Remedies for unfair dismissal

Here is an extract from a recent unfair dismissal case in which the principles which apply to determining a remedy for unfair dismissal are explained.

“Is reinstatement of the Applicant inappropriate?

[140] The Applicant does not seek reinstatement. The Respondent’s oral submissions during the hearing were that it did not have any concerns with having the Applicant back as an employee as it would not have to train up a new member of staff.

[141] I do not consider that reinstatement is an appropriate remedy. The Applicant has found alternative employment. Given the way in which the Respondent effected the dismissal, the size of the business and that the Applicant would likely need to work with at least one of the persons who was involved in making the decision to dismiss her, I do not consider that there is any reasonable prospect that a viable working relationship could be re-established.

Is an order for payment of compensation appropriate in all the circumstances of the case?

[142] 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…”. 35

[143] I must therefore consider whether it is appropriate in all the circumstances to make an order for payment of compensation (s.390(3)(b) of the FW Act).

[144] Where an applicant has suffered financial loss as a result of the dismissal, this may be a relevant consideration in the exercise of this discretion. 36 I am satisfied that the applicant has suffered some loss as a result of her employment, including during the period where she was without earnings and noting her new role is paid less than her role prior to her dismissal.

[145] Section 392 of the FW Act sets out the circumstances that must be taken into consideration when determining an amount of compensation, the effect of any findings of misconduct on that compensation amount and the upper limit of compensation that may be ordered.

[146] In considering each of the criteria in s.392 of the FW Act, it is useful to refer to the helpful restatement of principles to be applied in the assessment of compensation in Johnson
v North West Supermarkets T/A Castlemaine IGA: 37

“[9] The well-established approach to the assessment of compensation under s 392 is to apply the ‘Sprigg formula’, derived from the Australian Industrial Relations Commission Full Bench decision in Sprigg v Paul Licensed Festival Supermarket. This approach was articulated in the context of the current legislative framework in Bowden v Ottrey Homes Cobram and District Retirement Villages. Under that approach, the first step to be taken in assessing compensation is to consider s.392(2)(c), that is, to determine what the applicant would have received, or would have been likely to receive, if the person had not been dismissed. In Bowden this was described in the following way:

“[33] The first step in this process – the assessment of remuneration lost – is a necessary element in determining an amount to be ordered in lieu of reinstatement. Such an assessment is often difficult, but it must be done. As the Full Bench observed in Sprigg:

‘… we acknowledge that there is a speculative element involved in all such assessments. We believe it is a necessary step by virtue of the requirement of s.170CH(7)(c). We accept that assessment of relative likelihoods is integral to most assessments of compensation or damages in courts of law.’

[34] 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’…”

[10] The identification of this starting point amount ‘necessarily involves assessments as to future events that will often be problematic,’ but, as the Full Bench observed in McCulloch v Calvary Health Care Adelaide, ‘while the task of determining an anticipated period of employment can be difficult, it must be done.’

[11] Once this first step has been undertaken, various adjustments are made in accordance with s.392 and the formula for matters including monies earned since dismissal, contingencies, any reduction on account of the employee’s misconduct and the application of the cap of six months’ pay. This approach is however subject to the overarching requirement to ensure that the level of compensation is in an amount that is considered appropriate having regard to all the circumstances of the case.” (references omitted)

[147] The Sprigg formula was discussed and refined in Ellawala v Australian Postal Corporation 38 as follows:

“[31] The principles applicable to determining an amount to be ordered in lieu of reinstatement are dealt with in Sprigg. In that case the Full Bench endorsed the following approach:

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.

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.

[32] Any amount provisionally arrived at by application of these steps is subject to whether offsetting weight is given to other circumstances, including those that need now to be taken into account under paragraphs 170CH(7)(a), (b) and (c). The legislative cap on the amount able to be ordered is then applied pursuant to ss.170CH(8) and (9).

[33] The first step in this process – the assessment of remuneration lost – is a necessary element in determining an amount to be ordered in lieu of reinstatement. Such an assessment is often difficult, but it must be done. As the Full Bench observed in Sprigg:

“…we acknowledge that there is a speculative element involved in all such assessments. We believe it is a necessary step by virtue of the requirement of s.170CH(7)(c). We accept that assessment of relative likelihoods is integral to most assessments of compensation or damages in courts of law.”

[34] 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.

[35] 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 twelve 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.

[36] The next step is to discount the remaining amount for “contingencies”. This step is a means of taking into account the possibility that the occurrence of contingencies to which the applicant was subject might have brought about some change in earning capacity or earnings.

[45] In relation to the fourth step set out in Sprigg we note that the usual practice is to settle a gross amount and leave taxation for determination.” (my emphasis, references omitted)

[148] In Balaclava Pastoral Co Pty Ltd t/a Australian Hotel Cowra v Darren Nurcombe, 39 the Full Bench stated that in quantifying compensation, it is necessary to set out with some precision the way in which the various matters required to be taken into account under s.392(2) (and s.392(3) if relevant), and the steps in the Sprigg formula, have been assessed and quantified. The Full Bench also proffered that the way in which a final compensation amount has been arrived at should be readily apparent and explicable from the reasons of the decision-maker.

[149] I will assess compensation having regard to these matters.

Remuneration that would have been received if the dismissal had not occurred – s.392(2)(c)

[150] As stated by a majority of the Full Court of the Federal Court, “[i]n determining the remuneration that the Applicant 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.” 40

[151] The Applicant submitted that:

  • The employment would have continued for at least another 12 months from the dismissal date and that she would have earned $57,200.00 plus superannuation.
  • Any amounts earned since dismissal should be deducted prior to the legislative cap being applied; those amounts are at time of hearing $4,167.88 leaving a provisional amount of $53,032.12.

