Compensation for unfair dismissal; the principles explained

These passages from a recent unfair dismissal case in the Fair Work Commission are a very useful template for the application of the principles which apply to assessing compensation for unfair dismissal.

“Consideration of the factors in s.392

[13] I turn now to the factors I must consider under s.392(2) of the Act.

Viability (s392(2)(a))

[14] The Respondent contends that the making of a significant compensation order in favour of the Applicant will adversely impact on the viability of its business enterprise. The business is a small fencing business located in a regional area. This factor weighs against ordering a substantial award of compensation.

Length of service (s392(2)(b))

[15] The Applicant had worked for the Respondent for approximately seven years, initially casually and then in a full time capacity since leaving school in 2016. There had been no substantial issues with his performance or conduct until the incident with Crackers. This factor is in favour of a substantial award of compensation.

Remuneration the Applicant would have received, or would likely have received, if they had

not been dismissed (s 392(2)(c))

[16] As I found in my decision on the merits, the Respondent did not have a valid reason to dismiss the Applicant and also failed to follow any proper disciplinary procedure. Mr Dunshea had described the Applicant as “part of the family” and no warnings had ever been issued in respect of the Applicant’s conduct. It is thus entirely feasible that, had the Applicant not been dismissed following the Crackers incident, he would have remained employed by the Respondent for a significant period. Of course, s.392(2)(c) requires me to contemplate this hypothetical scenario when considering how long the Applicant would have been employed by the Respondent had he not been unfairly dismissed. It is a matter of conjecture, however, given the Applicant’s length of service and the lack of any previous disciplinary dealings, I consider that he would likely have continued to be employed by the Respondent for at least another 26 weeks. This suggests that a substantial award of compensation would be appropriate.

Mitigation efforts and remuneration earned (s 392(2)(d) and (e))

[17] The Applicant has taken steps to mitigate his loss. Though he was unemployed for approximately seven and a half weeks following his dismissal, he has been able to secure alternative work. He commenced new employment on 23 September 2021, though that work has a lower daily rate. He has earned a total of $7,872.00 since being terminated on the 9 August 2021.

[18] I note the Respondent’s comments about the Applicant not being formally qualified or a high-income earner and therefore easily employable. However, equally the fact that the Applicant had no other qualifications which may have limited his ability to secure alternative employment.

Any other relevant matter (s 392(2)(g))

[19] Section 392 goes on to provide that misconduct by the Applicant reduces the amount of compensation payable to them. 10 Given my findings above, this factor is irrelevant. It must also be noted that I cannot award any compensation for shock, distress or humiliation, or other analogous hurt, caused to the Applicant by their dismissal.11 I also note that given the Applicant earned below the high income threshold and therefore the compensation cap is 26 weeks’ compensation. I make no deduction for tax.

Contingencies

[20] Pursuant to the Spriggs formula, I must consider whether to discount the amount of compensation for contingencies. This step is a means of accounting for the possibility of the occurrence of contingencies to which the Applicant was subject, which might have brought about some change in earning capacity or earnings. While a 25% discount was applied in Sprigg, this amount was decided based on the facts of the case rather than a statement of what is generally appropriate. In assessing the impact of contingencies, the Commission must exercise its broad discretion and consider both favourable and unfavourable contingencies. It is important to note that contingencies only apply to the anticipated period of employment.

[21] I have applied a 20% discount to account for the vicissitudes of life, given the Applicant was a young employee who may have decided to pursue another role or career path. Similarly, given the unpredictability of the pandemic, it may be that the business could have suffered and make his ongoing employment untenable.

Conclusion

[22] Given the Applicant’s seven year service, unblemished disciplinary record and no evidence of other economic or personal matters that might have disturbed this engagement, I imagine that the Applicant could have been employed for at least another six months. That is where I begin my consideration of an appropriate remedy.

[23] Since his termination, the Applicant had secured alternative employment and had earned a total of $7,872.78. No evidence was provided regarding the type of work and why it was at a lower rate. I note that the Applicant had not been pursuing any vocational training since leaving school and so had only the skills he had learnt on the job with the Respondent. This, coupled with the fact that the circumstances of his termination would have meant he had no statement of service or reference, may have meant his options were limited in respect of finding work.

[24] Taking into account each of the factors in s.392(2) of the Act and applying the Spriggs formula, I am satisfied that the compensation awarded to the Applicant should be as follows.

[25] Had the Applicant been employed for the next 26 weeks, and continued to earn $701.25 per week, he would have earnt $18,232.50 over the course of that period. From that, it is appropriate in this case to discount the income earned by the Applicant during the intervening period ($7872.78), which brings the amount to $10,359.72. It is appropriate to discount that figure by a further 20% for contingencies, which brings the total to $8287.78.

[26] While I accept this amount may be felt sharply by a small regional fence-building business, I am also conscious of the fact that not only did the Respondent have no valid reason for dismissing the Applicant, no process was followed in bringing about the termination. Clearly Crackers was a well-loved member of Mr Dunshea’s family and Mr Dunshea was upset by his death. However, that does not excuse Mr Dunshea’s behaviour. On Friday afternoon, he had told the shocked and remorseful Applicant not to worry about the accidental death of Crackers. By Monday morning, he had turned on the Applicant – a young man who had worked for him since he was a teenager – declaring that the Applicant had turned into someone he despised and dismissed him without warning and without an opportunity to respond. However, taking into account the present circumstances, I consider an order requiring the Respondent pay to the Applicant $8287.78 to be an appropriate and fair outcome between the parties.

[27] No application has been made by the Respondent for any amount of compensation awarded to be paid in the form of instalments.

[28] Accordingly, I order that the Respondent pay to the Applicant $8287.78.”

O’Keeffe v The Trustee for Dunshea Family Trust (2022) FWC 298 delivered 14 February 2022 per Lake DP