Compensation for unfair dismissal; the fair work principles

Here is a classic decision of the Fair Work Commission assessing compensation for unfair dismissal.

“Application for an unfair dismissal remedy – determination regarding remedy.

[1] On 25 May 2022 I issued a decision ex tempore where I found that Mr Kyle Chadwick (the Applicant) was unfairly dismissed. I also determined that reinstatement was not appropriate, and that consideration of an amount of compensation, if any, is appropriate. 1

[2] Written reasons for the 25 May decision were issued on 3 June 2022 (the Decision). 2 The Applicant was provided an opportunity to file additional submissions and evidence on remedy and JG1 Construction Pty Ltd (the Respondent) was given an opportunity to reply. The Applicant filed materials. The Respondent provided no submissions of any kind and has continued to be non-responsive to any contact from the Commission. I will therefore determine the matter of compensation taking into account the submissions and uncontested evidence provided by the Applicant.

[3] The Act provides for compensation as a remedy for unfair dismissal:

“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.

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.

393 Monetary orders may be in instalments

To avoid doubt, an order by FWA under subsection 391(3) or 392(1) may permit the employer concerned to pay the amount required in instalments specified in the order.”

[4] The Applicant has lost remuneration as a result of the dismissal. There is no reason apparent that compensation should not be awarded. In all of the circumstances, I consider that the award of some amount of compensation is appropriate in this matter.

[5] In determining the amount of compensation, I must have regard to “all the circumstances of the case” including each of the paragraphs in s.392(2) of the Act as set out above. No one matter is paramount, but regard must still be had to each of them. 3

[6] The general approach to the calculation of compensation was well set out by the Full Bench in Tabro Meat Pty Ltd v Kevin Heffernan 4 and I will follow that approach in determining this matter.

Section 392(2)(c) – the remuneration that the person would have received or would have been likely to receive, if the person had not been dismissed

[7] The Applicant was employed by the Respondent on a full-time basis as a Carpenter from 19 July 2021 until 29 January 2022. 5 The Applicant’s weekly wage with the Respondent was $790.40.6 This amount was for 40 standard hours per week and did not include superannuation or any payment for overtime.7

[8] The Applicant was paid overtime at the same rate as his ordinary hours of $19.76 8 and worked an average of two and a half hours of overtime, based on a 40-hour working week, during his employment.9 This means that the Applicant’s average weekly wage with overtime was $839.80.

[9] The Applicant’s employment with the Respondent was covered by the Building and Construction General On-Site Award 2020 (Building Award). 10 Clause 14.6 of the Building Award provides that all fees charged by a Registered Training Organisation will be reimbursed by the employer at particular intervals unless there is unsatisfactory progress.

[10] The amount of $839.80 per week (or $43,669.60 per annum) representing the amount of ordinary hours, plus the amount of regular overtime earned, will be used as the basis for the calculation of the amount the Applicant would have received or would likely to have received had it not been for the dismissal.

[11] I have no submissions from the Respondent as to how long it was expected the employment relationship would have continued were it not for the dismissal taking place.

[12] The Applicant states that he has been in the construction industry for four years and has been undertaking trade school, most recently a Certificate III in Carpentry at Swinburne University of Technology (Swinburne). 11 The Applicant has paid $799.52 in fees to Swinburne and as at 9 February 2022, has $595.10 in outstanding fees.12

[13] The Applicant was intending to stay employed with the Respondent “as long as [he] could, until [he] completed [his] apprenticeship with JG1 Construction” which would have occurred in approximately November 2023. Further, the Applicant could have asked the Respondent to continue to employ him as a leading hand once he was qualified. 13

[14] In the circumstances, the Applicant submits that he would have remained employed until at least November 2023 and that this is the appropriate date to use for the purpose of calculating the amount of income he would likely have earned had he not been dismissed. 14 I agree that this is the appropriate period to use for the purposes of the calculation.

[15] The period from the Applicant’s dismissal on 29 January 2022 to 30 November 2023 is approximately 95 weeks. This means that, in that period, the Applicant could have expected to earn $79,781 plus superannuation.

[16] The Applicant additionally submits that, had he not been terminated, he would have also been able to seek reimbursement of trade school fees of $1,394.62 which have not been reimbursed in accordance with clause 14.6 of the Building Award. 15 I agree that this is also remuneration that the Applicant would otherwise have received had it not been for the termination.

[17] This means that the total amount which the Applicant would have earned had he remained employed is $81,175.62, plus superannuation.

[18] I think it is reasonable to assume that, but for the dismissal, that in all the circumstances the employment relationship would have continued for a further period of 95 weeks, consistent with the submissions of the Applicant.

[19] Accordingly, I calculate the remuneration that the Applicant would have received or would have been likely to receive, if his employment had not been terminated, at $81,175.62 plus 10% superannuation.

