What compensation unfair dismissal

This passage from a recent unfair dismissal case of the Fair Work Commission is an excellent summary of the legal principles which are applied when calculating compensation for an unfair dismissal.

“Remedy

[94] In the circumstances where I have found Mr Palibrk was protected from unfair dismissal at the time of being dismissed and that he has been unfairly dismissed, s.390 of the Act prescribes that a remedy is available. Accordingly, I am required to determine whether to order the reinstatement of Mr Palibrk or, if I am satisfied reinstatement is inappropriate, to order the payment of compensation if I am satisfied that such an order is appropriate in all the circumstances. 52

[95] The primary remedy under the Act is reinstatement, however Mr Palibrk does not seek reinstatement. Having regard to this and the circumstances of this case, I am satisfied it is inappropriate to order reinstatement (s.390(3)(a)).

[96] I must therefore consider whether it is appropriate in all the circumstances to make an order for payment of compensation (s.390(3)(b)).

[97] Section 392 of the Act sets out the circumstances that must be taken into consideration when determining an amount of compensation, the effect of any findings of misconduct on that compensation amount and the upper limit of compensation that may be ordered.

[98] In considering each of the criteria in s.392 of the Act, it is useful to refer to the helpful restatement of principles to be applied in the assessment of compensation in Johnson v North West Supermarkets T/A Castlemaine IGA: 53

“[9] The well-established approach to the assessment of compensation under s 392 is to apply the ‘Sprigg formula’, derived from the Australian Industrial Relations Commission Full Bench decision in Sprigg v Paul Licensed Festival Supermarket. This approach was articulated in the context of the current legislative framework in Bowden v Ottrey Homes Cobram and District Retirement Villages. Under that approach, the first step to be taken in assessing compensation is to consider s.392(2)(c), that is, to determine what the applicant would have received, or would have been likely to receive, if the person had not been dismissed. In Bowden this was described in the following way:

“[33] The first step in this process – the assessment of remuneration lost – is a necessary element in determining an amount to be ordered in lieu of reinstatement. Such an assessment is often difficult, but it must be done. As the Full Bench observed in Sprigg:

‘… we acknowledge that there is a speculative element involved in all such assessments. We believe it is a necessary step by virtue of the requirement of s.170CH(7)(c). We accept that assessment of relative likelihoods is integral to most assessments of compensation or damages in courts of law.’

[34] Lost remuneration is usually calculated by estimating how long the employee would have remained in the relevant employment but for the termination of their employment. We refer to this period as the ‘anticipated period of employment’…”

[10] The identification of this starting point amount ‘necessarily involves assessments as to future events that will often be problematic,’ but, as the Full Bench observed in McCulloch v Calvary Health Care Adelaide, ‘while the task of determining an anticipated period of employment can be difficult, it must be done.’

[11] Once this first step has been undertaken, various adjustments are made in accordance with s.392 and the formula for matters including monies earned since dismissal, contingencies, any reduction on account of the employee’s misconduct and the application of the cap of six months’ pay. This approach is however subject to the overarching requirement to ensure that the level of compensation is in an amount that is considered appropriate having regard to all the circumstances of the case.” (My emphasis – references omitted)

[99] The Sprigg formula was discussed and refined in Ellawala v Australian Postal Corporation 54 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.

[32] Any amount provisionally arrived at by application of these steps is subject to whether offsetting weight is given to other circumstances, including those that need now to be taken into account under paragraphs 170CH(7)(a), (b) and (c). The legislative cap on the amount able to be ordered is then applied pursuant to ss.170CH(8) and (9).

[33] The first step in this process – the assessment of remuneration lost – is a necessary element in determining an amount to be ordered in lieu of reinstatement. Such an assessment is often difficult, but it must be done. As the Full Bench observed in Sprigg:

“…we acknowledge that there is a speculative element involved in all such assessments. We believe it is a necessary step by virtue of the requirement of s.170CH(7)(c). We accept that assessment of relative likelihoods is integral to most assessments of compensation or damages in courts of law.”

[34] Lost remuneration is usually calculated by estimating how long the employee would have remained in the relevant employment but for the termination of their employment. We refer to this period as the “anticipated period of employment”. This amount is then reduced by deducting monies earned since termination. Only monies earned during the period from termination until the end of the “anticipated period of employment” are deducted. An example may assist to illustrate the approach to be taken.

[35] In a particular case the Commission estimates that if the applicant had not been terminated then he or she would have remained in employment for a further 12 months. The applicant has earned $3,000 a month for the 18 months since termination, that is $54,000. Only the money earned in the first twelve months after termination – that is $36,000 – is deducted from the Commission’s estimate of the applicant’s lost remuneration. Monies earned after the end of the “anticipated period of employment”, 12 months after termination in this example, are not deducted. This is because the calculation is intended to put the applicant in the financial position he or she would have been in but for the termination of their employment.

[36] The next step is to discount the remaining amount for “contingencies”. This step is a means of taking into account the possibility that the occurrence of contingencies to which the applicant was subject might have brought about some change in earning capacity or earnings.

[45] In relation to the fourth step set out in Sprigg we note that the usual practice is to settle a gross amount and leave taxation for determination.” (my emphasis, references omitted)

[100] In Balaclava Pastoral Co Pty Ltd t/a Australian Hotel Cowra v Darren Nurcombe, 55 the Full Bench stated that in quantifying compensation, it is necessary to set out with some precision the way in which the various matters required to be taken into account under s.392(2) (and s.392(3) if relevant), and the steps in the Sprigg formula, have been assessed and quantified. The Full Bench also proffered that the way in which a final compensation amount has been arrived at should be readily apparent and explicable from the reasons of the decision-maker.

