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Calculating compensation for unfair dismissal: the principles

Arndt v Crown Business Solutions Pty Limited, Australian Industrial Relations Commission, constituted by Deputy President Ives in Melbourne on 22 July 2003 is often cited in Fair Work Commission judgments as a leading authority on the proper approach to be taken in assessing compensation for unfair dismissal, and as such provides a good illustration of the process for calculation of compensation in the industrial relations commissions. The Commission found the employer had imposed quite unreasonable demands on the applicant to complete a database and dismissal of the employee was based on a failure to meet these demands was not a valid reason for termination. The Commissioner also found that the employer had not warned the applicant about her unsatisfactory performance or provided an opportunity to respond prior to the termination. The Commissioner considered that reinstatement would not be appropriate and turned to the issue of compensation. He adopted the following process:

Firstly he assessed the applicant’s loss by considering:
the length of time the applicant would have been likely to remain in the employment had she not been terminated; and
what income the applicant would have received in that time.
Next he determined the applicant’s actual earnings since termination. Then he considered whether the applicant had undertaken made reasonable efforts to mitigate her loss.

And finally the Commissioner discounted any amount to take account of unknown contingencies such as sickness and accident. In this context, the Commissioner considered the applicant would have only continued working with the employer for a further 4 months because of the extremely demanding nature of the job, the lack of assistance from the employer and the unlikelihood of the applicant moving to another similar position in the company. The second matter is a factual one. In deciding whether reasonable efforts to mitigate loss had been taken, the Commissioner considered the number of job applications submitted and Centrelink’s involvement in seeking work on the applicant’s behalf. Finally, the Commissioner decided that no discount should be made as the likely period of employment had already passed. The Commissioner ordered payment of a gross sum subject to taxation within a period of 3 months.

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