Unfair dismissal; the compensation principles

This extract from a recent unfair dismissal case delivered by the Fair Work Commission is a good practical explanation of the legal principles which are used to calculate compensation for unfair dismissal.

“Compensation – Appropriateness

 

  • Having found that reinstatement is inappropriate, it does not automatically follow that a payment for compensation is appropriate.

 

  • As noted by the Full Bench in Nguyen v Vietnamese Community in Australia t/a Vietnamese Community Ethnic School South Australia Chapter:2

 

“[t]he question whether to order a remedy in a case where a dismissal has been found to be unfair remains a discretionary one…”3

 

  • 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.4

 

  • The Applicant submits that compensation is an appropriate remedy in the The Applicant submits that the losses suffered due to the conduct of the Respondent exceeded the 26-week compensation cap. The Applicant submits that the maximum compensation is the appropriate remedy in the circumstances.

 

  • The Respondent submits that any compensation awarded to the Applicant should be on the lower range of the compensation that can be awarded by the Commission.

 

  • Accordingly, due to the harsh and unreasonable manner in which the Applicant’s employment was terminated, and the impact this decision had on the Applicant, I consider that an order for payment of the compensation is appropriate in the circumstances of the matter.

 

Compensation – Considerations

  • Section 392(2) of the 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:

 

  • the effect of the order on the viability of the Respondent’s enterprise;

 

  • the length of the Applicant’s service;

 

  • the remuneration that the Applicant would have received, or would have been likely to receive, if the Applicant had not been dismissed;

 

  • the efforts of the Applicant (if any) to mitigate the loss suffered by the Applicant because of the dismissal;

 

 

 

  • 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;

 

  • 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

 

  • any other matter that the Commission considers

 

  • I consider all the circumstances of the case currently before the Commission

 

Effect of the order on the viability of the Respondent’s enterprise

  • The Respondent submits that, during the COVID-19 pandemic, the business suffered a downturn in operations which resulted in decreased employee hours and head count, where practicable, to ensure the business remained The Respondent submits this should be a neutral factor.

 

  • It is not uncommon that the COVID-19 pandemic had a negative impact on the Respondent’s business, as it did to the operations of various businesses. That being said, the Respondent has not satisfied the Commission that such a payment would jeopardise the on- going viability of the Respondent’s business.

 

  • I am therefore satisfied that an order for compensation would not have an effect on the viability of the Respondent’s enterprise.

 

Length of the Applicant’s service

 

  • The Respondent notes that the Applicant’s prior service, with the employer who was purchased by the Respondent, was transferred upon the sale of business and confirmed that the Applicant’s tenure was six years and two months.

 

  • The Applicant submits that it was her intention to remain employed with the Respondent until she had reached retirement age.
  • The Applicant highlights her previous record of stable long-term employment and submits that she was not someone who moved job frequently as evidence supporting her submission that she intended to remain employed with the Respondent until retirement.

 

  • I also note that under the WA Long Service Leave Act 1958, the Applicant was eligible for pro-rata long service leave after an additional 10 months of service with the Respondent, as a factor supporting the Applicant’s submissions that she would have sought to remain employed by the Respondent until retirement.

 

  • I consider that the Applicant’s length of service supports increasing the amount of compensation ordered.

 

 

 

Remuneration that the Applicant would have received, or would have been likely to receive, if the Applicant had not been dismissed

 

  • As stated by a majority of the Full Court of the Federal Court in He v Lewin;5

 

“[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.” 6

 

  • The Applicant submits that her employment would have continued for a considerable period of time, until the age of retirement.

 

  • The Applicant, in her submissions, highlighted a number of factors which she believes supports the submission that her employment would have continued for the maximum period of 26 weeks, including:
    • The Applicant’s employment having already been greater than six years with the Respondent (and the previous employer) when factoring in the transfer of
    • The Applicant highlighted the issues faced in securing new employment as a further reason as to why she would not have been seeking to leave the Respondent. Namely, the Applicant’s mature age as well as her limited qualifications diminished her ability to gain employment in other industries.

 

  • The Applicant provided the below breakdown of her annual remuneration with the Respondent:

 

  • Annual Base Salary = $75,000
  • Car Allowance = $15,000

 

  • Phone/Internet Allowance = $960

 

  • Annual Commission Payment = $21,000 ($5,250 per quarter).

 

  • Total Annual Remuneration = $111,960 plus

 

  • The Applicant also submits that the Commission should include quarterly commission payments when considering her remuneration. The Applicant confirmed that she had received 10 quarterly commission payments, in a row, going back over two and a half years, as evidence in support of such position.

