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