Unfair dismissal, restraints of trade and compensation

This extract from a recent unfair dismissal decision of the Fair Work Commission contains some interesting observations about the tension between the common law obligation upon a former employee seeking to obtain a remedy for unfair dismissal to take reasonable measures to mitigate his or her loss of earnings post dismissal.

 

“Remedy

 

[26]    The only remedies that the Commission may award are reinstatement and compensation. The former is not sought and I do not believe it would be appropriate in this case. Mr Goddard seeks compensation. Section 392 requires the Commission to take into account certain matters when determining an amount of compensation. There is no indication that compensation would affect the viability of the employer’s enterprise (s 392(2)(a)). I note that Mr Goddard had some 21 months of service with the company (s 392(2)(b)). Section 392(2)(c) directs the Commission to take into account the remuneration that the person would have received or would have been likely to receive if the person had not been dismissed. This requires the Commission to consider what would have occurred if the person was not dismissed, and in particular how long the person would have remained employed. Mr Goddard submitted that, had he not been dismissed, his employment would have lasted for at least another year. I agree. I accept his evidence that he had no intention of leaving. Although his annual base salary was $65,000 a year, which is

$1250 a week, Mr Goddard said that he earned substantial commissions. A payslip from January 2024 showed that for the first six months of the 2023/24 financial year he had earned, inclusive of commissions, $53,652.46 (excluding superannuation). Over the 12 month period for which his employment would likely have continued had he not been dismissed Mr Goddard could have expected to earn $107,304.92; with superannuation, adjusted to account for the rise on 1 July 2024, this would be $119,366.63.

 

[27]    Section 392(2)(d) requires the Commission to consider the efforts of the person to mitigate the loss suffered as a result of the dismissal. Mr Goddard said that he had applied for hundreds of jobs on ‘Seek’, including sales jobs, in which he had a lot of experience. However, he said that he had not applied for jobs in the same sector as his previous work, because of the presence of a post-employment restraint provision in his contract of employment (clause 10.1). This stated that for a period of 12 months after the termination of his contract of employment, Mr Goddard was not to work as an employee or contractor or advisor or in any other capacity in any business which was ‘engaged in activities substantially similar or identical to the Company and provides services substantially similar or services offered by the Company.’ One wonders why such restraint of trade provisions are so commonly found in the contracts of ordinary workers and whether they really protect any legitimate business interest of the employer, or merely serve to fetter the ability of workers to ply their trade, and to reduce competition for labour and services. Ordinarily, one would expect a person to have applied for jobs in the sector of their expertise as a reasonable step in mitigating loss. However the presence of a non-compete provision in his contract explains Mr Goddard’s decision not to do so. Although the provision is most likely unenforceable on the basis that its scope is unreasonable, an ordinary worker cannot be expected to know this, and it is understandable that Mr Goddard would not want to risk embroiling himself in a legal controversy by acting contrary to an express provision in his contract. I therefore make no deduction in respect of Mr Goddard’s decision not to apply for jobs that might have involved a prima facie contravention of the restraint of trade provision in his contract of employment.

 

[28]    Section 392(2)(e) requires the Commission to take into account any earnings of the person since their dismissal. Mr Goddard gave evidence that he had obtained two jobs since his dismissal, at lower rates of pay than his previous role, from which he had earned $10,464.85; with superannuation, this amounts to $11,615.98. He has recently found a new job on a salary of $60,000 per year ($1153.85 a week). I proceed on the basis that he will continue in this role for the foreseeable future and it is therefore appropriate to deduct the weekly wages he is currently earning over the remainder of the 12 month period for which he would have likely remained employed but for the dismissal (36 weeks). This produces a figure of $41,538.46, which with superannuation comes to $46,252.08. This gives a sub-total to be deducted, for actual earnings since dismissal and expected future earnings, of $57,868.06. The 12 month figure of $119,366.63 is reduced to $61,498.57.

 

[29]    A further deduction should be made for the misconduct constituted by Mr Goddard’s rudeness to the customer (see s 392(3)). I will deduct 25%, which gives a figure of $46,123.94. Further, I will adopt the approach in other decisions of applying a discount to reflect contingencies. The usual amount of 15% appears to me to be appropriate, which gives a figure of $39,205.34.

 

[30]    I will order that this amount, less taxation as required by law, be paid to Mr Goddard within 28 days of the date of this decision. An order is issued separately in PR773520.”

 

Goddard v Richtek Melbourne Pty Ltd (2024) FWC 979 delivered 16 April 2024 per Colman DP