Reinstatement for unfair dismissal

It is reasonably rare for the Fair Work Commission to order reinstatement of employment in an unfair dismissal case, despite that remedy being the paramount remedy available to it. Here are some of the legal principles which the Fair Work Commission uses when determining whether to order reinstatement of employment for unfair dismissal.

“Is reinstatement of the Applicant inappropriate?

[166] Mr Rossi submits that reinstatement is an appropriate remedy together with restoration of lost pay. He submits that as co-founder and formerly sole Director of the Respondent Company his position as CTO was more than just a position. The Company has taken years to be financially viable and in support of the Company he took a significant drop in salary to ensure its success. He submits that should he be reinstated he would continue to act in the best interests of the Company.

[167] He further submits that embarrassment to the co-founder Mr Troughton should not be a deterrent to reinstatement. He also refers to the requirement to consider the combination of circumstances in his case and his good working relationship with his staff in the engineering team in Melbourne. In addition, Mr Rossi seeks that I order that the Respondent correct the ATO payment summary as it incorrectly reflected his wages for the 2019/2020 financial year.

[168] The Respondent on the other hand submits that reinstatement is not appropriate as this would likely lead to resignations and a continuation of the breakdown in working relations, trust and confidence between Mr Rossi and employees of the Respondent including the executive. It submits that there is no alternative position for Mr Rossi and it strongly opposes reinstatement.

[169] A Full Bench of the Commission has helpfully identified the following propositions relevant to the impact of a loss of trust and confidence on the appropriateness of an order for reinstatement:

“•  Whether there has been a loss of trust and confidence is a relevant consideration in determining whether reinstatement is appropriate but while it will often be an important consideration it is not the sole criterion or even a necessary one in determining whether or not to order reinstatement.

  • Each case must be decided on its own facts, including the nature of the employment concerned. There may be a limited number of circumstances in which any ripple on the surface of the employment relationship will destroy its viability but in most cases the employment relationship is capable of withstanding some friction and doubts.
  • An allegation that there has been a loss of trust and confidence must be soundly and rationally based and it is important to carefully scrutinise a claim that reinstatement is inappropriate because of a loss of confidence in the employee. The onus of establishing a loss of trust and confidence rests on the party making the assertion.
  • The reluctance of an employer to shift from a view, despite a tribunal’s assessment that the employee was not guilty of serious wrongdoing or misconduct, does not provide a sound basis to conclude that the relationship of trust and confidence is irreparably damaged or destroyed.
  • The fact that it may be difficult or embarrassing for an employer to be required to re-employ an employee whom the employer believed to have been guilty of serious wrongdoing or misconduct are not necessarily indicative of a loss of trust and confidence so as to make restoring the employment relationship inappropriate.” 103

[170] The Full Bench concluded that, “[u]ltimately, the question is whether there can be a sufficient level of trust and confidence restored to make the relationship viable and productive. In making this assessment, it is appropriate to consider the rationality of any attitude taken by a party.”104

[171] In this matter while there would have been some loss of trust largely because of the dismissal, I am mindful that the co-founders have worked together in the past and have had a productive business relationship therefore in my opinion, despite their differences, they could continue to do so. They reside and work in different countries and with proper policies and procedures regarding lines of authority, acceptable conduct, compliance with legal obligations and matters concerning Board decisions it is in both their interests to maintain a working relationship for the benefit of the Company.

[172] Having considered the evidence and my findings that there was no valid reason for the dismissal and that the dismissal was harsh, unjust or unfair, I must consider whether reinstatement is appropriate in the first instance. Firstly, I am not satisfied that Mr Rossi has acted against the interests of the business. Although having observed the behaviour of Mr Rossi with the witnesses over many days during the proceedings, it can be reasonably found that the combination of an absence of policies and procedures together with pressures of a start-up may have contributed to inadequate communication. Despite these pressures, there was no evidence of misconduct or evidence of potential misconduct. However, I also conclude that the relations were further aggravated by the behaviour of Messrs Troughton and Wu by undermining Mr Rossi through Melbourne based team leaders.

[173] Of further relevance is that the allegations made against Mr Rossi while serious, there was no credible evidence in support. Further, a number of these allegations occurred in 2020 and early 2021 and the Respondent provided no reasons why it continued to employ Mr Rossi if it genuinely held concerns of serious misconduct.

[174] On the evidence it is apparent that the Company including the Holdings Corporation is more financially secure and has developed considerably from the time that Mr Rossi was dismissed. The pressures of a start-up have alleviated somewhat and provided proper policies and procedures, including governance processes are established, there is no evidence of any reason that reinstatement to the position of CTO in Melbourne managing the Australian subsidiary would not be contrary to the interests of the Company.

[175] Section 390 of the Act provides that the Commission may make an order for reinstatement if it is satisfied that the person was protected from unfair dismissal, the person was dismissed unfairly and the person seeks such an order. I so find.

[176] Section 391(1) of the Act provides that an order for the Applicant’s reinstatement must be an order that the Applicant’s employer at the time of the dismissal reinstate the Applicant by:

  1. a) reappointing the Applicant to the position in which the Applicant was employed immediately before the dismissal; or
  2. b) appointing the Applicant to another position on terms and conditions no less favourable than those on which the Applicant was employed immediately before the dismissal.

[177] Section 391(2) of the Act provides that, if:

  1. a) the position in which the Applicant was employed immediately before the dismissal is no longer a position with the Applicant’s employer (as at the time of dismissal); and
  2. b) that position, or an equivalent position, is a position with an associated entity of the employer,

the order for reinstatement may be an order to the associated entity to:

  1. c) appoint the Applicant to the position in which the Applicant was employed immediately before the dismissal; or
  2. d) appoint the Applicant to another position on terms and conditions no less favourable than those on which the Applicant was employed immediately before the dismissal.

