misconduct.

[62] I am satisfied that misconduct of Ms Giblin did not contribute to the employer’s

decision to dismiss. Therefore, the amount of the order for compensation is not to be reduced

on account of misconduct.

Compensation – how does the compensation cap apply?

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

Commission must not exceed the lesser of:

(a) the amount worked out under section 392(6); and

(b) half the amount of the high income threshold immediately before the dismissal.

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

(a) the total amount of the remuneration:

(a) received by Ms Giblin; or

(ii) to which Ms Giblin was entitled;

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

weeks immediately before the dismissal; and

(b) if Ms Giblin 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

Ms Giblin for the period of leave in accordance with the regulations.

[65] Ms Giblin was not on leave without pay or without full pay during the 26 weeks

immediately before the dismissal.

[66] Based on the payslips Ms Giblin tendered at the hearing, I find that the total amount of

the remuneration received by Ms Giblin during the 26 weeks immediately before the dismissal

was $27,414.69.

[67] The high income threshold immediately before the dismissal was $162,000. Half of that

amount is $81,000

[68] The amount of compensation ordered by the Commission must therefore not exceed

$27,414.69.

[69] I have determined that the Club should pay compensation to Ms Giblin in the sum of

$24,376.42 gross plus superannuation less taxation as required by law in lieu of reinstatement

within 14 days of the date of this decision.

[70] An order giving effect to this decision is published with this decision.”