How to assess compensation for unfair dismissal

One of the factors which the Fair Work Commission must determine when assessing compensation for unfair dismissal is the Remuneration that the person would have received, or would have been likely to receive, if the person had not been dismissed. In this passage from a recent case, the principle is set out and applied.

“Consideration

[12] The Fair Work Act 2009 (Cth) (the Act) provides the following with respect to remedy:

“390 When the FWC may order remedy for unfair dismissal

(1) Subject to subsection (3), the FWC may order a person’s reinstatement, or the payment of compensation to a person, if:

(a) the FWC is satisfied that the person was protected from unfair dismissal (see Division 2) at the time of being dismissed; and

(b)  the person has been unfairly dismissed (see Division 3).

(2) The FWC may make the order only if the person has made an application under section 394.

(3) The FWC must not order the payment of compensation to the person unless:

(a)  the FWC is satisfied that reinstatement of the person is inappropriate; and

(b) the FWC considers an order for payment of compensation is appropriate in all the circumstances of the case.

Note: Division 5 deals with procedural matters such as applications for remedies.”

Reinstatement

[13] Section 390(3) of the Act provides that the Commission must not order the payment of compensation unless it is satisfied both that reinstatement of the person is not appropriate, and that it considers an order for the payment of compensation to be appropriate in all the circumstances of the case.

[14] The parties have filed submissions that, although for different reasons, reinstatement as the primary remedy would not be suitable.

[15] Mr Meredith does not seek reinstatement and instead seeks an order for the maximum allowable compensation. 6

[16] Chad Group do not think reinstatement is an appropriate remedy in the circumstances. Chad Group submits an order for compensation is also not appropriate however if compensation should be ordered then it should be limited to a minimal amount. 7

[17] Whilst I do not intend to restate the findings set out in the Substantive Decision, having considered those findings (Mr Meredith’s conduct in the workplace both prior to his dismissal and at the time of his dismissal) and the submissions of the parties, it is evident there would be little prospect of re-establishing a productive and cooperative relationship. If Mr Meredith was reinstated it would likely have an adverse effect on both parties. I do not consider reinstatement would be appropriate or practical. I will now consider if an order for compensation is appropriate.

Compensation

[18] Section 392 of the Act sets out the criteria to which I must give regard in determining any amount of compensation I might order Chad Group to pay Mr Meredith. Section 392 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.”

[19] I will consider each of these criteria in succession below.

The effect of the order on the viability of the employer’s enterprise

[20] Chad Group submits the effects of the COVID-19 pandemic and government-enforced restrictions have had adverse effects on the business. Chad Group submits its survival is heavily reliant on the JobKeeper subsidies. 8

[21] Chad Group submit they have suffered a financial loss with sales being down by 29% in July 2020 when compared to July 2019 and that sales had continued to decline with the August figures being 45% less than those compared to August 2019. 9

[22] Further to the decline in sales, Chad Group submits its three Directors have each taken a $20,000 pay cut and retail staff have had to reduce hours due to the decline in work. In addition, Chad Group submit it has vacated one of its rented premises. 10

[23] In support of its submission, Chad Group filed a letter from its accountant Mr Wilson, Director of Wilmit Australia Pty Ltd a tax agency. Mr Wilson’s correspondence provides that in addition to the downturn in business three staff members have left the business and it is not intended that their positions will be replaced. He further provides that the vacancy left by Mr Meredith has not been filled. 11

[24] In response to the assertion that Chad Group Directors have taken a $20,000 pay cut Mr Meredith submits his total income for the financial year ending in 2020 was approximately $17,000. He submits that Chad Group were notified of his unfair dismissal application months ahead of the COVID-19 pandemic and therefore it should have prepared for an Order of financial compensation. Mr Meredith further submits that he is unable to claim Centrelink benefits and has had no remuneration since his unfair dismissal. 12

[25] Whilst I accept that Chad Group was aware ahead of the COVID-19 pandemic that Mr Meredith had made an application for unfair dismissal, it is impractical to expect that Chad Group could have factored in the unpredictable events that followed and the impact of those events on the financial status of the business.

[26] I have taken into consideration the materials filed by Chad Group in support of its submission that COVID-19 has had a financial impact on the viability of the business. Any compensation ordered will be adjusted accordingly.

Length of the person’s service with the employer

[27] It is not in contention that Mr Meredith was employed for approximately four years and three months. Chad Group submit that this was not a particularly long period of employment. However, in its submission Chad Group notes a short period of service, in isolation, is “not a powerful force” for the Commission when making “a compensation remedy (or a compensation order of significant quantum)”.

[28] Mr Meredith made no submissions pertaining to his length of service other than he had been employed for four years and three months.

[29] A service of more than 4 years and less than 5 years is a reasonable length of service with a single employer. Whilst I do not consider this to be a period of service that would in and off itself attract the maximum amount of compensation that can be ordered, such a period weighs against any reduction in compensation that may be ordered.

