Unfair dismissal for employers; remedies

Reinstatement is the primary statutory remedy for unfair dismissal but it is very rarely awarded by the Fair Work Commission on the basis of an argument (which I believe is much over stated) that the relationship between the parties (after an unfair dismissal case) cannot be restored. In any event, here is an extract from a recent case of the Commission which restates the principles which are used to assess compensation for unfair dismissal.


[15] Before considering the grounds of appeal it is worth setting out the approach generally adopted by Members of the Commission in determining the amount of compensation following a finding of unfair dismissal.

[16] The Full Bench of the Commission in Bowden v Ottrey Homes Cobram and District Retirement Villages 13 (Bowden) enunciated the approach to be taken under the current legislative framework to the determination of compensation. The Full Bench in Bowden endorsed the approach in Ellawala v Australian Postal Corporation14 (Ellawalla) where the Full Bench of the AIRC articulated the approach to the determination of compensation in respect of s.170CH(7) of the WR Act, prior to the Work Choices amendments. The Full Bench in Bowden commenced its review of Ellawala as follows:

“[24] In Ellawala the Full Bench commenced its analysis of the correct approach as follows:

[31] The principles applicable to determining an amount to be ordered in lieu of reinstatement are dealt with in Sprigg. In that case the Full Bench endorsed the following approach:

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

[17] Sprigg is a reference to Sprigg v Paul’s Licensed Festival Supermarket. 15

[18] Whilst we endorse the approach in Bowden, the determination of compensation outlined in Ellawala, with all due respect to that Full Bench, has abbreviated the test set out in Sprigg and any member relying on Ellawala (or decisions which have used the Sprigg approach outlined in Ellawala) may fail to correctly determine compensation where social security (or workers compensation) payments are involved.

[19] The Full Bench of the AIRC in Sprigg said:

“26. Ross VP addressed the construction of the relevant provision through a detailed examination of decisions by Members of the Court. The substance of his decision is adequately summarised in the following passages:

“It can be seen that the approach taken in a number of cases in the Industrial Relations Court is to assess the appropriate amount of compensation in the light of all relevant circumstances, including the remuneration that the employee would have received, or have been likely to have received, if the employer had not terminated the employment and, if that amount exceeds the permissible figure, reduce the compensation to that figure. 16 The following general principles regarding reinstatement and compensation may be extracted from the cases referred to:

(5) Lost remuneration is a fundamental element in assessing compensation though it is not the only matter that may be considered: Krupp-Geir v Open Family (Australia) Inc.

(6) In assessing the amount of compensation to be awarded the following approach has been adopted by the Court:

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.

STEP 2: Deduct moneys 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 awarded.

STEP 3: The remaining amount of compensation is discounted for contingencies.

STEP 4: The impact of taxation is calculated to ensure that the employee receives the actual amount he or she would have received if they had continued in their employment.

STEP 5: The legislative cap on compensation is applied… 17

[our emphasis, footnotes omitted]”

[20] That no deduction is to be made for social security payments was affirmed by the Full Bench in McCulloch v Calvary Health Care Adelaide 18:

“[32] The FWC, and its predecessors, have not deducted social security payments in the manner proposed by the respondent on the basis that such payments do not constitute ‘remuneration earned … from employment or other work’ for the purposes of s.392(2)(d). This issue was specifically addressed in Kennedy and Cumnock No.1 Colliery Pty Ltd 19 where the Full Bench said:

“We note that allowance is generally not made for social security payments in assessing an amount to be ordered in lieu of reinstatement pursuant to s.170CH(6): Sprigg v Paul’s Licensed Festival Supermarket (1998) 88 IR 21; Australian Postal Commission v Ellawalla 17 April 2000, [Print S5109]. The relevant part of the decision in each of these cases was influenced to some extent by the decision in Shorten v Australian Meat Holdings Pty Ltd (1996) 70 IR 360.” 20

[33] The Full Bench then went on to say at [11]:

“It is not our intention that the remuneration lost should be discounted for social security payments which the applicant is required to repay. Equally we think it would be inequitable to permit recovery of lost remuneration from the employer when social security payments referable to loss of income could be retained.” 21

[34] The most recent consideration of this issue appears to have been in Kim Lee Jarvis v Crystal Pictures Pty Ltd 22 in which Cloghan C declined to make any deduction on account of the receipt of Centrelink payments, for the following reasons:

“[74] I should note for the benefit of both parties that Ms Jarvis advised that during between her termination of employment and 15 April 2010, she received Centrelink payments. Ms Jarvis did not disclose the amount received. For my purposes under s.392(e) of the Act, I do not consider Centrelink payments as “…remuneration earned by [Ms Jarvis] from employment or work during the period between the dismissal and the making of the order for compensation”. Further, I do not consider it “relevant” for the purposes of s.392(g) of the Act, as it would be inappropriate for Australian taxpayers to effectively subsidise compensation (foregone wages) payable to an employee, where the employer has instantly dismissed that employee unfairly.

[75] Having said that, if the Centrelink payments received by Ms Jarvis have to be repaid or there is discretion for repayment, that is a matter between Ms Jarvis and the relevant Commonwealth officers.” 23

[21] The requirement to give adequate reasons was stated by the Full Bench in Barach v University of New South Wales 24:

“[16] The duty to give adequate reasons for decision has been considered on many occasions. 25 Important public policy considerations underlie this duty. In particular, the reasons for decision must be sufficient to allow the parties to exercise such rights of appeal as may be available and to enable an appeal bench to determine whether or not error has occurred in relation to a decision. Consequently the reasons given must articulate the essential grounds for reaching the decision and must address material questions of fact and law in a manner which discloses the steps which lead to a particular result. However the reasons for decision of a tribunal member need not be lengthy or elaborate and need not spell out every detail in the reasoning process or deal with every matter of fact or law which was raised in the proceedings.”

[22] We now turn to consider each of the grounds of appeal.”

Smith v Fearon Howard Real Estate Pty Ltd T/A Ray White (Balmain)  [2021] FWCFB 581 delivered 5 February 2021 per Catanzariti VP, Anderson DP and Bissett C