How much compensation for unfair dismissal

In these passages from an unfair dismissal case of the Fair Work Commission the principles which are applicable to assessing compensation for unfair dismissed are addressed in detail.

“REMEDY

[150] As required by s. 390 of the Act, I am satisfied that the Applicant was protected from unfair dismissal and that he was unfairly dismissed. I am also of the view that the Applicant should have a remedy for his unfair dismissal. The parties agree that their relationship has irretrievably broken down and cannot be re-established. I share their view and have concluded that reinstatement is not an appropriate remedy. I have made the necessary findings that are prerequisite to awarding compensation.

[151] In relation to the assessment of compensation, s. 392 of the Act provides as follows:

“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.”

[152] Based on the findings in relation to the criteria for deciding amounts in s. 392(2), the approach to calculating compensation is as set out in Sprigg v Paul’s Licenced Festival Supermarket 8. The approach, sometimes described as the Sprigg formula, is in summary, to estimate the remuneration the employee would have received if they had not been dismissed (usually calculated by estimating how long the person would have remained in the relevant employment but for the termination of their employment); deduct any remuneration earned by the person since their dismissal until the end of the anticipated period of employment; deduct an amount for contingencies; consider the impact of taxation and adjust the figure accordingly; and assess the figure against the compensation cap set by s.392(5).

[153] It has also been observed by Full Benches of the Commission that if the application of the Sprigg formula “yields an amount which appears either clearly excessive or clearly inadequate” than the Commission should reassess the assumptions made in reaching that amount. 9 The order for the payment of compensation must be appropriate having regard to all the circumstances of the case (see s.390(3)(b) and s.392(2)).

[154] In relation to the criteria, I am required to consider in deciding the amount of compensation to be awarded to the Applicant for his unfair dismissal, I find as follows.

The effect of the order on the viability of the Respondent – s. 392(2)(a)

[155] There was no evidence that the Respondent’s viability would be affected by the order I made.

Length of the Applicant’s service – s. 392(2)(b)

[156] The Applicant had been employed by the Respondent for just over 12 months, at the point he was dismissed.

Remuneration the Applicant would have or would likely have received – s. 392(2)(c)

[157] I am satisfied based on the evidence that the Applicant’s relationship with the Respondent was under considerable strain at the point he made his claim for backpay. The Applicant was fixated on being classified and paid at the trade level under the Award and would not have accepted the level 3 classification he was being offered for a period beyond when he obtained alternative employment on 12 May 2021, given that the alternative employment is permanent.

[158] Further, the quantum of backpay claimed by the Applicant was vastly inflated and completely unrealistic. It is also the case that the tone of the Applicant’s correspondence with the Respondent became increasingly hostile and aggressive. The Applicant had placed the matter into the hands of the FWO which was pursuing his claim and the Respondent was cooperating with this process and paid the amounts assessed by FWO. I have accepted that the correspondence from the Respondent and its legal representative to the Applicant was confusing and contradictory. Notwithstanding that correspondence, it was not reasonable for the Applicant to correspond with the Respondent in the terms which he employed. The Applicant continued to display hostility towards Mr Harding and Mr Cardier at the hearing of his application.

[159] It is also the case that the Applicant was fixated on the pursuit of his claim to be classified at level 5 under the Award and paid accordingly. The Respondent was maintaining the position that the Applicant was only entitled to be classified at level 3 at most, and that it would not pay level 5 rates to an employee who did not hold a trade qualification. The FWO accepted that the Applicant’s underpayment claim had been addressed by the Respondent and by extension, that he was properly classified at level 3. The Applicant did not accept this outcome and maintains his position to the present day.

[160] Further, the Applicant was employed on a casual basis. The Respondent is a small business and could have reduced the Applicant’s hours of work at any time or decided to contract out the work that the Applicant was performing. The Respondent could also have restructured its business along the lines set out in the letter to the Applicant advising him that joinery work was being removed from the business. While the Applicant had a right to request the conversion of his casual employment to permanent employment and had done so, the Respondent had a right to refuse conversion on reasonable business grounds.

[161] Finally, the Applicant states that he found other employment 11 weeks after he ceased being offered work by the Respondent (which according to his evidence was on or around 31 January 2021). Accordingly, the Applicant started his new employment on 12 May 2022. This is the date that the Applicant says he was dismissed and that his dismissal took effect. The Applicant was looking for alternative employment during the period he was not being provided with work by the Respondent. The new employment is permanent, and the Applicant is classified as a tradesperson which is the outcome he sought while employed by the Respondent.

[162] When these matters are considered, it is likely that the Applicant would not have remained in the employment of the Respondent for a lengthy period and would have left employment when he found other employment, which the Applicant commenced on 12 May 2021.

