Compensation for unfair dismissal; the principles

This portion of an unfair dismissal decision constitutes an excellent summary of the legal principles involved when calculation compensation for unfair dismissal in the absence of an order for reinstatement.

 

  • “The Applicant did not seek reinstatement. I do not regard reinstatement as appropriate in the circumstances. The Applicant sought compensation. I am satisfied that it is appropriate in the circumstances to make an order for compensation in lieu of In doing so, I am required by s.392 to take account of all of the circumstances of the case, including the matters listed in subsections (2)(a) to (g) of that section.

 

  • The parties were given an opportunity to put written submissions on the question of compensation at the conclusion of the hearing. I note that the Respondent is a small business, albeit one that is part of a larger corporate group of The Respondent did not provide any evidence as to the effect that an order for compensation would have on the viability of the Respondent’s enterprise. I make no deduction on account of the effects on the viability of the enterprise.

 

  • I also take into account the fact that the Applicant had approximately 21 months service with the company. I do not regard this period of service to provide any basis for reducing the amount of the proposed order.

 

 

  • In determining the remuneration that the Applicant would have received or would have been likely to receive if he had not been dismissed, I take into account the fact that the Applicant is presently on workers compensation as a result of his injury and the evidence as to his future medical treatment and return to work prospects. I am of the view that it is likely that the Applicant would have remained in the employment of the Respondent for a further twelve months had his employment not been terminated. In the current circumstances, the Applicant has a limited capacity to mitigate his loss arising from the termination. I do not consider it appropriate to reduce the proposed amount of the order on account of any lack of mitigation

 

  • I propose to take into account the amount that the Applicant has earned by way of workers compensation payments from the date of dismissal until the making of the order for compensation. I also take these projected payments into account as income reasonably likely to be earned by the Applicant between the making of the order and the actual compensation. I think it is also appropriate to have regard to the projected workers compensation payments that the Applicant is likely to receive from the date of the actual compensation until his anticipated return to normal duties. I take that into account as a relevant matter under s392(2)(g).

 

  • Aside from the usual contingencies such as illness and accidents, there is a significant contingency associated with the Applicant’s situation that needs to be taken into account. The Applicant’s existing work-related injury brings with it an element of uncertainty as to its impact on the Applicant’s potential earnings. The Applicant says his medical advice is that further surgery is required and that there is a potential long recovery Assuming the Applicant can fully recover and return to his normal duties, his workers compensation payments would be discontinued. On the other hand, the Applicant may not fully recover or may not recover until some later time. These are matters which must be factored into the quantum of any compensation order.

 

  • The well-established approach to the assessment of the quantum of compensation under

s.392 of the Act is to apply the “Sprigg formula”. That formula is derived from the Australian Industrial Relations Commission Full Bench decision in Sprigg v Paul’s Licensed Festival Supermarket.4

 

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 5: Assess the figure against the compensation cap.

 

  • Applying the above formula to this case I calculate the order for compensation as follows:

 

  • The Applicant would have received or been likely to receive remuneration by way of workers’ compensation payments in the period since his termination until 15 August 2024 if he had not been dismissed in accordance with the following:

 

  • 11 October 2023 to 31 October 2023 – 3 weeks at $1,900 per week – $5,700
  • 1 November 2023 to 16 May 2024 (being estimated date of second surgery)

– 28 weeks at $1,640 per week – $45,920

  • 16 May to 15 August 2024 (being estimated period of post-surgery recovery) – 13 weeks at $1,640 per week – $21,320
  • 16 August 2024 – 10 October 2024 – (8-week period after Applicant is fully recovered from surgeries and fit for full pre-injury duties and therefore not entitled to receive weekly workers compensation payments) – 8 weeks at

$1,900 being pre-injury average weekly earnings – $15,200 Total – $88,140

  • Deduct remuneration earned between the date of dismissal and the date of the making of an order for compensation – 11 October 2023 to 31 October 2024 (3 weeks at $1,900 per week – $5,700) and 1 November 2023 to 5 February 2024 (14 weeks at $1,640 – $22,960) and between the making of the order for compensation and the actual payment (3 weeks at $1,640) – $4,920.

 

Total – $33,580

 

Less further deduction for remuneration likely to be earned as workers compensation payments from 26 February until 15 August 2024 (24 weeks at

$1,640) – $39,360

 

  • Balance – $15,200 less discount for contingencies at 25% – $3,800.
  • Amount of order $11,400 (gross).

 

  • The amount proposed does not exceed the compensation cap. Having regard to the circumstances as a whole, I do not consider an order in this amount to be clearly inadequate or clearly excessive. The gross amount should be adjusted for taxation purposes in accordance with the principles described in Shorten & Ors v. Australian Meat Holdings Pty Ltd.5

 

  • For the reasons outlined above, I consider that the Applicant was unfairly dismissed and a payment of $11,400 (gross) should be paid by the Respondent to the Applicant as compensation in lieu of reinstatement as an appropriate remedy.

 

  • An order requiring payment of this amount will issue ”

 

Hahn v Hewitt Holdings Bathurst Pty Ltd (2024) FWC 299 delivered 5 February 2024 per Roberts DP