Remedies for unfair dismissal

This extract from an unfair dismissal decision of the Fair Work Commission deals with remedies for unfair dismissal.

“Conclusion

[357] I am therefore satisfied that the Applicant was unfairly dismissed within the meaning of s.385 of the FW Act.

Remedy

[358] Being satisfied that the Applicant:

made an application for an order granting a remedy under s.394;

was a person protected from unfair dismissal; and

was unfairly dismissed within the meaning of s.385 of the FW Act,

I may, subject to the FW Act, order the Applicant’s reinstatement, or the payment of compensation to the Applicant.

[359] Under s.390(3) of the FW Act, I must not order the payment of compensation to the Applicant unless:

(a) I am satisfied that reinstatement of the Applicant is inappropriate; and

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

Is reinstatement of the Applicant inappropriate?

[360] The Applicant’s submissions indicate that he did not seek an order for reinstatement and he confirmed during the hearing that he does not wish to be reinstated. The Applicant submitted that he had the following concerns in relation to reinstatement:

whether he would have a reasonable prospect of success if he were to be reinstated to his previous role due to the conduct of the Respondent prior to and since the Applicant’s termination;
whether a suitable role could be found in another team and business area if the working relationship with leadership positions has been impacted by the Applicant’s termination and reaction to his termination by bringing an unfair dismissal application; • he has now secured a suitable alternative position with another employer;
he has had a loss of trust and confidence in the Respondent.

[361] In such circumstances, “the Applicant’s disposition is a sure guide to the Commission as to whether or not it would be appropriate to reinstate or re-employ the Applicant. To act contrary to the Applicant’s desired position in this respect would be to give effect to an order that may not yield a productive or cooperative workplace.”300

[362] The Applicant has also found alternative employment. As stated by the Full Bench, “[i]n assessing whether reinstatement is an appropriate remedy, it is obviously relevant as to whether the dismissed employee has obtained alternative employment. Where that new employment is satisfactory to the employee, it will be no remedy at all to reinstate the employee to the predismissal employment to which the employee, for well-founded reasons, has no desire to return.”301

[363] Having regard to the matters referred to above, I consider that reinstatement is inappropriate. I will now consider whether a payment for compensation is appropriate in all the circumstances.

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

[364] 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…”302

[365] 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.303

[366] Section 392(2) of the FW Act requires all of the circumstances of the case to be taken into account when determining an amount to be paid as compensation to the Applicant in lieu of reinstatement including:

(a) the effect of the order on the viability of the Respondent’s enterprise;

(b) the length of the Applicant’s service;

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

(d) the efforts of the Applicant (if any) to mitigate the loss suffered by the Applicant because of the dismissal;

(e) 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 compensation;

(f) the amount of any income reasonably likely to be so earned by the Applicant during the period between the making of the order for compensation and the actual compensation; and

(g) any other matter that the Commission considers relevant.

[367] 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:304

“[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.’

[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)

[368] The Sprigg formula was discussed and refined in Ellawala v Australian Postal Corporation305 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)

[369] In Balaclava Pastoral Co Pty Ltd t/a Australian Hotel Cowra v Darren

Nurcombe,306 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.

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

Remuneration that the Applicant would have received, or would have been likely to receive, if the Applicant had not been dismissed – s.392(2)(c)

[371] 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.”307

[372] When calculating the remuneration that the Applicant would have received or would have been likely to receive if the Applicant had not been dismissed, the intention is to put the Applicant in the financial position they would have been in but for the unfair dismissal.

[373] While the reason for the dismissal was poor performance and this constituted a valid reason, I have earlier found that the the Applicant was not provided with the details of what particular aspects of the PIP he had not met so that he could consider and provide a response to the specific concerns that the Respondent still had about his performance at the time the Show Cause Letter was provided to him. The Applicant would have reasonably held a belief at the mid-point review of the PIP that he was on track for successful completion of the PIP. The feedback after the mid-point review did not make clear that he was ‘off-track’ and at risk of having his employment terminated prior to the 4 October 2023 meeting and the show cause process would have come as a shock to him. If the Respondent’s assessment of the Applicant’s performance had changed following the mid-point review such that he was off-track and at risk of having his employment terminated this should have been clearly communicated to him. I consider it likely that if the Respondent did so, the Applicant would have shown some degree of improvement during the second half of the PIP and this would have given rise to continued employment for a further period of time, particularly considering the Applicant had shown an uplift in performance during the first half of the PIP.

[374] However the Respondent submitted that to the extent that the PIP included specific tasks, these tasks were not an exhaustive statement of the duties the Applicant was required to perform and he was also expected to continue to perform all other duties of the Role set out in the Position Description. It does appear that, particularly after the mid-point review of the PIP, the Respondent has raised concerns about matters falling outside the specific PIP requirements. These include:

concerns raised in the meeting on 15 August 2023 about two labour hire services agreements reaching their expiry, and the Applicant being ‘uncertain’ about these;
concerns raised in the meeting on 15 August 2023 about the Applicant’s uncertainty in relation to progress towards the establishment of and the Respondent’s potential participation in the Whole of Australian Government People Panel;308
concerns raised in the meeting on 23 August 2023 that a significant high profile project was looking like it was delayed;309
concerns at the 20 September 2023 meeting that the Applicant was not meeting expectations in relation to the development of a handover document and process maps to support the fleet services transition. I have earlier found that this requirement was only clearly communicated to the Applicant on 13 September 2023 and it was not clear that this was a requirement of the PIP as asserted by the Respondent. Particular concerns were raised during the meeting on 20 September 2023 that the fleet service transition items due to be delivered by 15 September 2023 had been delivered in draft on 18 September 2023 with no advanced notice of the delay and that the items were incomplete and required a significant amount of further work;
concerns expressed in a meeting on 22 September 2023 that Mr Hunter was having to provide too much guidance to the Applicant in the development of a handover document.

