What do employees get for unfair dismissal?

In the following decision of the Fair Work Commission in an unfair dismissal case, a senior member of the Commission sets out the legal principles which are applied when calculating compensation for unfair dismissal.

“Applications for relief from unfair dismissal remedy – applications for unfair dismissal successful – determination of remedy – compensation of two weeks’ ordered.

[1] Further to my decision of 22 December 2020, 1 having found that Mr Barratt-Hassett (the Applicant) was a protected from unfair dismissal and that he was unfairly dismissed within the meaning of s.385 of the Act, I must now consider what, if any, remedy should be granted to the Applicant.

[2] Reinstatement was not sought and would not be appropriate, given the evidence at hearing regarding the loss of trust and confidence.  2

Assessment of Compensation

[3] Section 390(3)(b) of the Act provides that the Commission may only issue an order for compensation if it is appropriate in all the circumstances. Compensation as a remedy is designed to compensate an unfairly dismissed employee, in lieu of reinstatement, for losses reasonably attributable to the unfair dismissal, within the bounds of the statutory cap on compensation that is to be applied. 3

[4] Having regard to all the circumstances of the case, I consider that an order for payment of compensation to the Applicant is appropriate. It is therefore necessary for me to assess the amount of compensation that should be ordered to be paid to the Applicants, having regard to the criteria under section 392(2) of the Act.

[5] The established approach to assessing compensation in unfair dismissal cases was set out in Sprigg v Paul Licensed Festival Supermarket 4 and applied and elaborated upon in the context of the current Act by Full Benches of the Commission in a number of cases. The recent Full Bench decision in Alison Thurston v Bunbury Medical Imaging,5 noted that as to the Sprigg formula:

“[32] 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 (Bowden). 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 (the Anticipated Period of Employment). 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’…”

[6] In Bowden, the Full Bench stated:

“[23] Section 392(2) of the FW Act is similar to s.170CH(7) of the WR Act, prior to the Work Choices amendments, and s.654(8) of the WR Act. However, s.170CH(7) and s.654(8) did not contain terms similar to ss.392(2)(e) and (f). Nonetheless, under the WR Act post dismissal remuneration of the dismissed employee was usually had regard to by the Australian Industrial Relations Commission (AIRC) in determining an amount of compensation.

[24] As much is apparent from the decision in Ellawala v Australian Postal Corporation. 9 In Ellawala a Full Bench of the AIRC said in respect of s.170CH(7) of the WR Act, prior to the Work Choices amendments:

“[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) [sic]. The legislative cap on the amount able to be ordered is then applied pursuant to ss.170CH(8) and (9).

[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…

[43] We note that in Slifka North J only applied the deduction for contingencies to prospective loss, that is loss occasioned after the date of the hearing. This approach has also been adopted in a number of first instance arbitrations by members of the Commission. As a matter of logic this approach has some appeal. A discount for contingencies is a means of taking account of the various probabilities that might otherwise affect earning capacity. At the time of hearing any such impact on an applicant’s earning capacity between the date of termination and the hearing will be known. It will not be a matter of assessing prospective probabilities but of making a finding on the basis of whether the applicant’s earning capacity has in fact been affected during the relevant period. But this matter was not raised before us and we were not directed to any evidence upon which we could make a finding as to whether Ms Ellawala’s earning capacity was adversely effected by some event which took place in the period between her termination and the hearing of the matter at first instance…

[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.” [Endnotes omitted]” 6

(Emphasis added)

[7] In light of the authorities and in accordance with the Sprigg formula, I have considered as follows, noting that s 392(2)(f) is not relevant in this matter.

[8] There is no evidence to suggest that an award for compensation would affect the viability of the employer’s enterprise and I consider this neutral (s 392(2)(a)). The Applicant’s length of service was less than one year and I do not consider this length of service requires an adjustment to any award for compensation (s 392(2)(b)).

Remuneration the Applicants would have received, or would likely have received, if they had not been dismissed (s 392(2)(c))

[9] As with any calculation of damages or compensation, this involves 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. 7

[10] The conduct of the Applicant was found to be a valid reason for termination; it was the rather abysmal conduct of the employer regarding notifying the Applicant and providing him opportunity to respond that resulted in the dismissal being unfair. It is a relatively clear inference open to me that the Applicant’s employment would have been terminated based on his conduct, just at a point later in time. It is reasonable to assume this process would not have taken any more than three weeks; this should have left ample time for the allegations to be put to the Applicant and for his response to be provided and properly considered, in line with the criteria under s 387 of the Act.

[11] The anticipated period of employment is therefore estimated to be a further three weeks from the date of termination.

Remuneration earned (s 392(2)(e))

[12] The Applicants’ evidence is that they did not earn any remuneration from any source during that anticipated period of employment and certainly up until the date of the hearing. 8

[13] Only monies earned since termination for the anticipated period of employment are to be deducted. 9 I find that for the relevant period for any award of compensation, the Applicant did not earn any monies and accordingly three weeks’ salary is the amount of remuneration the Applicant would likely have earned had they not been dismissed. This calculation is intended to put the Applicant in the position they would have been in but for the termination of their employment.10

Mitigation efforts (s 392(2)(d))

[14] There were no concerns regarding the Applicant’s efforts to mitigate their loss during the anticipated period of employment and no adjustment is necessary.

Any other relevant matter (s 392(2)(g))

[15] 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. 11 As the anticipated period of employment ended before the date of hearing, there is no prospective loss that requires an amendment to account for contingency. This is evident from the extract of Bowden above.12 I have also 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))

[16] The Applicant clearly engaged in some misconduct, given the language used in the workplace. A reduction of one weeks’ remuneration is appropriate to account for this conduct. Accordingly, the Applicant is entitled to two weeks’ compensation.

Shock, distress or humiliation, or other analogous hurt (s 392(4))

[17] 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))

[18] Compensation is below the compensation cap and therefore no reduction is required.

Instalments (s 393)

[19] No application has been made to date by the Respondent for any amount of compensation awarded to be paid in the form of instalments.

Conclusion

[20] 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, there is no basis for me to reassess the assumptions made in reaching the amount of two weeks’ compensation to the Applicant. 13

[21] The Applicant was entitled to $70,000 a year, plus superannuation of 9.5%. This is calculated to be a weekly amount of $1346, before tax and superannuation. For the reasons I have given, my view is that compensation of two weeks; in the sum of $2,692 (less taxation as required by law) is to be paid to the Applicant, plus the appropriate superannuation contributions to be paid into the Applicants superannuation account. An Order to that effect will issue with this Decision. This must be paid within 7 days of this decision.”

Barratt-Hassett v ScreenAway Australia Pty Ltd (2021) FWC 1504 delivered 19 March 2021 per Lake DP