Unfair dismissal and redundancy laws

In the decision in the unfair dismissal case from which the following extract is taken, the Fair Work Commission determined that the dismissal was relevantly unfair (entitling the applicant prima facie to some kind of remedy) because although the applicant’s position was ceasing to be due to legitimate operational issues the business faced it was not a genuine redundancy because the employer had not adequately consulted with the employee but in all the circumstances the employee had suffered no compensable loss.

“Is the Commission satisfied that the dismissal of the Applicant was harsh, unjust or unreasonable?

“[72] I have made findings in relation to each matter specified in s.387 as relevant.

[73] I must consider and give due weight to each as a fundamental element in determining whether the termination was harsh, unjust or unreasonable. 8

[74] Having considered each of the matters specified in s.387 of the FW Act, I am satisfied that the dismissal of the Applicant was unjust, the primary reason being the failure to consult with the Applicant as required by the consultation provision in the Award.

[75] Having found that the dismissal was unjust, I am therefore satisfied that the Applicant was unfairly dismissed within the meaning of s.385 of the FW Act.

Remedy

[76] 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.

[77] 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?

[78] The mere fact that the position that was occupied by the Applicant no longer exists does not render an order for reinstatement inappropriate. 9 As a Full Bench of the Australian Industrial Relations Commission observed, the adoption of such an approach “would tend to defeat the remedial purpose of the legislation.”10

[79] However, I accept the evidence of the Respondent that its business has suffered adverse effects arising from the COVID-19 pandemic in which it has needed to reduce the size and cost of its workforce. I also find that, had the Respondent held discussions with the Applicant to consult about the decision to dismiss him on the grounds of redundancy in compliance with the Award, the outcome would not have changed and in those circumstances the dismissal would not have been harsh, unjust or unreasonable, and therefore not unfair. The Applicant did not seek reinstatement.

[80] In the circumstances, I find that reinstatement is inappropriate.

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

[81] 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”. 11

[82] 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. 12

[83] I now deal with the issue of compensation.

Compensation – what must be taken into account in determining an amount?

[84] 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.

[85] I consider all the circumstances of the case below.

Section 392(2)(a) – effect of the order on the viability of the Respondent’s enterprise

[86] While I accept that the Respondent suffered adverse effects from the COVID-19 pandemic and its impacts, there is no evidence to suggest that an award of compensation would have an effect on the viability of the Respondent’s enterprise.

Section 392(2)(b) – length of the Applicant’s service

[87] The Applicant’s length of service was approximately seven months. This is not a long period of time. I consider that the Applicant’s very short period of service warrants reducing the amount of any compensation ordered.

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

[88] 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.” 13

[89] I am satisfied that, had the Respondent consulted with the Applicant in compliance with the consultation provision of the Award, it still would have dismissed the Applicant and this would have been fair in the circumstances.

[90] Had the Respondent undertaken such consultation, I find that this would have taken place over approximately one week. As such, I find that the Applicant’s employment would likely only have continued for a further period of one week and, had the Applicant been working, the amount of remuneration that the Applicant would have received or would have been likely to receive during that period is $1,292.00.

[91] However, in the circumstances of this matter, the Respondent had stood down its workforce on account of public health orders and did not reopen until 11 October 2021, after the Applicant was dismissed. Employees had been stood down during this period. As such, the Applicant would not have been in receipt of any remuneration during this period.

Section 392(2)(d) – efforts of the Applicant to mitigate the loss suffered by the Applicant because of the dismissal

[92] The Applicant must provide evidence that he has taken reasonable steps to minimise the impact of the dismissal. 14 What is reasonable depends on the circumstances of the case.15

[93] Having decided that the Applicant’s employment would have continued for an additional week, I only need to consider the efforts made to mitigate the loss in this week. The Applicant indicated he had been searching for employment and he was finding it difficult to secure a role. I find that the Applicant had taken reasonable steps to minimise the impact of the dismissal.

Section 392(2)(e) – amount of remuneration earned by the Applicant from employment or other work during the period between the dismissal and the making of the order for compensation

[94] The evidence does not establish that the Applicant earned any remuneration from employment or other work in the week following his dismissal. The Applicant was paid one weeks’ severance pay which constitutes remuneration and he would have received this same payment following one weeks’ consultation, had it occurred.

Section 392(2)(f) – amount of 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

[95] This factor is not relevant in the circumstances of this matter.

Section 392(2)(g) – other relevant matters

[96] I do not consider there are any other relevant matters beyond those already addressed above.

Compensation – how is the amount to be calculated?

[97] As noted by the Full Bench, “[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). 16 This approach was articulated in the context of the FW Act in Bowden v Ottrey Homes Cobram and District Retirement Villages.17

[98] The approach in Sprigg is as follows:

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. Workers’ compensation payments are deducted but not social security payments. The failure of an applicant to mitigate his or her loss may lead to a reduction in the amount of compensation ordered.

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.

[99] I find that the Applicant would likely have remained in employment for a further period of one week. This estimate of how long the Applicant would have remained in employment is the “anticipated period of employment”. 18 However, I also find that the Applicant would not have earned any remuneration during the anticipated period of employment, as the Respondent had stood down its workforce and did not recommence operations until 11 October 2021 in line with public health orders. As such, there is no amount from which I can make adjustments for the purposes of calculating compensation in accordance with the method above.

[100] Further, even if the Applicant had been entitled to earn his usual weekly pay during this period of one week, I would have reduced this amount, noting the Applicant’s very short period of service, including the period of stand down in which he was not working for the Respondent, which would warrant reducing the amount of compensation ordered.

[101] In light of the above, I do not consider it appropriate in the circumstances of this matter to order payment of compensation and decline to do so.”

Bentley-Gates v El Gringos Locos (2022) FWC 501 delivered 7 March 2022 per Matheson C