Section 392(2)(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 section 392(2)(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

[20] In the circumstances of this matter, ss.392(2)(e) and 392(2)(f) of the FW Act can be dealt with together. From 14 February 2022, the Applicant obtained full-time employment with TPL Carpentry (TPL). 16 This employment is subject to a six-month probationary period.17

[21] At hearing the Applicant was asked his current wage with TPL and the Applicant answered that it was around $1,122. 18 However, the Applicant’s most recent pay slips19 show that between 14 February 2022 and 19 May 2022, the Applicant has earned:

  • $9,473.63 for his ordinary hours of work;
  • $1,413.31 in respect of overtime; and
  • $2,085.40 in respect of allowances which are exempt from tax withholding.

[22] The period from 14 February 2022 and 19 May 2022 is 13.5 weeks which means that, in real terms, the Applicant has, on average per week, earned:

  • $701.75 in respect of his ordinary hours;
  • $104.68 in respect of overtime hours; and
  • $154.47 in respect of allowances.

[23] The amount earned by the Applicant since the time of the dismissal until the day of the hearing of the matter on 25 May 2020 is $11,451.45 for his ordinary hours of work and overtime performed at TPL. This amount has been reached by:

  • calculating the length of time from 14 February 2022 when the Applicant commenced employment with TPL to the date of the hearing which is 14.2 weeks; and
  • multiplying 14.2 weeks by $806.44, the Applicant’s average weekly wage including his ordinary hours and overtime. 20

[24] The Applicant submits that any allowances which he is paid are not relevant to the calculation of earnings and they are compensation for specific costs that are incurred, 21 specifically for travel and tools.22 This is reflected in the allowances paid to the Applicant being exempt from taxation, unlike earnings. I agree with this submission and have not included allowances in the calculation.

[25] In terms of the income that is reasonably likely to be earned from the date of the hearing to the end of the anticipated period of employment on 30 November 2023, the Applicant submits that the most appropriate figure to use is his guaranteed earnings, that is, earnings from his contracted ordinary hours which are anticipated to be $55,438.28. This figure has been reached by:

  • calculating the length of time from the date of the hearing on 25 May 2022 to the end of the anticipated employment period on 30 November 2023, which is 79 weeks; and
  • multiplying 79 weeks by $701.75, which is $55,438.28. 23

[26] From this amount, the Applicant submits that 20% should be deducted for contingencies, noting that he is yet to complete his probationary period in his new employment and given the solvency issues facing the construction industry which have been widely reported. $55,438.28 less 20% is $44,350.62. 24 I note that having regard to the correct application of the “Sprigg formula” as outlined in Sprigg v Paul’s Licensed Festival Supermarket (Sprigg)25, this is not in my view an acceptable use of the deduction for contingencies. Any deduction from contingencies is applied to the amount derived from deducting the amount the applicant has earned and is likely to earn from the amount the applicant would have earned had the applicant remained employed.26 The approach that the Applicant urges me to take is one of deducting a contingency amount only from the prospective earnings of the Applicant rather than the loss, or even the prospective loss of the Applicant that has arisen as a result of the dismissal. I cannot find any authority to support that as being the correct approach to take to calculating the amount and have not made such a deduction. At a short further hearing held on 4 July 2022, I raised this concern with the Applicant. The Applicant’s representative rightly conceded the approach I preferred was the correct one. However, the Applicant’s representative also urged me to not make a deduction for contingencies or alternatively increase the amount taking into account favourable contingencies. I deal with contingencies and have taken into account the matters raised by the Applicant later in the decision.

[27] Adding the amount actually earned up until the date of the hearing ($11,451.45) to the amount reasonably likely to be earned ($55,438.28) yields an amount of $66,889.73

[28] This means that an amount of $66,889.73 plus superannuation, representing the amount that the Applicant has earned and is likely to earn, should be deducted from the $81,175.62 plus superannuation, which the Applicant would have earned had he remained employed. This deduction results in an amount of compensation of $14,285.89 plus 10% superannuation.

Section 392(2)(g) – any other matter that FWA considers relevant

[29] The impact of contingencies needs to be considered at this point. As outlined in Ellawala v Australian Postal Corporation (Ellawala):

“Assessing the impact of contingencies requires the exercise of a broad general discretion. As the Full Court of the Federal Court said in Hall and another v Tarlinton:

“. . . it is not the law, in our opinion, that unfavourable contingencies are always to be assumed, and that the plaintiff has the onus of establishing that there are countervailing favourable contingencies. In our opinion, in each particular case, the question is one for the trial judge or jury: on all the evidence, does it appear that the calculation of the plaintiff’s loss of earning capacity, based on his wages at the time of the accident, should be increased for favourable contingencies, decreased for unfavourable contingencies, or left unchanged for the combination of both . . . the matter is not one for calculation, but for the exercise of a broad general discretion.” 27”28

[30] While normally deduction of some amount is appropriate for contingencies, I am satisfied in the circumstances of this case that the Applicant has established that there are countervailing favourable contingencies noting that he is yet to complete his probationary period in his new employment and given the solvency issues facing the construction industry. Unfavourable contingencies impacting earning capacity of the types contemplated in the leading authorities such as sickness and accident need to also be considered. 29 In all the circumstances, I consider this a matter in which the amount should be “left unchanged or a combination of both”.30

[31] This results in a provisional amount of compensation of $14,285.89 plus 10% superannuation. There are no other matters that are relevant to the determination of compensation other than ss.392(2)(a),(b) and (d), 392(3) and 392(5) of the Act. I will turn to those factors now.