[375] It is apparent that the Respondent had expectations of the Applicant that extended beyond the PIP and had concerns that the Applicant was not meeting them. If the Applicant had shown uplift in performance during the second part of PIP, this would likely have resulted in a further period of employment and continued performance management. However the Respondent’s ongoing concerns suggest that the gap between the Applicant’s performance and Respondent’s expectations was going to be a difficult one for the Applicant to bridge. It is apparent that the Respondent wanted the Applicant to work in a more self-directed way in his capacity as a manager, there was a continued lack of alignment between the Applicant and Respondent about what work needed to be prioritised and how it needed to be undertaken, and it is unlikely that this would have been remedied without further performance management or that the level of improvement would have been so substantial such that the Applicant would not have been terminated at some time by another means following further performance management measures. In these circumstances it find that that the Applicant’s employment was likely to continue for a further period of eight weeks.

Findings

[376] Having regard to the above matters I find that:

the Applicant’s employment was likely to continue for a further period of eight weeks (i.e. up until 6 December 2023); and

the remuneration likely to have been received by the Applicant during that period would have been $23,643.85. This has been calculated by dividing the Applicant’s annual salary of $153,685 by 52 ($2,955.48) and multiplying this by eight.

[377] I am satisfied that the Applicant has suffered some financial loss as a result of his dismissal between the period that he was dismissed and the end of the eight week period across which I anticipate his employment would have continued.

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

[378] 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 also required 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.

[379] The Applicant indicated during the determinative conference that he had earned $18,270.00, being earnings received from ad hoc work between November 2023 and January 2024 and secured full-time employment on 8 January 2024 and as at the date of the hearing had received a net payment of $8,999.00 from this ongoing full-time employment. This was not challenged by the Respondent. The salary in respect of the Applicant’s new employment is $195,000 per annum exclusive of superannuation. Applying a divisor of 52, this equates to $3,750 per week. Assuming the Applicant continues to receive $3,750.00 per week, I find that the amount of remuneration earned by the Applicant from employment or other work during the period since the dismissal is $142,020 until the date of the order, comprised of $123,750 (earned between 8 January and 23 August 2024) in earnings from his new role and $18,270 in other earnings, excluding payment of notice.

[380] Based on the Applicant securing alternative employment and having been paid an amount of $3,750.00 per week, 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 $7,500.

[381] As the Applicant commenced receiving remuneration from work in or around November 2023 and this is before the time when his employment would, in my view, have ended (i.e. 6 December 2023 being a period of 8 weeks from the time of dismissal), earnings between 11 October 2023 and 6 December 2023 should reduce the amount of compensation ordered. Income was earned in respect of the period between 27 November 2023 and 3 December 2023 in the amount of $3,480. Further income was earned between the period 4 December 2023 and 10 December 2023 in the amount of $4,350 (equating to $870 a day for a period of 5 working days). The income earned between 4 and 6 December 2023 inclusive is therefore calculated to amount to $2610. The total amount earned between 27 November 2023 and 6 December 2023 was $6,090.

[382] In mathematical terms, this means deducting the actual and likely income for the

Applicant for the 8 week period from the date of his dismissal ($6,090) from the amount calculated for the purpose of s.392(2)(c) ($23,643.85), which leaves $17,553.85 gross in compensation. The Applicant was also paid four weeks in lieu of notice, further reducing the amount by $11,821.92, leaving $5,731.92 gross in compensation.

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

[383] The Applicant was a long serving employee with approximately 14 years service.

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

Effect of the order on the viability of the Respondent’s enterprise – s.392(2)(a)

[385] The evidence before the Commission does not establish that an order for compensation would have an effect on the viability of the employer’s enterprise.

Efforts of the Applicant to mitigate the loss suffered by the Applicant because of the dismissal

– s.392(2)(d)

[386] The Applicant must provide evidence that they have taken reasonable steps to minimise the impact of the dismissal.310 What is reasonable depends on the circumstances of the case.311

[387] The Applicant submitted that following his dismissal he applied for three roles and had six interviews in total for those roles. The Applicant obtained work on an ad hoc basis in or around November 2023. The Applicant was successful in obtaining alternative employment on a full time ongoing basis on 8 January 2024.

[388] I am satisfied that the Applicant took reasonable steps to mitigate his loss by actively seeking and ultimately obtaining alternative employment.

Misconduct – s.392(3)

[389] 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)

[390] I find that the total amount of the remuneration received by the Applicant and to which he was entitled during the 26 weeks immediately before the dismissal was $76,842.50.

[391] The high income threshold immediately before the dismissal was $167,500. Half of that amount is $83,750.00.

[392] The amount of compensation ordered by the Commission must therefore not exceed $76,842.50 in wages.

Instalments – s.393

[393] I do not consider that there is any reason for compensation to be made by way of instalments.

Shock, Distress – s.392(4)

[394] 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

[395] I am satisfied that the Applicant was protected from unfair dismissal, that the dismissal was unfair and that an order for compensation equating to $5,731.92, less taxation to be deducted as required by law, is appropriate having regard to all the circumstances of the case.

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

– McLean v Reserve Bank of Australia [2024] FWC 2269 delivered 23 August 2024 per Matheson C