Remuneration that the person would have received, or would have been likely to receive, if the person had not been dismissed.

[30] The majority of the Full Court of the Federal Court in He v Lewin 13 stated that, “[i]n determining the remuneration that the Applicant would have received, or would have been likely to receive….it is necessary for the Commission to 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 other 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.”14

[31] Mr Meredith gross earnings per week were approximately $1,011.35. He submits had he not been dismissed, he anticipated earning a gross income of $52,590.20 per annum for the next ten years. Mr Meredith submits he had a total expected earnings of $525,902.00. 15

[32] Mr Meredith also submits that even with the onset of COVID-19, Chad Group would have been able to maintain his employment, even with the financial downturn. He submits under the JobKeeper supplement scheme Chad Group would have been responsible for payments of only $261.00 per week. 16

[33] Chad Group submits it is inconceivable for Mr Meredith to presume he would have remained employed for another 10 years. He had been employed for less than half that time and had been counselled and formally warned regarding his aggressive and abusive behaviour. 17

[34] Chad Group further submit had it given Mr Meredith an opportunity to respond to the their concerns, Mr Meredith’s justification would have been limited to his assertion that he “snapped”, which is unreasonable and could not have justified his abusive conduct and any such discussion would not have resulted in a different outcome. 18

[35] Chad Group rely on the Full Bench decision of UES (Int’l) Pty Ltd v Harvey (UES) 19. The majority found that the decision to dismiss Mr Harvey was valid notwithstanding the failure to consult. It was concluded however that the failure to consult was unreasonable and therefore the dismissal was harsh.20 The majority determined that proper consultation would have taken two weeks and Mr Harveys employment would have ended at the conclusion of the consultation period.21

[36] Chad Group submit taking into account the decision in UES, Mr Meredith would not have remained employed for longer than one week if he had not been dismissed by the Respondent when he was. It is submitted that no deduction in contingencies would or could be applied owing to the short period of time for which Mr Meredith’s employment would have continued following 11September 2019, being the date of his dismissal, had the dismissal not occurred. 22

[37] In my Substantive Decision I determined that Mr Meredith’s conduct would have led to a dismissal regardless as to whether he had already been dismissed by Chad Group in the abrupt manner in which the dismissal occurred.

[38] Whilst again I do not intend to set out all of the reasons in the Substantive Decision, I do repeat that Mr Meredith’s conduct had led to an employee, Mr Piccin, feeling so unsafe in the workplace that he left his employment. Whilst I proportioned responsibility for this occurrence to Chad Groups poor management of disciplinary matters, I did not minimise the significance of Mr Meredith’s conduct in the matter for which he was counselled.

[39] I further found that Mr Meredith made statements as to his future employment with Chad Group that were inconsistent with his evidence. Mr Meredith claims he would have continued in his employment for a significant period whilst also submitting he was being bullied and that the bullying had led to him “snapping”. Whilst I was unable to determine that Mr Meredith was being bullied, I did find that the evidence did not support or excuse Mr Meredith’s actions. Again, I reiterate, Mr Meredith is responsible for his actions and his reactions.

[40] During the hearing of the merits in the matter Mr Meredith, after making several inaudible comments from the gallery, he stormed out of the hearing at one stage during which he was verbally disruptive to the Representative of Chad Group and disrespecting of the Commission. Mr Meredith appeared to be and continues to be oblivious to his own shortcomings when it came to his conduct.

[41] On any view of the evidence Mr Meredith would not have continued in his employment for a period that would have proceeded beyond a period of three weeks. I have determined three weeks taking into consideration the length of time it had taken Chad Group to deal with previous complaints and disciplinary matters.

[42] Mr Meredith’s employment would have ended in or around 2 October 2019, a period being before any entitlement to JobKeeper payments.

[43] Had Mr Meredith remained in his employment until 2 October 2019 it is likely that he would have received an amount of $3033.00 gross.

The efforts of the person (if any) to mitigate the loss suffered by the person because of the dismissal

[44] Mr Meredith submits he has been unduly disadvantaged in his job search during the COVID-19 pandemic as ongoing lockdown circumstances in the State of Victoria have severely hampered his ability to seek employment in person. The number of jobs available in the State of Victoria have severely diminished since the onset of pandemic. 23

[45] Mr Meredith submits that he had made job applications through a number of websites and agencies including Seek, Best Jobs Online, Just Jobs and Career One. Mr Meredith has also sought additional training and assistance from Centrelink. 24

[46] Mr Meredith made further submissions about the difficulties of securing employment in the absence of a suitable reference from Chad Group. 25

[47] Mr Meredith submits his efforts to gain employment have been hampered by amongst other things his age, his disability and the pandemic.

[48] Having particular regard to the circumstances in which Mr Meredith came to be employed by Chad Group, his age and the ongoing effects of the pandemic I am satisfied that Mr Meredith has made reasonable efforts to secure alternative employment, and no deduction will be made to any order for compensation I consider appropriate.

