This extract from a recent unfair dismissal decision of the Fair Work Commission deals with the legal principles applicable to the issue of relief for unfair dismissal, particularly compensation.
“Remedy
[76] Being satisfied that the Applicant:
- made an application for an order granting a remedy under section 394;
- was a person protected from unfair dismissal; and
- was unfairly dismissed within the meaning of section 385 of the FW Act,
[2023] FWC 1864
14
I may, subject to the FW Act, order the Applicant’s reinstatement, or the payment of
compensation to the Applicant.
[77] Under section 390(3) of the FW Act, I must not order the payment of compensation to
the Applicant unless:
(a) I am satisfied that reinstatement of the Applicant is inappropriate; and
(b) I consider an order for payment of compensation is appropriate in all the
circumstances of the case.
Is reinstatement of the Applicant inappropriate?
Submissions
[78] The Applicant did not seek reinstatement. Given the level of animosity between the
Applicant and the Respondent and the size of the business, it is clear that the Applicant
regarded reinstatement as impractical and inappropriate.
[79] The Respondent submitted that reinstatement is inappropriate because the employment
relationship had broken down irretrievably.
Findings
[80] Given the submissions made by the parties and the conduct of the parties during the
hearing, I find that it would be impossible for them to work together at any time in the future.
As such, I consider that reinstatement is inappropriate.
Is an order for payment of compensation appropriate in all the circumstances of the case?
[81] Having found that reinstatement is inappropriate, it does not automatically follow that
a payment for compensation is appropriate. As noted by the Full Bench, “[t]he question
whether to order a remedy in a case where a dismissal has been found to be unfair remains a
discretionary one…”14
[82] Where an applicant has suffered financial loss as a result of the dismissal, this may be
a relevant consideration in the exercise of this discretion.15
Submissions
[83] The Applicant submitted that payment of compensation is appropriate because he had
suffered financial loss and, as far as possible given that he would be travelling overseas,
sought alternative employment but been largely unsuccessful. The Applicant made no other
submissions on the issues set out in s392(2).
[2023] FWC 1864
15
[84] The Respondent submitted that payment of compensation is not appropriate because it
was the Respondent’s view that the Applicant’s failure to adequately pursue alternative
employment and the extended period spent overseas following his termination weighed
against an award of compensation. The Applicant made no other submissions on the issues set
out in s392(2).
[85] In all the circumstances, I consider that an order for payment of compensation is
appropriate because of the harshness of the termination and its impact on the Applicant.
Compensation – what must be taken into account in determining an amount?
[86] Section 392(2) of the FW Act requires all of the circumstances of the case to be taken
into account when determining an amount to be paid as compensation to the Applicant in lieu
of reinstatement including:
(a) the effect of the order on the viability of the Respondent’s enterprise;
(b) the length of the Applicant’s service;
(c) the remuneration that the Applicant would have received, or would have been likely
to receive, if the Applicant had not been dismissed;
(d) the efforts of the Applicant (if any) to mitigate the loss suffered by the Applicant
because of the dismissal;
(e) the amount of any remuneration earned by the Applicant from employment or other
work during the period between the dismissal and the making of the order for
compensation;
(f) the amount of any income reasonably likely to be so earned by the Applicant during
the period between the making of the order for compensation and the actual
compensation; and
(g) any other matter that the Commission considers relevant.
[87] I consider all the circumstances of the case below.
Effect of the order on the viability of the Respondent’s enterprise
[88] Neither party made submissions on the issue of whether an order for compensation
would have an effect on the viability of the employer’s enterprise. I find that a compensation
order would not impact the viability of the employer’s enterprise.
Length of the Applicant’s service
[89] The Applicant’s length of service was two years and three weeks.
[2023] FWC 1864
16
[90] I consider that the Applicant’s length of service does not support reducing or
increasing the amount of compensation ordered.
Remuneration that the Applicant would have received, or would have been likely to receive,
if the Applicant had not been dismissed
[91] As stated by a majority of the Full Court of the Federal Court, “[i]n determining the
remuneration that the Applicant would have received, or would have been likely to receive…
the Commission must address itself to the question whether, if the actual termination had not
occurred, the employment would have been likely to continue, or would have been terminated
at some time by another means. It is necessary for the Commission to make a finding of fact
as to the likelihood of a further termination, in order to be able to assess the amount of
remuneration the employee would have received, or would have been likely to receive, if
there had not been the actual termination.”16
Findings
[92] I find that the Applicant would not have remained in the employ of the Respondent for
an extended period. It was clear that the way the Applicant was doing his job did not sit well
with the Respondent and I find that the Respondent would have continued to have issues with
his performance. Further, the relationship between the parties had clearly deteriorated such
that the Applicant had stated that he would be glad to leave. Although this comment was
made in the heat of the moment, I find that it accurately reflected the Applicant’s state of
mind given his other evidence.
[93] In making this finding I am also mindful of the reality of the Respondent’s business in
that it is a small operation and the Applicant and the Respondent would have been working in
close proximity and unable to avoid each other. As such, I do not consider that the
employment relationship would have lasted beyond a further eight weeks, giving the
Applicant a sum of $10,769.23. However, the Applicant received payment for what the
Respondent termed “garden leave” equal to four weeks’ pay. As such, this amount should be
reduced to $5384.61.