Section 392(2)(a) – the effect of the order on the viability of the employer’s enterprise

[32] With respect to s.392(2)(a) of the FW Act, the Applicant notes that, as in Regan Bell v Jenni International Pty Ltd, 31 there has been no evidence led to suggest that any award of compensation will affect the viability of the Respondent. I agree that there is no evidence that the compensatory order sought will adversely affect the viability of the Respondent’s enterprise.

Section 392(2)(b) – the length of the persons service with the employer

[33] Addressing s.392(2)(b) of the FW Act, the Applicant acknowledges that he was employed by the Respondent for a relatively short period of time. However, he submits that no deduction in respect of this is appropriate as he is an apprentice in the initial years of a career he wants to pursue in the building industry, in respect of which he is still undertaking studies. Absent the unfair dismissal, it is submitted there is no reason to think the Applicant’s employment would not have continued at least until he obtained his qualification. I agree with these submissions and no further deduction is warranted in these circumstances.

Section 392(2)(d) – the efforts of the person (if any) to mitigate the loss suffered by the person because of the dismissal

[34] In respect of s.392(2)(d), it is submitted the Commission should consider the extremely diligent efforts of the Applicant to mitigate his loss in finding new employment. I agree the Applicant’s mitigation efforts are considerable and sufficient to exclude any further deduction from the quantum of compensation calculated.

Section 392(3) – misconduct

[35] I have found that the Applicant was not dismissed for a valid reason and that no misconduct was in evidence. Therefore, there is no basis to make a further deduction for misconduct.

Section 392(5) – compensation cap

[36] As the amount of $14,285.89. plus 10% superannuation is less than the legislative compensation cap. No further deduction for that reason is required.

The Commission’s discretion

[37] The Applicant made the following submissions pertaining to the discretion to award compensation.

[38] In Smith v Moore Paragon Australia Ltd, the AIRC said in relation to the predecessor provisions that:

“…any remedy ordered by the Commission must be a remedy that the Commission considers “appropriate” having regard to all the circumstances of the case including [the legislation]

If an application of the guidelines in Sprigg yields an amount which appears either clearly excessive or clearly inadequate, then the member should reassess any assumptions or intermediate conclusions made or reached in applying the guidelines so as to ensure that the level of compensation is in an amount that the member considers appropriate having regard “to all the circumstances of the case” including the matters listed in s 170CH(7) and subject to the “cap” provided for in s 170CH(8) and (9).” 32

[39] In Mezino v Baia the Italian Pty Ltd (t/as Baia the Italian), which was an unusual case involving a French national who was working in Australia at a restaurant and was underpaid and then unfairly dismissed, in which the Respondent also did not participate the Commission, making a significant award of $15,000 held that:

“Against the background of the raft of atypical factors and the absence of any material from the respondent concerning matters which usually arise, and having regard to what I consider was an egregiously unfair dismissal of an employee who sought no more than to be paid properly and then lost his job (and, separately, had his sponsorship application evaporate).” 33

[40] Should the Commission find, for any reason, that the Applicant is not entitled to the $19,469.33 plus superannuation based on the application of s.392 of the FW Act and Sprigg, the Applicant submits that the Commission should exercise its discretion and make an award of this amount in any event to ensure that this Applicant:

  • whose dismissal was an egregious example of an unfair dismissal;
  • who is an employee early on in his career;
  • who was diligent and proactive in finding new work; and
  • is reasonably compensated for his losses and potential future losses.

[41] I have considered these submissions. While the Applicant urges me to award compensation at the statutory cap, they have sought to do so via a misapplication of the Sprigg principles in any event. I consider the amount calculated of $14,285.89 to be appropriate in all the circumstances of the case.

Conclusion and order as to remedy

[42] I find that reinstatement is not an appropriate remedy in this case. I find that compensation is appropriate.

[43] I am satisfied that an order for payment of compensation by the Respondent of $14,285.89 gross plus 10% superannuation, less taxation as required by law, to the Applicant in lieu of reinstatement is appropriate in all the circumstances of the case. It accords a fair go all round to both the Respondent and the Applicant.

[44] The compensation payment, less any required deduction in taxation, is to be made within 14 days of this decision. An order to that effect will be issued concurrently with this decision. 34”

Chadwick v JG1 Construction Pty Ltd (2022) FWC 1642 delivered 6 July 2022 per Lee C