The amount of remuneration earned by the person from employment or other work during the period between the dismissal and the making of the order for compensation.

[49] I have adopted the approach of the Full Bench of the AIRC in Ellawala v Australian Postal Corporation 26 as follows:

“Lost remuneration is usually calculated by estimating how long the employee would have remained in the relevant employment but for the termination of their employment. We refer to this period as the “anticipated period of employment”. This amount is then reduced by deducting monies earned since termination. Only monies earned during the period from termination until the end of the “anticipated period of employment” are deducted. An example may assist to illustrate the approach to be taken.

In a particular case the Commission estimates that if the applicant had not been terminated then he or she would have remained in employment for a further 12 months. The applicant has earned $3,000 a month for the 18 months since termination, that is $54,000. Only the money earned in the first 12 months after termination (that is $36,000) is deducted from the Commission’s estimate of the applicant’s lost remuneration. Monies earned after the end of the “anticipated period of employment”, 12 months after termination in this example, are not deducted. This is because the calculation is intended to put the applicant in the financial position he or she would have been in but for the termination of their employment.”

[50] Mr Meredith submits that he has not been able to earn any wages since his dismissal and due to assets held by his wife which I take to include an investment property 27 he referred to during the hearing, he does not qualify for Social Security payments. Mr Meredith also submits he is unable to obtain JobSeeker payments.

[51] Chad Group submit that it is a questionable matter that Mr Meredith has not qualified for JobSeeker given that means testing for JobSeeker payments were only recently introduced. They further submit that Mr Meredith has provided no evidence in support of his assertions. 28

[52] Given that Social Security payments are not generally considered to be ‘remuneration’, I do not consider it necessary for Mr Meredith to provide evidence in support of any applications he may or may not have made in an attempt to obtain Centrelink benefits.

[53] I am satisfied that Mr Meredith has not earned any remuneration from employment or other work during the period since his dismissal. No deduction to the compensation amount will be made.

Any amount of income reasonably likely to be earned during the period between the making of the order and the actual compensation.

[54] Mr Meredith submits that he has not earned any remuneration from employment since his dismissal.

[55] Chad Group rely on its earlier submissions and submit an absence of an explanation as to the contention raised about JobSeeker payments should be looked at further.

[56] As stated earlier given that Social Security payments are not generally considered to be ‘remuneration’ I do not consider it necessary for Mr Meredith to provide evidence in support of any applications he may or may not have made in an attempt to obtain Centrelink benefits.

[57] I am satisfied that it is unlikely that Mr Meredith would be in a position to obtain an income between the making of the order and the actual payment of compensation.

Any other matter that the FWC considers relevant.

[58] Mr Meredith submits that he reserves his rights to seek a costs order in the forthcoming appeal of the decisions in this matter. This is matter for the consideration of the Member of the Commission to whom any such application is allocated and not a matter I intend to consider in making the order for compensation.

[59] I do not include any component by way of compensation for shock, distress or humiliation caused by the manner of the dismissal.

Compensation to be ordered

[60] I have estimated the remuneration that Mr Meredith would have received, or would have been likely to have received if he was not terminated by Chad Group on 11 September 2019 would have been $3033.00 gross. The gross amount of $3033.00 is subject to the applicable taxation.

[61] I have found that Mr Meredith has not earned any amount of remuneration since the date of his dismissal and is unlikely to earn any remuneration between the making of the order for compensation and the payment of compensation. Therefore, I make no deductions from the amount ordered.

[62] I do not consider it appropriate to deduct an amount for contingencies.

Compensation -is the amount reduced on account of misconduct?

[63] Chad Group submit the seriousness of Mr Meredith’s misconduct should not be understated and considers the level of misconduct supports an order for compensation to be limited to a minimal amount and cites a number of decisions in support of its submissions.

[64] Mr Meredith submits that Chad Group had created a workplace culture where bad language had been tolerated and that the Directors frequently used bad language around Mr Meredith. Mr Meredith further submits that the Commission has a history of considering bad language in the context of the workplace environment and cites a number of decisions it relies on in support of his submission.

[65] In my Substantive Decision I took into consideration the way in which Mr Meredith’s conduct had been managed in the workplace. Due to the nature of Mr Meredith’s conduct I found that there was a valid reason for his dismissal, and although unacceptable, the conduct had generally been condoned. It is for this reason I make no deduction to the amount of compensation ordered.

Conclusion

[66] Chad Group must pay to Mr Meredith the amount of $3033.00, plus Mr Meredith’s superannuation entitlements, less appropriate taxation as required by law. The amount of compensation that I have determined is less than the compensation cap imposed by s.392(6) of the Act. It is not an amount that is clearly excessive or clearly inadequate. To minimise the potential risk of cashflow problems for the business, the compensation order will be made payable within 30 days.

[67] An order 29 for the payment of compensation will be issued separately.”

Meredith v Chad Group Australia P/L  [2021] FWC 182 delivered 27 January 2021 per Harper-Greenwell C