How to calculate compensation for unfair dismissal

Today I am publishing an entire decision of the Fair Work Commission on the issue of calculating compensation for unfair dismissal. I commend this decision to readers of my blog because of the brevity of it, the excellent summary of the law and that the decision is by a very highly regarded and senior member of the Fair Work Commission.

“BACKGROUND

[1] On 27 June 2019, I published a decision in Van-Son Thai v Email Ventilation Pty Ltd [2019] FWC 4116 (the ‘Decision’). Shortly stated, I found the dismissal of the applicant, Mr Van-Son Thai by the respondent, Email Ventilation Pty Ltd on 30 July 2018, was ‘harsh, unjust and unreasonable’, both substantively and procedurally, within the meaning of s 387 of the Fair Work Act 2009 (Cth) (the ‘Act’). I made a further finding that reinstatement of the applicant would not be appropriate in the circumstances. As there was limited evidence going to compensation considerations, in particular the post-dismissal earnings of the applicant, I directed the parties to file further evidence and short submissions in respect to the requirements under s 392(2) of the Act.

[2] To assist the parties, I set out the relevant statutory provisions of s 392 and the methodology for calculating any compensation orders in this case. The applicant complied with the directions and filed submissions and a second witness statement on 4 July 2019. As these submissions are relatively short, I set out them out in full below:

‘Remedy

  1. The appropriate amount of compensation should be calculated with regard to the factors set out in s 392 of the Act, and with reference to Sprigg. In these circumstances, the Applicant submits that s 392(f) is a neutral factor for consideration and highlights that is open for the Commission to consider any other relevant matters in determining the appropriate compensation amount.

Section 392(a)

  1. The Respondent has not provided any evidence of the company’s financial position, any financial concerns that would affect the company’s on-going viability, or any of its associated entities. In the absence of any evidence, s 392(a) should be considered a neutral factor.

Section 392(b) – (e)

  1. The Applicant is an experienced, skilled worker who had a good work record. The Commission accepted this evidence and gave little weight to any arguments advanced by the Respondent that the Applicant had any performance issues.
  2. The Applicant enjoyed his position and was a valued employee given his extensive experience and trade qualifications performing sheet metal work. The Applicant was the only trade-qualified employee at the time and vital to the Respondent’s business. Additionally, the Applicant’s considerable period of service of twelve (12) years is significant, particularly in light of the Applicant now being sixty-three (63) years old.
  3. The Applicant maintains that the anticipated period of employment should be assessed at no less than fifty-two (52) weeks. This submission is supported by the Respondent’s attempts to extend the Applicant’s notice period twice after providing notice of termination. But for the Respondent’s conduct, and if the Applicant had accepted a reduction in pay, it is likely that the Applicant would have remained in this job for some time. The Respondent has not provided any evidence to suggest anything to the contrary.
  4. The Applicant remains currently unemployed and has not been employed since being terminated by the Respondent. Despite looking at job listings in the local newspaper and attending any interviews sourced through an employment agency, the Applicant has been unsuccessful in finding another job. As a result, the Applicant has not received any post-termination earnings aside from superannuation payments and CentreLink benefits.

Compensation

  1. In accordance with s 392(5), the Applicant maintains that the amount ordered by the Commission must not exceed the lesser of:
  2. the amount worked out under sub-section (6); and
  3. half the amount of the high-income threshold immediately before the dismissal.

  1. In these circumstances, the Applicant advances that an order for the statutory maximum of twenty-six (26) weeks is appropriate, being an amount of $33,072.00.’ (footnotes omitted)

[3] At this juncture, I note that the respondent was unable to be contacted by the Commission when my earlier decision was published, as the email addresses previously provided by him gave bounce back messages to my Chambers. Additionally, on 5 July 2019, Mr Rabaud of the Australian Manufacturing Workers’ Union (on behalf of the applicant) sent my Chambers the following email:

‘As you are aware, the Applicant filed its submissions and material yesterday, however an error occurred when attempting to serve the documents on the Respondent.

The Applicant received an initial bounce back from the email address [email address provided] when filing the documents with Chambers. I note that the Respondent has also previously utilised a second email address [email address provided]. After receiving the bounce back, I can confirm that the Applicant forwarded the correspondence to the second email address. Again, the correspondence bounced back.

I can confirm that the Applicant has sent the submissions and material via express post to the Respondent’s work address in a further attempt to serve the material today.’

Since this time, my Chambers has not received any submissions or contact from the respondent.