[178] The Respondent gave evidence that there is no CTO appointed by the Respondent, further that the Australian subsidiary remains with the engineering team based in Melbourne.

[179] I am satisfied that it is open to me to award reinstatement to the position held by Mr Rossi immediately before his dismissal, that being the position of CTO based in the Australian subsidiary, LLM. I also order that the Respondent appoint Mr Rossi to the position within seven days of the order to the position on no less favourable terms than his written contract of employment immediately before the dismissal.

[180] Section 391(2) of the Act provides that, if the Commission makes an order for reinstatement and considers it appropriate to do so, the Commission may also make any order that the Commission considers appropriate to maintain the following:

  1. a) the continuity of the Applicant’s employment;
  2. b) the period of the Applicant’s continuous service with the employer or, if applicable, the associated entity.

[181] In all the circumstances, I do consider it appropriate to make an order to maintain Mr Rossi’s continuity of employment and period of continuous service with the employer. While there has been significant delay in finalising this matter, the proceedings have been complicated and prolonged. There is no evidence of any potential financial viability concerns for the business arising from an order for reinstatement and there is no reason that Mr Rossi should be disadvantaged by the delay of remedy.

[182] On the matter of lost pay, the Commission may make an order for remuneration lost, or likely to have been lost. In making any order for remuneration, the Commission must take into account:

  1. a) the amount of any remuneration earned by the Applicant from employment or other work during the period between the dismissal and the making of the order for reinstatement; and
  2. b) the amount of any remuneration reasonably likely to be so earned by the Applicant during the period between the making of the order for reinstatement and the actual reinstatement. 105

[183] An order to restore lost pay does not necessarily follow an order for reinstatement. The Commission may only make an order if it considers it appropriate to do so and only make an order that the Commission considers appropriate.106

[184] During proceedings there were two related matters raised where Mr Rossi submits that he has suffered financial loss from the dismissal. Firstly, prior to the payment of Mr Rossi’s leave entitlements, the Respondent deducted days purely based on an out-of-office message in his calendar. Some of these days were outside normal business hours, some were public holidays and personal leave. There was no valid process to confirm that the time in the calendar was in fact leave taken by Mr Rossi. This failure to consider the reasons for an out-of-office message is no justification for the loss of entitlements. Therefore, I order that these entitlements be reinstated at the full rate of pay prior to the reduction in Mr Rossi’s salary in January 2021.

[185] The second matter concerned the evidence of Mr Blake that Directors and Mr Wu should not have suffered loss of pay as funding was obtained. The Respondent relied on earlier witness statements in the jurisdiction hearing, and I note Mr Troughton gave evidence that in January 2021 he raised capital which negated the requirement for salaries to be dropped. Relevantly, he states:

“In fact, in around January 2021, I raised capital through some US investors, allowing Frameplay’s US holding company to distribute sufficient funds to keep Frameplay buoyant without the need for anybody to temporarily vary their salary.” 107

[186] For reasons unknown, this information was not conveyed to Mr Rossi and he suffered a drop in salary and this continued until his dismissal, while others did not experience any drop in salary. Interestingly, the CEO nor the CFO took any steps to correct Mr Rossi’s salary. Of course, during the jurisdictional hearing it was asserted that Mr Rossi reduced his own salary without authority unbeknown to the Holdings Corporation. On this basis, I order that Mr Rossi’s salary be reinstated to the rate of $86.0324 per hour and that he be reimbursed for the loss that he should not have suffered in the last six months of his employment. I have calculated the following payments to be made to Mr Rossi:

  • For the period of drop in salary, the records show that 836 hours of ordinary time were paid. Payment of the difference to original rate is $21.329 per hour. This is a total due of $17,831.05.
  • Back pay for wages deferred of $32,692.30 which was not paid. 108
  • Makeup of pay to correct rate on annual leave on termination of 197.3097 hours is $4,208.42, and annual leave deducted without cause of 68.4 hours amounts to $5,884.62.
  • Superannuation is to be paid at 9.5% on back pay on ordinary hours made up to correct rate, and 10% to be paid on the annual leave payable as the SGC employer contribution adjusted on 1 July 2021.

[187] This represents a gross of $60,616.39 to be taxed at the relevant tax rate, plus superannuation of $4,799.72 (representing 9.5% on ordinary hours) and $1,009.31 (representing 10% on annual leave on termination) to paid into Mr Rossi’s superannuation fund.

[188] Mr Rossi tendered his bank statement and evidence of earnings since his dismissal and on that material, which remains confidential to the Commission, I do not order loss of pay other than the two months of payment as he had no earnings until September 2021. I do find that Mr Rossi mitigated his loss in wages from September 2021. I note that while LLM did not pay any notice to Mr Rossi and although the contract refers to the notice period in the NES, I observe that it is unusual to see that the NES notice period applied to a working director. In the circumstances I therefore find that two months of wages is reasonable in the circumstances. This eight weeks of pay of $26,153.85 gross is less than the unfair dismissal cap on compensation and I consider this a reasonable outcome having considered s.392(5) of the Act. Mr Rossi’s eight weeks of wages will attract a 10% superannuation contribution.

[189] While I cannot order the correction of the ATO Payment Summary for the 2019/20 financial year, it is advisable that the Respondent correct any tax records to properly reflect actual payments made to Mr Rossi.”

Rossi v Low Latency Media Pty Ltd T/A Frameplay (2022) FWC 2133 delivered 12 August 2022 per Yilmaz C