 

 

 

  • The Applicant submits that she is not merely an average performer. The Applicant submits that her long history in the industry (28 years) and previous evidence of bonus payments supports the conclusion that she consistently performed above standard by receiving 10 quarterly commission payments in a row.

 

  • The Respondent submits that the maximum compensation payable to the Applicant is

$45,800, plus superannuation.

 

  • The Respondent submits that it is incorrect for the Commission to determine that the Applicant would have achieved her full commission payments, for the periods following her termination if she had remained employed, for the below reasons:

 

  • The Applicant was only directly employed by the Respondent for 10 months. During this period, the Applicant received two commission payments. The Respondent submits that this is an insufficient period to determine whether the Applicant would have continued to receive full commission payments.

 

  • The Respondent cannot quantify or confirm the commission payment KPI’s for the Applicant’s previous employer compared to that of the Respondent’s business.

 

  • Commission payments are not guaranteed as they are impacted by market conditions. The Respondent submits it cannot be guaranteed that the Applicant would have received any commission payment. The Respondent submits that, for FY 2022, only 41 out of 105 salespeople received some form of quarterly commission payment.

 

  • The Respondent acknowledges that the Applicant was subject to a three-month post- employment restraint. Despite the restraint of trade clause, the Respondent submits that the Applicant should have found employment in alternative industries.

 

  • The parties do not dispute that the below items should be included in the Applicant’s annual remuneration:

 

  • Annual Base Salary = $75,000
  • Car Allowance = $15,000
  • Phone/Internet Allowance = $960

 

  • As outlined above, the Respondent is of the position that the Applicant’s quarterly commission payments should not be included in the calculation of the annual remuneration.

 

  • For the reasons outlined below, I have concluded that the Applicant’s commission payments should be included in determining the total annual remuneration.

 

  • It is not uncommon or unreasonable for commission payments, such as those outlined by the Applicant, to be included in factoring in total annual remuneration for the purposes of determining I note the decision in Davis v Portseal Pty Ltd,7 reflecting that

 

 

 

commission payments can be included when determining the total annual remuneration that an employee may receive.

 

  • The Applicant has provided evidence demonstrating a strong track record of meeting her sales targets and receiving full commission The fact that the Applicant was able to secure such payments for 10 consecutive quarters, dating back to 2019, supports that it is reasonable to include these payments in her total annual remuneration.

 

  • In relation to the anticipated period of employment, I make the following findings:

 

  • The Applicant has put forward a sound and logical argument as to why her employment would have continued until retirement.

 

  • The Applicant had been working in the industry for 28 years and had been continuously employed in the same role, noting the transfer of business, for 6 years and 2 months.

 

  • The Applicant does not display a history of “job hopping”. Rather, the Applicant rightfully asserts her stable on-going employment history.

 

  • The Applicant’s submission that she would have stayed employed with the Respondent until retirement is reasonable and logical. I make this conclusion with reference to the factual matrix surrounding her employment. Notably, the Applicant was very close to qualifying for long service leave.

 

  • I therefore find that the Applicant’s employment would have continued for a further 4 years, ending when the Applicant reached the age of 65 years.

 

Efforts of the Applicant to mitigate the loss suffered by the Applicant because of the dismissal

 

  • The Applicant must provide evidence that they have taken reasonable steps to minimise the impact of the dismissal.8 What is reasonable depends on the circumstances of the case.9

 

  • The Applicant also submits that the Commission should consider the below steps when considering what is reasonable in these circumstances:
    • The Applicant was subject to a post-employment restraint for 3 months following the termination of her employment which prevented her from working with any form of competitor or in the same industry as the Respondent.

 

  • The Applicant had worked in the industry for the past 28 years and had a strong preference to remain employed in the office supply The Applicant notes there were very few positions available in the industry at a comparable level.

 

  • The Applicant joined/frequented various job search websites such as Seek and Indeed to look for work. The Applicant also updated her LinkedIn profile to reflect the fact that she was seeking work.

 

 

 

  • The Applicant provided copies of her job applications, to positions in other industries, (including the Transport, Packaging, Racing, Media, FMCG, and Travel industries). However, the Applicant was not successful in obtaining a position in other sectors.

 

  • The Applicant notes that her age, lack of experience in other sectors, and limited educational qualifications limited her ability to find work in other sectors.

 

  • The Respondent disputes that the Applicant took reasonable steps to minimise the impact of her dismissal.