[152] The Respondent did not make any submissions in response to the Applicant’s submissions regarding compensation.

[153] At the Hearing, the Respondent presented numerous allegations regarding the Applicants’ conduct, however, none were found to be a valid reason. The Respondent has not made any submissions to the effect that the Applicant’s employment would not have continued if not for the dismissal events. The Applicant’s evidence was that she had been unemployed for a substantial period of time prior to her employment with the Respondent and that there was Government incentive provided to the Respondent when they hired her due to her age and unemployment status. 41 The Applicant’s evidence was that she had been unemployed for a substantial period of time prior to her employment with the Respondent and that there was a Government incentive provided to the Respondent when they hired her due to her age and unemployment status.

[154] I find that if the Applicant had not been dismissed, I consider there is no reason, on the evidence before me, why she would not have remained in employment for a further period of 12 months. Based on her earnings prior to the dismissal, this would amount to $57,200.00. This is the starting point.

Remuneration earned – s.392(2)(e) and income reasonably likely to be earned – s.392(2)(f) and (g)

[155] Remuneration earned from the date of dismissal to the date of any compensation order is required to be taken into account under s.392(2)(e) of the FW Act. Remuneration reasonably likely to be earned from the date of any compensation order to the date the compensation is paid is to be taken into account under s.392(2)(f) of the FW Act. Any remuneration likely to be earned after that date to the end of the period of anticipated employment determined for the purpose of s.392(2)(c) is a relevant amount to be taken into account under s.392(2)(g) in accordance with the Sprigg formula. 42

[156] I am satisfied that the amount of remuneration earned by the Applicant from employment or other work during the period since the dismissal is $2,167.88 plus such other amounts she would have earned once she commenced alternative employment on 6 September 2021. Based on an amount of approximately $1,000.00 per week for a further 11 weeks from 6 September 2021, this amounts to $11,000.00. This would amount to $13,167.88.

[157] Based on the Applicant securing alternative employment and having been paid an amount of approximately $2,000.00 in relation to two weeks’ worth of work, I am satisfied that the amount of income reasonably likely to be earned by the Applicant between the making of the order for compensation and the payment of compensation is a further $2,000.00.

[158] As the Applicant commenced receiving remuneration from her new job from 6 September 2021 and this is before the time when her employment would, in my view, have ended, these earnings should reduce the amount of compensation ordered.

[159] Continuing in this role during the 30 week balance of the period between the making or the order for compensation and date I have determined that the Applicant would have remained in employment with the Respondent had her employment continued, the Applicant would earn an amount of approximately $30,000.00.

[160] In mathematical terms, this means deducting the actual and likely income for Applicant for the twelve month period from the date of her dismissal ($45,167.88) 43 from the amount calculated for the purpose of s.392(2)(c) ($57,200.00),44 leaves $12,032.12 gross in compensation.

Length of service – s.392(2)(b) and any other matters – s.392(2)(g)

[161] The Applicant’s length of service was approximately one year and eight months, which is not particularly significant. As such I apply a 5% discount to the amount of $57,200.00, reducing the amount of compensation by $2,635 to $9,397.12.

[162] I do not consider there is any basis for any deduction for contingencies in this matter and it will be left to the Respondent to deduct taxation required by law.

Viability – s.392(2)(a)

[163] Nothing specific of relevance was put on this aspect, however the Respondent did make submissions that the Respondent operates in a highly competitive industry that has been impacted adversely by COVID-19 and I do accept that the Respondent is a small business within the ordinary meaning of that term. If a significant award of compensation were made, it would likely have some impact. As such I apply a 5% discount to the amount of $57,200.00, reducing the amount by a further $2,635.00 to $6,762.12.

Mitigation efforts – s.392(2)(d)

[164] The Applicant must provide evidence that they have taken reasonable steps to minimise the impact of the dismissal. 45 What is reasonable depends on the circumstances of the case.46

[165] The Applicant submitted she has taken reasonable steps to mitigate her loss.

[166] The Respondent did not make any submissions in relation to this.

[167] I am satisfied that the Applicant mitigated her loss by actively seeking and ultimately obtaining alternative employment.

Misconduct – s.392(3)

[168] I am not satisfied that the Applicant engaged in misconduct so no deduction is required under s.392(3) of the FW Act.

Compensation cap – s.392(5) & (6)

[169] I find that the total amount of the remuneration received by the Applicant during the 26 weeks immediately before the dismissal was $28,600.00.

[170] I find that the total amount of the remuneration to which the Applicant was entitled during the 26 weeks immediately before the dismissal was $28,600.00.

[171] The high income threshold immediately before the dismissal was $153,600.00. Half of that amount is $76,800.00.

[172] The amount of compensation ordered by the Commission must therefore not exceed $28,600.

Instalments – s.393

[173] I do not consider that there is any reason for compensation to be made by way of instalments. The conduct of the Respondent most certainly weighs against this.

Shock, Distress – s.392(4)

[174] The amount of compensation calculated must not and will not include a component for shock, distress, humiliation or other analogous hurt caused to the Applicant by the manner of his dismissal.

Conclusion

[175] I am satisfied that the Applicant was protected from unfair dismissal, that the dismissal was unfair and that order for compensation equating to $6,762.12 less taxation to be deducted as required by law, is appropriate having regard to all the circumstances of the case.

[176] An order requiring the payment of this amount within 14 days will be issued with this decision.”

Winning v Wins Australia Pty Ltd (2021) FWC 6403 delivered 19 November 2021 per Matheson C