Efforts of the Applicant to mitigate the loss suffered by the Applicant because of the
dismissal
[94] The Applicant must provide evidence that they have taken reasonable steps to
minimise the impact of the dismissal.17 What is reasonable depends on the circumstances of
the case.18
Submissions and Evidence
[95] The Applicant gave evidence that he had taken steps to minimise the impact of the
dismissal by actively seeking other employment within “a week or two” of his dismissal.
However, the Applicant gave evidence that, as he was declaring to prospective employers that
he was travelling overseas for a period of several weeks, his efforts were hampered.
[2023] FWC 1864
17
[96] The Respondent submitted that the Applicant had not taken reasonable steps to
minimise the impact of the dismissal because of his overseas travel – a factor that the
Respondent regarded as being beyond his control and one for which he should not be
penalised.
Findings
[97] In making my finding, I am mindful that the overseas trip taken by the Applicant was
not to go on holiday, but instead to visit a very close friend with a terminal illness. As such,
his absence is understandable. However, I am also mindful of the submissions from the
Respondent regarding the duty to mitigate loss and the extent to which the Respondent should
be, effectively, liable for the Applicant’s inability to secure alternative employment.
[98] As such, I find that while the Applicant took all steps reasonable in his particular
circumstances, his extended overseas absence weighs against a general finding that he took
reasonable steps to mitigate his loss. I will therefore apply a reduction of 12.5% to the
compensation payable.
Amount of remuneration earned by the Applicant from employment or other work during
the period between the dismissal and the making of the order for compensation
[99] The Applicant’s evidence was that he has not earned any remuneration from
employment or other work since the dismissal.
[100] That evidence was not challenged by the Respondent.
[101] I am satisfied that the amount of remuneration earned by the Applicant from
employment or other work during the period since the dismissal is zero.
Amount of income reasonably likely to be so earned by the Applicant during the period
between the making of the order for compensation and the actual compensation
[102] The Applicant’s evidence is he is not likely to earn any remuneration in the period
between the making of the order for compensation and the payment of compensation. While
he concedes he has gained employment, his evidence was that this was one day a week on a
casual basis and his further evidence was that in five weeks he has had no shifts.
[103] That evidence was not challenged by the Respondent.
[104] I am satisfied that the amount of income reasonably likely to be earned by the
Applicant between the making of the order for compensation and the payment of
compensation is zero.
Compensation – how is the amount to be calculated?
[105] 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
[2023] FWC 1864
18
Festival Supermarket (Sprigg).19 This approach was articulated in the context of the FW Act
in Bowden v Ottrey Homes Cobram and District Retirement Villages20.”21
[106] 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
[107] I have estimated the remuneration the Applicant would have received, or would have
been likely to have received, if the Respondent had not terminated the employment to be
$5,384.61 on the basis of my finding that the Applicant would likely have remained in
employment for a further period of eight weeks but that this figure should be reduced due to
the four weeks of payment already received. This estimate of how long the Applicant would
have remained in employment is the “anticipated period of employment”.22
Step 2
[108] I have found that the amount of remuneration earned by the Applicant from the date of
dismissal was zero and that the amount of income reasonably likely to be earned by the
Applicant between the making of the order for compensation and the payment of
compensation is also zero.
[109] Only monies earned since termination for the anticipated period of employment are to
be deducted.23 As this combined figure is zero, the amount remains $5,384.61.
Step 3
[110] 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.24
[111] I find that there are no relevant contingencies given that the anticipated period of
employment is relatively short.
Step 4
[2023] FWC 1864
19
[112] I have considered the impact of taxation but have elected to settle a gross amount of
$5,384.61 and leave taxation for determination.
[113] 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,”25 including my findings that there should be a reduction of 12.5%
for the Applicant’s reduced efforts to mitigate his loss.
[114] As such, the figure of $5,384.61 is to be reduced by 12.5%, leaving the figure taking
into account the issues in 392(2) of the FW Act at $4,711.54.
Compensation – is the amount to be reduced on account of misconduct?
[115] If I am satisfied that misconduct of the Applicant 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.
[116] As I found above, if there was misconduct on the part of the Applicant, it was at the
lower end of the scale of misconduct and was such that it did not warrant termination. On that
basis, I believe that a small deduction of 5% is appropriate. The figure of compensation is
thus $4,711.54 less 5%, being $4,475.96.
Compensation – how does the compensation cap apply?
[117] 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.
[118] The amount worked out under section 392(6) is the total of the following amounts:
(a) the total amount of the remuneration:
(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
[2023] FWC 1864
20
(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 in accordance with the regulations.
[119] The Applicant was not on leave without pay or without full pay during the 26 weeks
immediately before the dismissal.
[120] There was no dispute and I find that the total amount of the remuneration received by
the Applicant during the 26 weeks immediately before the dismissal was $35,000.
[121] There was no dispute and I find that the total amount of the remuneration to which the
Applicant was entitled during the 26 weeks immediately before the dismissal was $35,000.
[122] The high income threshold immediately before the dismissal was $162,000. Half of
that amount is $81,000.
[123] The amount of compensation ordered by the Commission must therefore not exceed
$35,000.
[124] In light of the above, I will make an order that the Respondent pay $4,475.96 gross
less taxation as required by law to the Applicant in lieu of reinstatement within 14 days of the
date of this decision.”
Meyers v Box Tec Pty Ltd [2023] FWC 1864 delivered 27 July 2023 per O’Keeffe DP