 

  • The Respondent submits that the Applicant did not take adequate steps to mitigate her loss following the termination of her employment, noting:

 

  • The Applicant only applied for two positions in 2022, one position in October 2022, and one position on 29 December 2022.

 

  • The Applicant was terminated on 16 August 2022 and any restraint ceased on 16 November 2022.

 

  • The Applicant did not apply for any positions within other industries in which her skillset could have been used.

 

  • I find that:

 

  • The Applicant, by her own admission, is in the final years of her working life and was working in a position she intended to work in until her The Applicant has spent 28 years working in the office supply industry and her preference was to continue to work in a field in which she had a strong history and knowledge base. I am satisfied that, in the circumstances of this matter, the Applicant’s position in this regard is reasonable. It is clear that the personal attributes of the Applicant and the size of this industry would lend to a longer job search. Regardless, the Applicant did indeed make attempts to gain employment in other industries. However, as the Applicant has noted, her specialised experience and age likely caused issues in obtaining employment in other industries.

 

  • The Applicant was restrained from seeking employment in her field of choice and expertise by the Respondent for a period of 3 months. Given the history between the parties, it is reasonable to conclude that, had the Applicant found employment during the restraint period in the office supply sector, the Respondent, in all probability, would have sought to enforce the I accept the submissions of the Applicant that her age and lack of experience in other industries, in all probability, impacted her ability to gain alternate employment. Whilst often discounted, age discrimination, either directly or indirectly, unfortunately, but undeniably, occurs in recruitment and I am satisfied this, alongside the other circumstances noted, likely impacted the ability of the Applicant to find alternative employment.

 

  • Having considered the above factors, I am satisfied that the Applicant took reasonable steps to mitigate their loss.

 

 

 

 

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

 

  • From the period of 16 August 2022 until 25 June 2023 the Applicant did not earn any income, this is a period of around 10 months in The Applicant confirmed that she did not receive unemployment benefits during this period.

 

  • The Applicant, in her new employment, receives an annual remuneration of $63,000, plus superannuation. From the period of 25 June 2023 until 1 November 2023 the Applicant earned $18,377.13.

 

  • I am satisfied that the amount of remuneration earned by the Applicant from employment, or other work, during the period since the dismissal is $18,377.13.

 

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

 

  • During this period the Applicant would have worked an additional

 

  • Therefore, I have calculated the Applicant’s earnings during this period to be $4,930.96.

 

Other relevant matters

 

  • The Respondent outlined that, as of the time of terminating the Applicant’s employment, there were still very serious considerations in relation to COVID-19 and the Respondent’s operating environment which frustrated the employment relationship.

 

  • The Respondent submits that the Applicant could not attend the workplace and was restricted from visiting many clients during this period.

 

  • I acknowledge that the Respondent had the best of intentions, in relation to the continued measures they had in place to minimise the potential impact of COVID-19 on staff members and clients during this period. However, the State Government had removed all restrictions (except for Health and Aged Care industries) two months prior to the Applicant being

 

  • The Respondent also noted that the relationship breakdown between the parties was significant and should also be considered as a relevant I have considered this as a factor as to why the Applicant should not be reinstated. However, I am not satisfied that this is a relevant factor that should result in any compensation reduction.

 

  • The other relevant matters raised by the Applicant in her submissions have been addressed in the decision already.

 

Compensation – Calculation

 

 

 

  • As noted by the Full Bench in Double N Equipment Hire Pty Ltd t/a A1 Distributions v Humphries:

 

“[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).10 This approach was articulated in the context of the FW Act in Bowden v Ottrey Homes Cobram and District Retirement Villages11.”12

 

  • 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

 

  • 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.

 

Step 1

 

  • I have estimated the remuneration the Applicant would have received, or would have been likely to have received, if the Respondent had not terminated the employment to be

$447,840 on the basis of my finding that the Applicant would likely have remained in employment for a further period of 4 years.

 

  • This estimate of how long the Applicant would have remained in employment is the “anticipated period of employment”.13

 

Step 2

  • I have found that the amount of remuneration, earned by the Applicant, from the date of dismissal was $18,377.13, and that the amount of income reasonably likely to be earned by the Applicant, between the making of the order for compensation and the payment of compensation, is $4,930.96.

 

  • The Applicant did not earn any remuneration from the period of 16 August 2022 until 25 June 2023, this is a period of around 10 months.

 

  • The Applicant was not paid any form of notice from the Respondent following the termination of her employment. Therefore, this is not something that needs to be considered.

