This extract from an unfair dismissal case contains a very good summary of how the Fair Work Commission goes about calculating compensation for unfair dismissal.
“Remedy
[80] Having found that the Applicant was unfairly dismissed I now turn to consider the question of remedy pursuant to section 390 of the Act. Significantly, under s.390(3) of the 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.
[81] Dealing firstly with whether reinstatement is inappropriate, the Applicant submits that reinstatement is not appropriate as does the Respondent. In these circumstances I consider that reinstatement is inappropriate.
[82] 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…”42.
[83] The Applicant submits that payment of compensation is appropriate because he had been unfairly dismissed and had not until recently secured alternate employment following his dismissal, whereas the Respondent argues that no compensation would be appropriate in circumstances where the Applicant resigned.
[84] Having found that the Applicant was unfairly dismissed and noting that the Applicant remained unemployed until 27 August 2024, in these circumstances, I consider that an order for payment of compensation is appropriate. There is nothing in the material filed by the Respondent in the substantive proceedings that persuades me that a payment of compensation would be inappropriate.
[85] Turning now to the question of compensation, s 392(2) of the Act requires all 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.
[86] I consider all the circumstances of the case below.
[87] No material was filed, or evidence led by the Respondent that would support a finding that an order for compensation would have an effect on the viability of the employer’s enterprise. I consequently find that an order for compensation is unlikely to have an effect on the viability of the employer’s enterprise (s 392(2)(a)).
[88] The Applicant commenced employment with the Respondent on 23 March 2015 and was terminated on 11 April 2024, a period of over nine years which was served as a permanent full-time employee. I consider that the Applicant’s substantial length of service weighs in favour of a significant award of compensation (s 392(2)(b)).
[89] As stated by a majority of the Full Court of the Federal Court, “in 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.”43
[90] The Applicant had been employed by the Respondent for over nine years, there had been no performance or conduct issues raised with him by the Respondent during his employment and he gave evidence that he enjoyed working for the Respondent and had intended to remain employed for an indefinite period. The Respondent led no evidence to rebut the Applicant’s evidence. Based on these factors I am satisfied that but for the Applicant’s dismissal he would have remained employed by the Respondent for a further period of at least two years. The Applicant’s annual remuneration excluding superannuation at the time of dismissal was $112,320.16. That means his anticipated earnings excluding superannuation for the estimated two-year period of further employment is $224,640.32 (s 392(2)(c)).
[91] Turning to the Applicant’s efforts to mitigate his losses, the Applicant must provide evidence that he has taken reasonable steps to minimise the impact of his dismissal44 and what is reasonable depends on the circumstances of the case.45 I am satisfied on the evidence that the Applicant made multiple job applications in the wake of his dismissal. It was confirmed during the proceedings that after filing his material, the Applicant had secured comparable full-time employment commencing on 27 August 2024. I am comfortably satisfied that the Applicant made reasonable efforts to mitigate his loss and that no adjustment to the compensation otherwise calculated is appropriate for the period from 11 April – 26 August 2024 (s 392(2)(d)).
[92] As to the income likely to be earned in the period between the making of the order for compensation and the payment of compensation I am satisfied on the evidence of the Applicant that he is likely to earn income in that period based on his having secured employment commencing on 27 August 2024(s 392(2)(g)).
[93] No other relevant matters were raised by the parties going to an order for compensation (s 392(2)(g)).
[94] As noted by the Full Bench in Double N Equipment Hire Pty Ltd t/a A1 Distributions v Humphries, “[t]he well-established approach to the assessment of compensation under s.392 of the FW Act… is to apply the “Sprigg formula” derived from the Australian Industrial Relations Commission Full Bench decision in Sprigg v Paul’s Licensed Festival Supermarket (Sprigg).46 This approach was articulated in the context of the Act in Bowden v Ottrey Homes Cobram and District Retirement Villages47.”48
[95] The approach to calculating compensation per Sprigg is as follows:
Step 1: Estimate the remuneration the Applicant 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.
[96] I have estimated the remuneration the Applicant would have received, or would have been likely to have received, if the Respondent had not terminated his employment to be $224,640.32 (excluding superannuation) based on my finding that it is likely the Applicant would have remained in employment for a further period of two years. This estimate of how long the Applicant would have remained in employment is the “anticipated period of employment.”49
[97] I have found that the Applicant has earned no remuneration since the date of his dismissal, but that he is likely to earn remuneration between the making of the order for compensation and the payment of compensation. He has however secured employment commencing on 27 August 2024 on a level of remuneration that is comparable to that he enjoyed when employed by the Respondent. In these circumstances it is appropriate to make a deduction equivalent to the balance of the two-year period from 27 August 2024 onwards. In other words, the loss of earnings since the dismissal is to be calculated for the period from 11 April – 27 August 2024. That is a period of 19.7 weeks which based on the Applicant’s anticipated earnings of $224,640.32 equals $42,552.06 (plus superannuation).
[98] I now need to consider the impact of contingencies on the amounts likely to be earned by the Applicant for the remainder of the anticipated period of employment.50 I do not consider it appropriate to deduct an amount for contingencies.
[99] I have considered the impact of taxation but have elected to settle a gross amount of $42,552.06 which is to be subject to normal taxation, plus superannuation. Having applied the formula in Sprigg, I am nevertheless required to ensure that “the level of compensation is an amount that is considered appropriate having regard to all the circumstances of the case.”51 I am satisfied that the amount of compensation that I have determined above takes into account all the circumstances of the case as required by s.392(2) of the Act.
[100] If I am satisfied that misconduct of the Applicant contributed to the employer’s decision to dismiss him, I am obliged by section 392(3) of the Act to reduce the amount I would otherwise order by an appropriate amount on account of the misconduct (s 392(3)). I am satisfied that there was no misconduct on the part of the Applicant that contributed to the employer’s decision to dismiss. In these circumstances, no reduction in the amount of compensation is appropriate.
[101] Finally, ss 392(5) & (6) of the Act requires that the amount of compensation ordered by the Commission must not exceed the lesser of 6 months’ pay calculated at the high-income threshold (HIT) or the total amount of remuneration the Applicant received or was entitled to receive during the 26-week period prior to his dismissal. Based on the pay slips provided by the Applicant, I find that the total amount of remuneration the Applicant was entitled to receive during the 26-week period prior to dismissal was $56,160.08 while the HIT at the time of dismissal on 11 April 2024 was $167,500. Half of that amount is $83,750. It follows from the foregoing that the amount of compensation ordered must not exceed $56,160.08.
[102] Considering the above, I will make an order that the Respondent pay $42,552.06 gross less taxation as required by law, plus superannuation on that amount, to the Applicant in lieu of reinstatement within 14 days of the date of this decision.
Conclusion
[103] I am satisfied that the Applicant was dismissed at the initiative of the Respondent. Having been satisfied in respect of the other initial matters, I have considered and determined that the Applicant’s dismissal was unjust, unreasonable and harsh and thereby unfair. I am further satisfied that reinstatement would be inappropriate and that an award of compensation is appropriate.
[104] Finally, I have determined to make an order that the Respondent pay $42,552.06 gross less taxation as required by law, plus superannuation on that amount, to the Applicant in lieu of reinstatement within 14 days of the date of this decision. An order giving effect to this decision will be issued separately in conjunction with this decision.”
Dupre v Excell Protective Group Pty Ltd [2024] FWC 2313 delivered 2 September 2024 per Masson DP