This is an interesting decision of the Fair Work Commission in which the Commission found that there was a valid reason for the dismissal of the employee because of a physical and continuing incapacity to perform her duties but that the dismissal was relevantly unfair warranting modest compensation because the employer had not afforded the employee a reasonable opportunity of making an argument to the employer about the reasonableness of the decision.
“Consideration
Was there a valid reason for dismissal related to Ms Bouhnik’s capacity or conduct?
[28] In order to be a valid reason, the reason for the dismissal should be “sound, defensible or well founded”3 and should not be “capricious, fanciful, spiteful or prejudiced.”4 However, the Commission will not stand in the shoes of the employer and determine what the Commission would do if it was in the position of the employer.5
[29] Four Frogs Creperie dismissed Ms Bouhnik because of her continued incapacity for work and inability to perform the inherent requirements of her role. The trigger for this decision was Four Frogs Creperie becoming aware that Ms Bouhnik was in Western Australia seeking other employment.
[30] A reason will be “related to capacity” where the reason is associated or connected with the ability of the employee to do his or her job.6 It is the substantive position or role of the employee that must be considered and not some modified, restricted duties or temporary alternative position.7 The reference to “inherent” requirements invites attention to what are the characteristic or essential requirements of the employment as opposed to those requirements that might be described as peripheral.8
[31] A Full Bench has previously found, “[w]hen an employee is absent because of an incapacity to perform duties, a question of timing arises. The FW Act precludes a termination for a temporary absence of up to 3 months. If an absence extends beyond that period, it becomes a question of whether there is likely to be a return to duties in the short or medium term. Usually updated medical advice will be important to that consideration. Indeed that medical information could have a bearing on the adequacy of the reason for termination.”9
[32] There is no dispute that Ms Bouhnik was not fit to perform her pre-injury duties from 13 April 2023 to when she was dismissed on 4 April 2024. Ms Bouhnik currently remains unfit to perform her pre-injury duties. Although the certificate from Dr Bourke dated 13 March 2024 refers to Ms Bouhnik having some capacity for work, it does not certify that Ms Bouhnik was fit to perform her pre-injury full-time duties. There is also no evidence Ms Bouhnik requested part-time duties at Four Frogs Creperie after this certificate was provided by Dr Bourke. Ms Bouhnik remained in Western Australia.
[33] I am satisfied Four Frogs Creperie has established that when Four Frogs Creperie dismissed Ms Bouhnik on 4 April 2024, Ms Bouhnik had a continuing incapacity for work, and that she had been unable to perform the inherent requirements of her position for a lengthy period. I do not accept Ms Bouhnik’s submission that there was a reasonable likelihood of her returning to her pre-injury duties in the near future. There is no evidence to that effect. I find that there was a valid reason for Ms Bouhnik’s dismissal related to her capacity.
Was Ms Bouhnik notified of the reason for dismissal?
[34] Proper consideration of s.387(b) requires a finding to be made as to whether Ms Bouhnik “was notified of that reason”. Contextually, the reference to “that reason” is the valid reason found to exist under s.387(a).10
[35] Notification of a valid reason for termination must be given to an employee protected from unfair dismissal before the decision is made to terminate their employment.11 Notification must be given in explicit,12 plain and clear terms.13
[36] Although Ms Bouhnik was obviously aware of her ongoing incapacity for work, she was not notified that Four Frogs Creperie was intending to terminate her employment because of her prolonged absence. The lack of notification denied Ms Bouhnik any opportunity to mount an argument that it was premature for the employment to end, or to argue she would be able to resume her full-time role in the near future.
[37] I find that Ms Bouhnik was not notified by Four Frogs Creperie of the reason for her dismissal before the decision was made to terminate her employment.
Was Ms Bouhnik given an opportunity to respond to the valid reason?
[38] An employee protected from unfair dismissal should be provided with an opportunity to respond to any reason for their dismissal relating to their conduct or capacity. An opportunity to respond is to be provided before a decision is taken to terminate the employee’s employment.14
[39] The opportunity to respond does not require formality and this factor is to be applied in a common-sense way to ensure the employee is treated fairly.15 Where the employee is aware of the precise nature of the employer’s concern about his or her conduct or performance and has a full opportunity to respond to this concern, this is enough to satisfy the requirements.16
[40] The first Ms Bouhnik heard about her employment potentially being terminated was when she received her termination letter on 4 April 2024.
[41] I find Ms Bouhnik was not provided with an opportunity to respond to the reason for her dismissal.
Did Four Frogs Creperie unreasonably refuse to allow Ms Bouhnik to have a support person present to assist at discussions relating to the dismissal?
[42] This is a neutral factor given there were no discussions relating to the dismissal.
Was Ms Bouhnik warned about unsatisfactory performance before the dismissal?