 

 

 

  • Only monies earned since termination for the anticipated period of employment are to be deducted.14

 

  • Accordingly, I deduct $23,308.09.

 

Step 3

 

  • I now need to consider the impact of contingencies on the amounts likely to be earned by the Applicant for the remainder of the anticipated period of employment.15

 

  • There was significant disputation between the parties in relation as to how the Applicant’s total annual remuneration should be calculated.

 

  • As I have outlined previously, I have determined that the Applicant is correct in how the total annual remuneration has been established.

 

  • However, I have formed the view that the Respondent’s position in relation to the commission payment is not without merit.

 

  • Whilst I accept that the Applicant had previously demonstrated a strong track record of successfully meeting the requirements to obtain her quarterly commission payment, I believe it is reasonable and appropriate to make a deduction of 10%. This is based on the ever-changing nature of market conditions and the fact that a significant percentage of the Respondent’s sales workforce did not receive any commission payment in FY 2022.

 

  • For the reasons outlined above, I consider it appropriate to deduct an amount of 10% for

 

Step 4

 

  • Briefly, the below shows the calculation at this time:

 

  • Remuneration for the anticipated period: $447,840
  • Deduction of monies earned since termination: $23,308.09 = $424,531.91
  • Deduction for contingencies: $42,453.191 (10%) = $382,078.719

 

  • I have considered the impact of taxation but have elected to settle a gross amount of

$382,078.719, plus superannuation, and leave taxation for determination

 

Compensation – Reductions

 

  • I am satisfied that misconduct of the Applicant did not contribute to the employer’s decision to dismiss.

 

  • Therefore, the amount of the order for compensation is not to be reduced on account of

 

 

 

 

Compensation – Cap

 

  • Section 392(5) of the Act provides that the amount of compensation ordered by the Commission must not exceed the lesser of:

 

  • the amount worked out under section 392(6) of the Act; and

 

  • half the amount of the high-income threshold immediately before the

 

  • The amount worked out under section 392(6) of the Act is the total of the following amounts:

 

  • the total amount of the remuneration:

 

  • received by the Applicant; or

 

(ii) to which the Applicant was entitled;

 

(whichever is higher) for any period of employment with the employer during the 26 weeks immediately before the dismissal; and

 

  • if the Applicant was on leave without pay or without full pay while so employed during any part of that period – the amount of remuneration taken to have been received by the Applicant for the period of leave in accordance with the regulations.

 

  • The high-income threshold immediately before the dismissal was $162,000.

 

  • Half of the high-income threshold, as above, is $81,000.

 

  • From the submissions and evidence of the Applicant, which I have previously accepted above, the Applicant’s annual remuneration was $111,960.

 

  • Accordingly, the amount of compensation ordered by the Commission in this matter must not exceed $55,980.
  • The amount provided for as a result of the calculation in accordance with Sprigg far exceeds the compensation cap that is provided for under the Act.

 

  • As a result, the compensation cap will apply, leaving the total of $55,980.00.

 

Appropriateness

 

  • Having applied the formula in Sprigg, I am nevertheless required to ensure that “the level of compensation is an amount that is considered appropriate having regard to all the circumstances of the case”,16 including my findings that:

 

  • The payment will not adversely impact the viability of the Respondent’s

 

 

 

 

  • The Applicant’s length of service with the Respondent being a factor in favour of the amount ordered.

 

  • The efforts made by the Applicant to mitigate her loss of income following the dismissal. Noting, the Applicant’s age, employment history, trade restraint, qualifications, and skill set.

 

  • The Applicant did not engage in any form of misconduct that contributed towards her

 

  • Accordingly, considering all the circumstances, I have determined that the appropriate compensation is the maximum allowable under the Act.

 

  • I have considered the impact of taxation but have elected to settle on the amount of

$55,980.00 (gross) and leave taxation for determination.

 

  • I am satisfied that the amount of compensation I have determined above takes into account all the circumstances of the case as required by section 392(2) of the Act.

 

  • I confirm that, consistent with section 394(2) of the Act, the amount to be ordered does not include payment for shock, distress, or humiliation caused by the Applicant’s dismissal.

 

Conclusion

 

  • In light of the above, I will make an order that the Respondent pay $55,980.00 (gross) plus superannuation, less taxation as required by law, to the Applicant, in lieu of reinstatement, within 14 days of the date of this decision. The Order is issued concurrently.17””

 

Stace v Complete Office Supplies/Complete Office Staffing Pty Ltd (2023) FWC 3262 delivered 8 December 2023 per Schneider C