Unfair dismisal; compensation

This is an extract from a decision of the Fair Work Commission which sets out the principles for calculating compensation for unfair dismissal.

“Compensation

[61] Section 392 of the Act provides:

“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.”

Authorities

[62] The approach to the calculation of compensation is set out in a decision of a Full Bench of the Australian Industrial Relations Commission in Sprigg v Paul’s Licensed Festival Supermarket. 4 That approach, with some refinement, has subsequently been endorsed and adopted by Full Benches of the Commission in Bowden v Ottrey Homes Cobram and District Retirement Villages inc T/A Ottrey;5 Jetstar Airways Pty Ltd v Neeteson-Lemkes6 and McCulloch v Calvary Health Care (McCulloch).7

[63] I have had regard to the above authorities. I have evidence before from Mr Bailey, but none from the Respondent.

The effect of the order on the viability of the Respondent

[64] There is no evidence before the Commission of the effect that any order of compensation would have on the viability of the Respondent.

The length of Mr Bailey’s service

[65] Mr Bailey was employed for a period of just in excess of two years. This is not a long period of time.

The remuneration that Mr Bailey would have received, or would have been likely to receive, if he had not been dismissed

[66] Without the benefit of evidence from the Respondent, I consider that Mr Bailey would have continued in the role for a period of nine months. Mr Bailey is aged 58. His evidence is that he would have stayed in the role until he retired at age 65, however I consider he would likely have chosen to work for an alternative employer in 2023, one who more closely aligned to his high ethical standards.

[67] I consider that Mr Bailey would have received remuneration of nine months at the annual rate of $140,000 which is equal to $105,000.

The efforts of Mr Bailey (if any) to mitigate the loss suffered because of the dismissal

[68] Mr Bailey made every effort to mitigate his loss and secured suitable alternative employment approximately seven weeks later.

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

[69] Mr Bailey commenced in his new role on 11 May 2022. The period between 11 May 2022 and today’s date is 20 weeks and 2 days. At a rate of $140,000 per annum, that is a sum of $54,923.08. It is necessary to deduct this amount from the $105,000 determined by me at [67] to be paid to Mr Bailey.

The amount of any income reasonably likely to be so earned by Mr Bailey during the period between the making of the order for compensation and the actual compensation

[70] Mr Bailey is reasonably likely to earn a further two weeks’ pay in his new employment during the period between the making of order for compensation and the actual compensation. This is an amount of $5,384.62. It is necessary to deduct this amount from the $105,000 determined by me at [67] to be paid to Mr Bailey.

Other relevant matters

[71] I do not consider there are other relevant matters affecting the amount of compensation to be awarded.

Misconduct reduces amount

[72] Section 392(3) of the Act requires that if the Commission is satisfied that the misconduct of a person contributed to the employer’s decision to dismiss the person then the Commission must reduce the amount it would otherwise order by an appropriate amount on account of the misconduct.

[73] The section requires that consideration be given by the Commission, amongst other things, as to whether a person’s misconduct contributed to the decision to dismiss an employee even if the Commission has found that there was no valid reason for the person’s dismissal. However, if there was no valid reason for the dismissal that may be relevant to the Commission’s decision as to the appropriate amount by which the amount of compensation should be reduced. 8

[74] I am not satisfied that Mr Bailey engaged in any misconduct. Accordingly, I cannot be satisfied a reduction should be made.

Shock, distress etc. disregarded

[75] I confirm that any amount ordered does not include a component by way of compensation for shock, distress or humiliation, or other analogous hurt caused to Mr Bailey by the manner of the dismissal.

Compensation Cap

[76] I must reduce the amount of compensation to be ordered if it exceeds the lesser of the total amount of remuneration received by the applicant, or to which the applicant was entitled, for any period of employment with the employer during the 26 weeks immediately before the dismissal, or the high income threshold immediately prior to the dismissal.

[77] The high income threshold immediately prior to the dismissal was $158,500, and the amount for 26 weeks was $79,250. The amount of compensation the Commission will order does not exceed the compensation cap nor the amount that Mr Bailey was entitled to during the 26 weeks immediately before the dismissal.

Payment by instalments

[78] There is no evidence before the Commission to satisfy me that it is appropriate to order the payment by instalments.

Order of compensation

[79] I have determined that the Respondent is to pay to Mr Bailey nine months’ compensation at the rate of $140,000 per annum, being an amount of $105,000. From this amount there will be a deduction of $54,923.08 and $5,384.62 in respect of remuneration earned by him and to be earned by him in the two weeks between the making of an order of compensation and when it is to be paid to him.

[80] The amount to be paid to Mr Bailey is $44,692.30 gross, less tax as required by law.

[81] In addition, the Respondent is to pay superannuation at the rate of 10% (as the Superannuation Guarantee Rate was at the time of the dismissal), being an amount of $4,469.23 into Mr Bailey’s superannuation fund.

[82] The above amounts are to be paid within 14 days of the date of this decision.

[83] An Order of compensation [PR746350] will be issued concurrently with this decision.”

Bailey v Octeros Manufacturing Pty Ltd (2022) FWC 1946 delivered 29 September 2022 per Hunt C