Unfair dismissal compensation

This extract from a successful Fair Work Commission unfair dismissal case sets out the principles which are used to calculate compensation for unfair dismissal.

 

“[104] It is necessary therefore for me to assess the amount of compensation that should be

ordered to be paid to Mr Hutton. In assessing compensation, I am required by s 392(2) of the

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Act to take into account all the circumstances of the case including the specific matters

identified in paragraphs (a) to (g) of this subsection.

[105] I will use the established methodology for assessing compensation in unfair dismissal

cases which was set out in Sprigg v Paul Licensed Festival Supermarket62 and applied and

elaborated upon in the context of the current Act by Full Benches of the Commission in a

number of cases.63 The approach to calculating compensation in accordance with these

authorities 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.

Step 3: Discount the remaining amount for contingencies.

Step 4: Calculate the impact of taxation to ensure that the employee receives the actual

amount she or she would have received if they had continued in their employment.

Step 5: Apply the legislative cap on compensation.

Remuneration Mr Hutton would have received, or would have been likely to receive, if he had

not been dismissed (s 392(2)(c))

[106] Like all calculations of damages or compensation, there is an element of speculation in

determining an employee’s anticipated period of employment because the task involves an

assessment of what would have been likely to happen in the future had the employee not been

dismissed.64

[107] For the reasons explained above, I am satisfied on the balance of probabilities that if Mr

Hutton had not been dismissed on 19 December 2022, he would have remained employed by

the ESS until 15 February 2023, by which time the internal appeals process would have

concluded and it is more likely than not, in my assessment, that a decision would have been

made by the Managing Director of ESS to summarily dismiss Mr Hutton.

[108] I am satisfied on the balance of probabilities that if Mr Hutton had not been dismissed

on 19 December 2022, he would have continued to be stood down on pay at the rate of

$1,444.87 gross per week.65

[109] Accordingly, I am satisfied that $12,136.91 (8.4 weeks x $1,444.87 = $12,136.91) is the

remuneration that Mr Hutton would have received, or would have been likely to receive, if he

had not been dismissed.

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

[110] I accept Mr Hutton’s evidence that he did not earn any remuneration in the period from

19 December 2022 to the commencement of his new job at the start of February 2023. In that

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new job Mr Hutton has earned approximately at least as much remuneration as he was paid

when he was stood down by ESS. Accordingly, Mr Hutton has a period of financial loss from

his dismissal on 19 December 2022 until 31 January 2023. If Mr Hutton had remained employed

by ESS during that period, he would have received gross remuneration from ESS in the sum of

$8,958.19 (6.2 weeks x $1,444.87 = $8,958.19). This calculation is intended to put Mr Hutton

in the position he would have been in but for the termination of his employment.66

Viability (s 392(2)(a))

[111] No submission was made on behalf of the ESS that any particular amount of

compensation would affect the viability of the ESS’s enterprise.

[112] My view is that no adjustment will be made on this account.

Length of service (s 392(2)(b))

[113] My view is that Mr Hutton’s period of service with the ESS (about three years) does not

justify any adjustment to the amount of compensation.

Mitigation efforts (s 392(2)(d))

[114] The evidence establishes that Mr Hutton was suffering from depression and anxiety in

the period leading up to, and following, his dismissal. He made efforts to obtain alternative

employment and secured such employment on a casual basis at the start of February 2023.

[115] In all the circumstances, my view is that Mr Hutton acted reasonably to mitigate the loss

suffered by him because of the dismissal and I do not consider it appropriate to reduce the

compensation on this account.

Any other relevant matter (s 392(2)(g))

[116] It is necessary to consider whether to discount the remaining amount ($8,958.19) for

‘contingencies’. This step is a means of taking into account the possibility that the occurrence

of contingencies to which Mr Hutton was subject might have brought about some change in

earning capacity or earnings.67 Positive considerations which might have resulted in

advancement and increased earnings are also taken into account.

[117] The discount for contingencies should only be applied in respect to an ‘anticipated

period of employment’ that is not actually known, that is a period that is prospective to the date

of the decision.68

[118] Because I am looking in this matter at an anticipated period of employment which has

already passed (20 December 2022 to 31 January 2023), there is no uncertainty about Mr

Hutton’s earnings, capacity or any other matters during that period of time.

[119] In all the circumstances, my view is that it is not appropriate to discount or increase the

figure of $8,958.19 for contingencies.

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[120] Save for the matters referred to in this decision, my view is that there are no other matters

which I consider relevant to the task of determining an amount for the purposes of an order

under s 392(1) of the Act.

[121] I have considered the impact of taxation, but my view is that I prefer to determine

compensation as a gross amount and leave taxation for determination.

Misconduct (s 392(3))

[122] I have found that Mr Hutton did engage in misconduct on 30 October 2022. That

misconduct was the reason for ESS’s decision to dismiss Mr Hutton. I will reduce the

compensation to be awarded to Mr Hutton by 20% on account of his misconduct.

[123] In all the circumstances, I consider 20% to be an appropriate amount to reduce the

compensation on account of Mr Hutton’s misconduct. This reduces the compensation to

$7,166.55 ($8,958.19 – 20% = $7,166.55).

Shock, distress or humiliation, or other analogous hurt (s 392(4))

[124] I note that in accordance with s 392(4) of the Act, the amount of compensation

calculated does not include a component for shock, humiliation or distress.

Compensation cap (s 392(5)-(6))

[125] The amount of $7,166.55 is less than half the amount of the high income threshold

immediately before the dismissal. It is also less than the total amount of remuneration to which

Mr Hutton was entitled in his employment with the ESS during the 26 weeks immediately

before his dismissal. In those circumstances, my view is that there is no basis to reduce the

amount of $7,166.55 by reason of s 392(5) of the Act.

Instalments (s 393)

[126] No application has been made to date by the ESS for any amount of compensation

awarded to be paid in the form of instalments.

Conclusion on compensation

[127] In my view, the application of the Sprigg formula does not, in this case, yield an amount

that is clearly excessive or clearly inadequate. Accordingly, my view is that there is no basis

for me to reassess the assumptions made in reaching the amount of $7,166.55.69

[128] For the reasons I have given, my view is that a remedy of compensation in the sum of

$7,166.55 (less taxation as required by law) in favour of Mr Hutton is appropriate in the

circumstances of this case. An order will be made to that effect.”

 

Hutton v Evolution Support Services  [2023] FWC 919 delivered 19 April 2023 per Saunders DP