[43] The dismissal related to Ms Bouhnik’s capacity and not her performance. This factor is not relevant.
To what degree would the size of Four Frogs Creperie’ enterprise be likely to impact on the procedures followed in effecting the dismissal?
[44] I accept Four Frogs Creperie is a reasonably small business and that this substantially impacted on the procedures that were followed in effecting Ms Bouhnik’s dismissal.
To what degree would the absence of dedicated human resource management specialists or expertise in Four Frogs Creperie’s enterprise be likely to impact on the procedures followed in effecting the dismissal?
[45] I accept the absence of dedicated human resource specialists had a substantial impact on the procedures that were followed in effecting Ms Bouhnik’s dismissal.
What other matters are relevant?
[46] Section 387(h) requires the Commission to take into account any other matters that the Commission considers relevant.
[47] Neither party argued there were any other relevant factors that should be considered. I find there are not any other relevant matters.
Is the Commission satisfied that the dismissal of Ms Bouhnik was harsh, unjust or unreasonable?
[48] I have made findings in relation to each matter specified in s.387 of the FW Act. I must consider and give due weight to each as a fundamental element in determining whether the termination was harsh, unjust or unreasonable.17
[49] Having considered each of the matters specified in s.387 of the FW Act, I am satisfied that the dismissal of Ms Bouhnik was unjust. Ms Bouhnik was denied an opportunity to argue why she should not be dismissed because Four Frogs Creperie did not notify her of the dismissal or give her an opportunity to respond prior to making its final decision to terminate her employment.
[50] If a proper process had been followed, I would not have found that Ms Bouhnik had been unfairly dismissed. Four Frogs Creperie kept Ms Bouhnik’s position available for her to return to for nearly 12 months while she was incapacitated. Four Frogs Creperie did not contest Ms Bouhnik’s workers’ compensation claim and as a result she has been receiving close to her regular income despite not working for what is now well over a year. The position of Restaurant Manager is obviously an important operational position and I accept Four Frogs Creperie considered it would be in its commercial interests to permanently fill the position.
[51] I find Ms Bouhnik was unfairly dismissed.
Remedy
[52] Being satisfied that Ms Bouhnik:
- made an application for an order granting a remedy under s.394;
- was a person protected from unfair dismissal; and
- was unfairly dismissed within the meaning of s.385 of the FW Act,
I may, subject to the FW Act, order Ms Bouhnik’s reinstatement, or the payment of compensation to Ms Bouhnik.
[53] Under s.390(3) of the FW Act, I must not order the payment of compensation to Ms Bouhnik unless:
(a) I am satisfied that reinstatement of Ms Bouhnik is inappropriate; and
(b) I consider an order for payment of compensation is appropriate in all the circumstances of the case.
Is reinstatement of Ms Bouhnik inappropriate?
[54] Ms Bouhnik does not seek reinstatement, and it is opposed by Four Frogs Creperie. I find in these circumstances that reinstatement is inappropriate.
Is an order for payment of compensation appropriate in all the circumstances of the case?
[55] 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.”18
[56] Where an applicant has suffered financial loss as a result of the dismissal, this may be a relevant consideration in the exercise of the discretion to make an order for compensation.19
[57] Ms Bouhnik has suffered financial loss in circumstances where I have found she was unfairly dismissed. In all the circumstances, I consider that an order for payment of compensation is appropriate.
Compensation – what must be taken into account in determining an amount?
[58] 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 Ms Bouhnik in lieu of reinstatement including:
(a) the effect of the order on the viability of Four Frogs Creperie’s enterprise;
(b) the length of Ms Bouhnik’s service;
(c) the remuneration that Ms Bouhnik would have received, or would have been likely to receive, if Ms Bouhnik had not been dismissed;
(d) the efforts of Ms Bouhnik (if any) to mitigate the loss suffered by Ms Bouhnik because of the dismissal;
(e) the amount of any remuneration earned by Ms Bouhnik 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 Ms Bouhnik 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.
[59] I consider all the circumstances of the case below.
Effect of the order on the viability of Four Frogs Creperie’s enterprise
[60] I have no evidence about the viability of Four Frogs Creperie’s enterprise. I consider this is a neutral factor.
Length of Ms Bouhnik’s service
[61] Ms Bouhnik was employed by Four Frogs Creperie for around 12 months. However, Ms Bouhnik was only fit to work for around three months. I consider this factor weighs in favour of a lower compensation order.