[101] I will assess compensation having regard to these matters.

Remuneration that would have been received if the dismissal had not occurred – s.392(2)(c)

[102] The agreed position at the hearing was that Mr Palibrk’s gross earnings were $131,000 per annum which was paid by XL Express at the rate of $2,519.25 per week, together with an additional weekly payment in relation to his entitlement to a motor vehicle equating to $97.58 per week. 56 The combined total is $2,616.83 gross per week. Additionally, Mr Palibrk’s evidence was that at the time of his dismissal he was receiving $2,080 gross per week in workers’ compensation payments.

[103] Mr Palibrk was aged 62 years at the time of his dismissal. He submits his employment would have continued indefinitely or for at least a further three years to come.

[104] XL Express submits the probability is that Mr Palibrk’s performance would not have improved to the standard required by management and that he would have resigned or “self-selected” for termination within one or two months.

[105] Having regard to the certificates of capacity during and following Mr Palibrk’s employment and the lack of prognosis suggesting a return to work, I am not satisfied that Mr Palibrk would have remained in employment with XL Express for a further period beyond the eight week notice period to which he was entitled, had it been honoured. Based on the rate of earnings Mr Palibrk was receiving at the date of his dismissal, the remuneration he would have received during that period would have been $16,640.00 (gross). This is the starting point.

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

[106] Remuneration earned from the date of dismissal to the date of any compensation order is required to be taken into account under s.392(2)(e) of the Act. Remuneration reasonably likely to be earned from the date of any compensation order to the date the compensation is paid is also, to be taken into account (under s.392(2)(f) of the Act). Any remuneration likely to be earned after that date to the end of the period of anticipated employment determined for the purpose of s.392(2)(c) is a relevant amount to be taken into account under s.392(2)(g) in accordance with the Sprigg formula. 57

[107] Mr Palibrk has not earned any additional remuneration but has continued to be paid workers’ compensation payments. He has therefore earned approximately $2,080.00 gross per week in the 22 weeks since termination and this means he has earned $45,760.00 in the period from the date of his dismissal to date.

[108] As to the consideration in s.392(2)(f) of the Act, there is no evidence suggesting Mr Palibrk is not reasonably likely to continue to earn $2,080 gross per week during the period between now and the date upon which I would order that the compensation be payable (21 days).

[109] However, as stated by the Full Bench in Ellawala v Australian Postal Corporation: 58

“Monies earned after the end of the “anticipated period of employment” … are not deducted. This is because the calculation is intended to put the applicant in the financial position he or she would have been in but for the termination of their employment.”

[110] This means in mathematical terms, the actual income for Mr Palibrk in the 8-week period from the date of his dismissal ($16,640.00 gross)) equates to the amount calculated for the purpose of s.392(2)(c) ($16,640), 59 leaving zero compensation.

Length of service – s.392(2)(b) and any other matters – s.392(2)(g)

[111] Mr Palibrk had been employed full time for nine years and 4 months at the time of his dismissal. He was dismissed without notice nor payment in lieu for what would otherwise have been his entitlement of eight weeks’ notice. It is appropriate to consider and take into account Mr Palibrk’s length of service and his contractual entitlement to notice under s.392(2)(b) and/or as a relevant matter under s.392(2)(g). 60 In this matter, I consider it is appropriate for Mr Palibrk to be compensated for not having been afforded his contractual entitlement to notice, the denial of which he suffered because of his unfair dismissal. The quantum of eight weeks’ pay at Mr Palibrk’s ordinary rate of pay of $2,616.83 per week produces a total of $20,934.64 gross.

[112] I do not consider there is any basis for any deduction for contingencies in this matter and it will be left to XL Express to deduct taxation required by law.

Viability – s.392(2)(a)

[113] There was no evidence before me that would support a finding that an order for compensation will affect the viability of XL Express in any material way and there will be no deduction made having regard to this factor.

Mitigation efforts – s.392(2)(d)

[114] In considering whether Mr Palibrk has taken steps to mitigate the loss suffered as a result of the dismissal, I note he was going to be consulting with a pain specialist and attending follow-up with the surgeon who operated on his shoulder. There will be no adjustment on account of this factor.

Misconduct – s.392(3)

[115] This factor does not arise in the case.

Compensation cap – s.392(5)&(6)

[116] The amount of compensation I order must not exceed the lesser of:

1) the amount Mr Palibrk received or was entitled to receive during the 26 weeks immediately prior to his dismissal (in this case $2,616.83 gross x 26 weeks = $68,037.58); 61 and

2) half the amount of the high income threshold immediately before the dismissal (in this case $148,7000 ÷ 2 = $74,350.00). 62

[117] As such, the compensation cap in this matter is $68,037.58 gross and the amount of compensation proposed is below this.

Instalments – s.393

[118] I do not consider that there is any reason for compensation to be made by way of instalments.

Shock, Distress – s.392(4)

[119] The amount of compensation calculated must not and will not include a component for shock, distress, humiliation or other analogous hurt caused to Mr Palibrk by the manner of his dismissal.

Conclusion

[120] I am satisfied that Mr Palibrk was protected from unfair dismissal, that the dismissal was unfair and that order for compensation is an appropriate remedy in all the circumstances. The overarching requirement in assessing compensation is to ensure that the level of compensation is in an amount that is considered appropriate having regard to all the circumstances of the case. 63 In this case, I consider the appropriate amount of compensation to be awarded to Mr Palibrk equates to $20,934.64, less taxation as required by law.

[121] An order requiring the payment of this amount within 21 days will be issued with this decision.”

Palibrk v XL Express XL (Personnel) Pty Ltd (2020) FWC 5557 delivered 19 October 2020 per  Clancy DP