Unfair dismissal and compensation

You are here:
< Back

Unfair dismissal; compensation principles

There are times when the dismissal of an employee may be judged by the Fair Work Commission as relevantly unfair, and thus warrants compensation to be paid, based solely upon a procedural deficiency rather than the merits of the substantive reason for the dismissal.

Similarly, there are occasions when the Fair Work Commission concludes that the dismissal of the employee was inevitable in the sense that there is nothing which the employee could have said and done to prevent the dismissal had the employer followed a reasonable process and afforded the employee an opportunity of defending himself or herself.

In such a situation, the Commission’s approach to the assessment of compensation must be limited to calculating the economic loss the employee would have suffered but only in the time it would have taken for a procedurally fair process to be followed.

“If the Applicant’s dismissal was inevitable then the Appellant is correct in contending that the starting point in assessing compensation is how long a procedurally fair process would have taken. The Respondent contested the inevitability of dismissal submitting, during the course of oral argument:

‘… it comes to this question of procedural fairness and whether or not my client’s dismissal was inevitable because we say that the words reasons supporting the dismissal by the Commissioner do not equate to dismissal being inevitable …’ 12

Contrary to the submission put we are satisfied that the Commissioner’s reasons amount to a finding that dismissal was inevitable, so much is apparent from [92] of the Substantive Decision:

‘[92] The allegations were not clearly put to him for response. He was not afforded the opportunity to view the footage of the incident prior to the dismissal. The addition of his responses after dismissal has not however, undermined the reasons supporting the dismissal.’ (emphasis added)

The circumstances of the present matter are that the following findings have either been made directly or may be inferred:

  • there was a valid reason for the dismissal;
  • there was an absence of procedural fairness;
  • the dismissal was unfair solely due to the absence of procedural fairness; and
  • the Applicant’s dismissal was inevitable.

In such circumstances the finding required by s.392(2)(c) involves assessing the duration of a procedurally fair process. 13

Contrary to the Respondent’s submission the Full Bench decision in Federation Training v Mr Peter Sheehan (Federation) 14 is entirely distinguishable from the present matter. In Federation the Member at first instance had concluded that Mr Sheehan’s dismissal was ‘harsh and unjust’, and therefore unfair, for the following reasons:

‘… while the Respondent has established a valid reason it failed to notify the Applicant of the reason for his dismissal in plain and clear terms prior to the decision having been made; it had failed to provide the Applicant with an opportunity to respond to the reasons for the dismissal and it had accorded insufficient weight to Applicant’s age and length of service with the Respondent. On balance I am satisfied that these factors rendered the dismissal harsh and unjust.’ 15 (emphasis added)

In Federation there is a clear finding that the dismissal was harsh and unjust, based on the procedural deficiencies and the Applicant’s age and length of service. The present case is very different. There is no finding of harshness; the sole basis for the finding of unfairness rests on procedural deficiencies and dismissal was inevitable.

The Commissioner’s finding in respect of s.392(2)(c) involved both an error of principle and a significant error of fact. On that basis we are satisfied that it is in the public interest to grant permission to appeal and we grant permission. On the basis of the errors identified we uphold the appeal and quash the Commissioner’s Compensation Decision and Order.

We now turn to the rehearing of the question of compensation.

The Appellant submits that a compensation payment of 3 weeks’ pay would be appropriate – one week to address the procedural deficiencies and a further two weeks to mitigate the harshness of the termination, in view of Mr Pericich’s personal circumstances. The Appellant proposes that this amount ($4038.46) should be reduced by 30% on account of Mr Pericich’s conduct and on that basis arrives at a compensation order for $2826.92).

The Respondent submits that should we find that the Commissioner erred in her approach to determining the quantum of compensation we should nevertheless conclude that ‘the quantum arrived at was fair and just in all the circumstances’. As the Respondent puts it:

‘The length of Mr Pericich’s employment, employment record, clean traffic history and his relationship with his colleagues favour the award of compensation Commissioner Spencer deemed in her overarching decision to be appropriate.’ 16

We now turn to the factors which s.392(2) directs that we take into account.

We accept the Appellant’s submission that a procedurally fair process would have taken 1 week. Given the Commissioner’s finding that dismissal was inevitable it follows that the starting amount (s.392(2)(c)) is 1 weeks’ pay.

Mr Pericich made efforts to mitigate his loss (s.392(2)(d)). The amount of remuneration Mr Pericich has earned since his dismissal is not relevant for present purposes because it was earned well after the prospective period of employment, a point conceded by the Appellant. Nor is s.392(2)(f) relevant in the present circumstances.

The Respondent’s length of service – 4 years and 7 months – favours an award of compensation of in excess of 1 weeks’ pay.

As to other relevant matters (s.392(2)(g)) we have had regard to all of the material before the Commissioner and the parties’ subsequent written and oral submissions in the appeal. In particular, we note that the Applicant’s conduct involved taking an unnecessary risk that could have resulted in a serious accident and that the dismissal has had a significant adverse impact upon the Applicant, given his personal circumstances.

The Respondent and his partner support a 7 year old daughter with autism (who had an NDIS application pending) and an adult son (19 years) with special needs who does not live at home (and had a Centrelink application pending). 17 The Respondent and his partner also have a mortgage on a rental property which is not covered by the rent because of the low value of houses in Townsville.18 These matters are set out in more detail in the Respondent’s supplementary written submissions of 6 September 2018 at [10] to [37].

The strict application of the approach set out in Sprigg v Paul’s Licensed Festival Supermarket (Sprigg), 19 and endorsed in subsequent decisions, would yield an order that Mr Pericich be paid compensation of 1 weeks’ pay. Sprigg is a useful servant, but is not to be applied in a rigid determinative manner. In deciding the amount of a compensation order the Act directs that the Commission ‘must take into account all of the circumstances of the case’ including the particular matters set out at s.392(2)(a) to (g).

We have taken all of the circumstances into account including that there was a valid reason for dismissal based on the Applicant’s conduct, the Applicant has received a payment in lieu of notice, and the matters at s.392(2)(b) to (g), insofar as they are relevant. We have determined that an order for the payment of 6 weeks’ compensation is appropriate, having regard to the matters set out at [36] and [38] above. We are satisfied that Mr Pericich’s misconduct contributed to the employer’s decision to dismiss him and reduce the amount we would otherwise order by 1 weeks’ pay on account of his misconduct (s.392(3)).

We have decided to make an order for 5 weeks’ compensation ($6730.88), less applicable tax, with 7 days. The amount we propose to order does not include any component by way of compensation for shock, distress or humiliation or other analogous hurt, caused to Mr Pericich by the manner of his dismissal (see s.392(4)). Such order will have no effect on the viability of the employer’s enterprise (s.392(2)(a)).

In conclusion, we grant permission to appeal, uphold the appeal, quash the Commissioner’s Compensation Decision and Order, and order that Hanson Construction Materials Pty Ltd pay Mr Pericich $6730.77, within 7 days.”

Hanson Construction Materials Pty Ltd v Pericich (2018) FWCFB 5960 delivered 13 November 2018 per Ross J, Masson DP and Lee C