CONSIDERATION

[4] As just noted, the Commission has received no submissions from the respondent in relation to s 392(2) of the Act. Having reviewed the submissions and witness statement of the applicant, and its supporting evidence, I have no reason to doubt the credibility of the applicant’s materials. The respondent’s conduct is consistent with its earlier behaviour in failing to properly engage in the proceedings.

[5] With this in mind, I had cause to conduct an inquiry into Email Ventilation’s current status as a company, pursuant to s 590(2)(f) of the Act. According to the Australian Securities and Investments Commission’s (‘ASIC’) website, the Company is currently subject to strike-off action, signifying that the Company is currently in the process of being deregistered.

[6] Notwithstanding the above, I repeat s 392(2) of the Act which 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.’

I deal with each of the above subsections in turn.

(a) The effect of the order on the viability of the employer’s enterprise

[7] The Union correctly submitted that as the respondent has provided no evidence of its financial position, the Commission could not make any finding on this criterion. That said, as it appears that the Company is in the process of being deregistered, it is unclear what impact a compensation order would have on the company and/or its creditors. This matter is therefore a neutral factor.

(b) The length of the person’s service with the employer

[8] The applicant had a long period of service (approximately 12 years) with the respondent. This factor tells in favour of the applicant. Notwithstanding the post-dismissal claims of the respondent (see [15] in my earlier Decision), I am satisfied that the applicant was indeed a ‘good worker’ as put forward by the Union, and was valued by the respondent for his skills and experience.

This factor tells in favour of the applicant.

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

[9] It seems to me that had the applicant not been dismissed and in the manner he was, he would have remained in employment for at least a further 6 months, if not longer (the Union contended for 12 months, with no evidence to the contrary). The applicant’s earnings in the six months prior to his dismissal were estimated by the Union, noting the applicant’s claims in his second witness statement that the respondent ‘has never provided me a copy of my payslips, despite my requests’.

[10] Had the applicant worked for an additional 6 months, I accept the Union’s submissions that he would have earned an amount of $33,072, less applicable taxation. This amount will be taken into account.

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

[11] Given the applicant’s age, it is an unfortunate reality that securing work later in life can prove difficult. The applicant has attended fortnightly meetings with the ‘atWork Australia’ job search company in an attempt to secure further employment, including attending job interviews. However, as of 1 July 2019, he has been unsuccessful. This factor tells in favour of the applicant.

(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

[12] The applicant provided evidence of his income from 6 September 2018 to 30 June 2019, comprising of ‘NewStart’ payments from Centrelink, superannuation payments and personal transactions. I am satisfied that the applicant has not received remuneration from employment, up to and including 30 June 2019. This factor will be taken into account.

(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

[13] The order for compensation will require payment by close of business within 21 days. The amount of income reasonably likely to be earned by the applicant during the period between the making of the order for compensation and the actual compensation is $3,816.00 (less applicable taxation); however, given the period of time which has elapsed, I do not intend to take this amount into account.

(g) Any other matter that the FWC considers relevant.

[14] I have considered the applicant’s age and his long period of service for the same Company. While the treatment he experienced on, and around his dismissal was poor and worthy of reference back to my earlier decision, it does not otherwise increase any compensation order. I also accept the applicant’s evidence that he has not received all of his outstanding statutory entitlements, and is unlikely to recover these amounts.

[15] There was no misconduct by the applicant, so no deduction is made on this score (s 392(3)). The amount so ordered does not include any component for shock, distress, humiliation or any other analogous hurt caused by the applicant’s dismissal (s 392(4)). I make no deductions for contingencies.

[16] The amount I propose to order does not exceed either the amount earnt by the applicant in the 26 weeks prior to dismissal, or the high income threshold (ss 392(5)-(6)).

[17] In accordance with the Sprigg Formula, that amount of compensation I order is $33,072.00 less applicable taxation. In my view, this outcome is consistent with the principles set out in Balaclava Pastoral Co Pty Ltd t/a Australian Hotel Cowra v Nurcombe [2017] FWCFB 429 and Hanson Construction Materials Pty Ltd v Pericich [2018] FWCFB 5960 being a level of compensation which is appropriate, having regard for all the circumstances of the case.

[18] An order to this effect will accompany the publication of this Decision. The Order is to be complied with no later than 21 days from today.

[19] As I am aware the Company is in the process of being deregistered, and given the difficulty my Chambers has had in attempting to contact the respondent, the Commission will notify ASIC of this Decision and the compensation order made against the Company. If this is the current status of the Company, it may be the applicant will not benefit from the ‘fruits of his success’. I consider this to be a very regrettable outcome for him and his family.”

Thai v Email Ventilation Pty Ltd (2019) FWC 7346 delivered 28 October 2019 per Sams DP