Remuneration that Ms Bouhnik would have received, or would have been likely to receive, if Ms Bouhnik had not been dismissed
[62] As stated by a majority of the Full Court of the Federal Court, “[i]n determining the remuneration that the employee 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.”20
[63] Taking all the evidence into account, I find Ms Bouhnik would likely have remained employed with Four Frogs Creperie for a further month had she not been unfairly dismissed. This is the “anticipated period of employment.” 21 I consider one month is around how long a proper process of communicating with Ms Bouhnik about whether she should be dismissed would have taken. I have taken into account that updated medical evidence may have been sourced by Ms Bouhnik as part of that process and that Ms Bouhnik should have been given either a week of notice or a payment in lieu.22
[64] Ms Bouhnik’s annual salary was $85,000.00 plus superannuation. I calculate the remuneration Ms Bouhnik would have been likely to receive working for Four Fogs Creperie for a month from 4 April 2024 to 4 May 2024 to be $7,083.33 gross.
[65] I have not included superannuation payments because I consider Ms Bouhnik would have remained absent from work and in receipt of workers’ compensation payments during the anticipated period of employment. Superannuation is not required to be paid in those circumstances.23
Efforts of Ms Bouhnik to mitigate the loss suffered by Ms Bouhnik because of the dismissal
[66] Ms Bouhnik must provide evidence that she has taken reasonable steps to minimise the impact of the dismissal.24 What is considered reasonable depends on the circumstances of the case.25
[67] Ms Bouhnik has been fully or partially incapacitated for work since her dismissal on 4 April 2024. Ms Bouhnik’s workers’ compensation payments will be counted as remuneration as part of the compensation assessment. I do not consider any deduction should be made for failure to mitigate loss.
Amount of remuneration earned by Ms Bouhnik from employment or other work during the period between the dismissal and the making of the order for compensation
[68] Based on the evidence provided by Ms Bouhnik,26 it appears she received workers’ compensation payments of $1,558.82 per week during the anticipated period of employment. That is a total of $6,235.28 gross.
Amount of income reasonably likely to be so earned by Ms Bouhnik during the period between the making of the order for compensation and the actual compensation
[69] Given the anticipated period of employment has finished, I do not need to take this into account.
Other relevant matters
[70] Neither party submitted that there were any other relevant matters.
Compensation – how is the amount to be calculated?
[71] 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).27 This approach was articulated in the context of the FW Act in
Bowden v Ottrey Homes Cobram and District Retirement Villages28.”29
[72] 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 to mitigate 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
[73] I have estimated that Ms Bouhnik would have remained employed by Four Fogs Creperie for a month until 4 May 2024.
[74] The remuneration Ms Bouhnik would have received, or would have been likely to have received, from her dismissal on 4 April 2024 until 4 May 2024 is $7,083.33 gross.
Step 2
[75] Only monies earned since termination for the anticipated period of employment are to be deducted.30
[76] I have calculated that Ms Bouhnik received workers’ compensation payments totalling $6,235.28 gross during the anticipated period of employment.
[77] For the reasons outlined above, I have not applied a deduction for failing to mitigate loss because Ms Bouhnik was fully or partially incapacitated during the anticipated period of employment.
[78] A figure of $848.05 is left after the deduction for remuneration earned.
Step 3
[79] I now need to consider the impact of contingencies on the amounts likely to be earned by Ms Bouhnik for the remainder of the anticipated period of employment.31
[80] I know Ms Bouhnik’s earnings during the anticipated period of employment. I therefore do not need to make a deduction for contingencies.
Step 4
[81] I have considered the impact of taxation but have elected to settle a gross amount of $848.05 and leave taxation for determination.
Compensation – is the amount to be reduced on account of misconduct?
[82] If I am satisfied that misconduct of Ms Bouhnik contributed to the employer’s decision to dismiss, I am obliged by s.392(3) of the FW Act to reduce the amount I would otherwise order by an appropriate amount on account of the misconduct.
[83] Ms Bouhnik was dismissed due to incapacity. No deduction for misconduct is required.
Compensation – how does the compensation cap apply?
[84] 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 s.392(6); and
(b) half the amount of the high income threshold immediately before the dismissal.
[85] Section 392(6) of the FW Act provides:
(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…
[86] Given Ms Bouhnik’s annual salary, a compensation cap of $42,500 plus superannuation applies in accordance with s.392(6) of the FW Act.
Is the level of compensation appropriate?
[87] 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.”32
[88] The application of the Sprigg formula has resulted in an outcome where Ms Bouhnik would be awarded compensation of $848.05 gross.
[89] 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.
[90] While the compensation figure is low, I consider that is appropriate given Ms Bouhnik was in receipt of workers’ compensation payments at all relevant times and because there was a valid reason for her dismissal. The only issues I have identified with the dismissal are procedural.
Compensation order
[91] Given my findings above, I will make an order that Four Fogs Creperie must pay Ms Bouhnik $848.05 less taxation as required by law within 14 days of the date of this decision.”
Bouhnik v Four Frogs Creperie Circular Quay Pty. Ltd [2024] FWC 2240 delivered 22 August 2024 per Crawford C