The Applicant’s efforts to mitigate loss – s. 392(2)(d)

[163] The Respondent contended that the Applicant was not entitled to the amount of compensation he claimed because of his failure to mitigate his loss for the 11-week period upon which that claim was based. I do not accept that submission. The Applicant was under no obligation to mitigate loss prior to the date his dismissal took effect.

[164] I accept that the Applicant was actively looking for work and that he took reasonable steps to mitigate the loss of his employment. I am also of the view that the uncertainty caused by the Respondent’s conduct and correspondence impacted the Applicant’s ability to find alternative work. I make no deduction based on failure to mitigate.

The amount of any remuneration earned since dismissal – s. 392(2)(e)

[165] The Applicant has earned no remuneration between the date of his dismissal and 12 May 2021 when he started alternative employment. No deduction is made on this basis.

The amount of any income reasonably likely to be earned during the period between the making of the order for compensation and the actual compensation – s. 392(2)(f)

[166] Given the period over which I have assessed compensation, based on my view about the likely period that the Applicant would have remained in employment, this matter is not relevant to the calculation of compensation.

Any other matter that the FWC considers relevant – s. 392(2)(g)

[167] It was also suggested at the hearing that the back pay received by the Applicant meant that he did not suffer a loss in this period. I do not accept this submission. As the Applicant correctly stated at the hearing, the backpay is money that he was entitled to receive during his employment and there is no basis to offset compensation for an unfair dismissal by the amount of backpay.

[168] There are no other matters I consider relevant to the assessment of compensation.

Deduction for misconduct

[169] The Applicant did not engage in misconduct and no deduction is made on this basis.

Application of the Sprigg formula in the present case

[170] In the present case, the application of Step 1 of the Sprigg formula would yield an amount of nil as remuneration that would have been received or likely would have been received by the Applicant if the employer had not terminated the employment. This is because the Applicant started his new job on the same date as he states that his dismissal by the Respondent took effect.

Is the amount manifestly inadequate?

[171] I am of the view that the application of the Sprigg formula in the present case would yield an amount of compensation – nil – which is clearly inadequate in circumstances where the Applicant has been unfairly dismissed in all the circumstances that pertained.

[172] Accordingly, I reassess the assumptions upon which I based my findings in relation to the s. 392 matters and find that the Applicant would have remained in employment for a further period of 6 weeks had he not been dismissed. I base this assumption on the fact that had the Respondent communicated with the Applicant in a reasonable manner and informed him that while he would not be classified at level 5 under the Award but he would maintain his current rate of pay, the Applicant may have agreed to return to work while continuing to agitate his wages claim. The Applicant may also have delayed his search for alternative employment until his wages claim was resolved, resulting in him commencing that employment at a later date.

[173] I therefore find that but for his dismissal, the Applicant would have remained in employment for a further period of eight weeks. I also find that the Applicant would not have worked full time during that period and have assessed that he would have worked 152 hours or half of the full-time hours in that period.

[174] I maintain my conclusions in relation to the criteria in s. 392. However, the assumption I have made in relation to when the Applicant’s employment would have ended, means that the Applicant earned remuneration from his new job during the period I have estimated he would have remained in employment but for his dismissal. I have taken that remuneration into account but in all of the circumstances of this case, I have decided not to deduct it from the compensation I have calculated.

[175] The Respondent treated the Applicant unfairly and placed him in a position where he was without income for 11 weeks prior to him obtaining his new employment. The Respondent had access to legal advice and there was no reasonable basis to treat the Applicant in the manner that it did, including by sending him confusing and contradictory correspondence about his employment that can only have prolonged the dispute about his wages and probably impacted on him seeking alternative employment, given that the uncertainty of the status of his employment with the Respondent.

ORDERS

[176] I conclude as follows:

  1. An order for the payment of compensation in the amount below would not affect the viability of the Respondent’s business.
  2. The period of the Applicant’s employment was just over 1 year and no deduction from compensation should be made on this basis.
  3. But for the dismissal, the Applicant would likely have earned an amount of $4,256.00.
  4. Given the length of the period over which I have assessed compensation based on how long the Applicant would have remained in employment I make no deduction for contingencies.
  5. I make no deduction in relation to failure of the Applicant to mitigate loss.
  6. The Applicant earned remuneration from other sources during period over which I have assessed compensation but for the reasons set out above, I make no deduction on this basis. I make no deduction for income likely to be earned during the period between the making of my order and the actual compensation.
  7. I make no deduction in respect of misconduct.
  8. The amount of compensation is less than the compensation cap calculated in accordance with s. 392(5) and s. 392(6).

[177] In all the circumstances of this case I considered it appropriate that I make an Order for compensation. The Order issued on 13 December 2021 and required the Respondent to pay the Applicant in lieu of reinstatement a gross amount of $4,256.00 to be taxed according to law and a further amount of $404.32 for superannuation contributions.”

White v Trend Constructions NQ T/A Trend Constructions NQ – [2022] FWC 752 delivered 11 April 2022 per Asbury DP