[2016] FWCFB 7206 |
FAIR WORK COMMISSION |
DECISION |
Fair Work Act 2009
s.604 - Appeal of decisions
VICE PRESIDENT HATCHER |
|
Appeal against decision [2016] FWC 5927 of Commissioner Platt at Adelaide on 22 August 2016 in matter number U2016/5951.
Introduction
[1] Double N Equipment Hire Pty Ltd t/a A1 Distributions (A1 Distributions) has applied for permission to appeal and appealed a decision of Commissioner Platt issued on 22 August 2016 1 (Decision). In the Decision, the Commissioner found that A1 Distributions’ summary dismissal of Mr Alan Humphries on 29 March 2016 for serious misconduct was harsh, unjust and unreasonable, and ordered it to pay Mr Humphries compensation in the amount of $32,305.00 as a remedy. A separate order was issued to give effect to the Decision on 22 August 20162 (Order).
[2] The grounds of appeal contained in A1 Distributions’ notice of appeal were as follows:
1. The learned Commissioner erred in his calculation of any compensation payable by failing to take into account the Respondent’s evidence that the Applicant was in receipt of workers compensation payments at all relevant times.
2. The award of compensation was excessive.
3. The learned Commissioner placed undue weight and emphasis on the apparent contents of the relevant parcel rather than noting its direction to be treated by the Applicant as ‘dangerous goods’ regardless of its content.
4. The Applicant’s conduct did justify summary dismissal.
SIGNIFICANT ERRORS OF FACT
5. The learned Commissioner erred in not finding the Applicant had been in receipt of income in the form of weekly payments of compensation since the termination of his employment by the Respondent.
6. The learned Commissioner erred in his acceptance of the Applicant’s uncorroborated evidence in light of the Respondent’s evidence in its entirety.
[3] It may be seen that grounds 3, 4 and 6 involve a challenge to the Commissioner’s finding that Mr Humphries’ dismissal was harsh, unjust and unreasonable, and grounds 1, 2 and 5 challenge in the alternative the Commissioner’s quantification of the compensation to be paid to Mr Humphries.
[4] The appeal was one to which s.400(1) of the Fair Work Act 2009 (FW Act) applied. Section 400(1) provides:
(1) Despite subsection 604(2), the FWC must not grant permission to appeal from a decision made by the FWC under this Part unless the FWC considers that it is in the public interest to do so.
[5] Accordingly it was necessary for A1 Distributions to demonstrate that it was in the public interest that permission to appeal be granted. Its notice of appeal identified only the following matter as attracting the public interest:
“By failing to make an allowance for the workers compensation payments received by the Applicant, the Commissioner has permitted the worker essentially to “double-dip”. It is therefore in the public interest to grant permission for the appeal to ensure the Court process is not used by parties to effectively recover twice or benefit to the detriment of the other party.”
[6] No public interest consideration was identified as relevant to those grounds which were concerned with the finding that the dismissal was unfair - that is, grounds 3, 4 and 6.
[7] The issue of permission to appeal was the subject of a preliminary hearing before a differently constituted Full Bench (Hatcher VP, Clancy DP and Cirkovic C) on 10 October 2016. On 28 October 2016 the Full Bench informed the parties that it had determined that it had decided to grant permission to appeal in respect of grounds 1, 2 and 5, and that permission to appeal was otherwise refused. This decision was made on the basis that grounds 1, 2 and 5 were arguable and the nature of the errors alleged meant that it was in the public interest to grant permission to appeal in respect of those grounds, but no reason was advanced by A1 Distributions or was identifiable as to why permission to appeal should be granted in relation to grounds 3,4 and 6.
[8] Pursuant to the limited grant of permission to appeal, A1 Distributions’ appeal against the compensation amount was heard before us on 12 December 2016.
The Decision
[9] The Commissioner’s factual findings in the Decision record three matters of relevance to the assessment of compensation:
[10] Having found that Mr Humphries’ dismissal was unfair, the Commissioner firstly considered whether reinstatement was the appropriate remedy. He recorded that Mr Humphries did not seek reinstatement, and that he was satisfied that it was not appropriate to order reinstatement. We note that neither party challenged that finding in the appeal.
[11] The Commissioner then turned to consideration of the remedy of compensation, and took the approach of dealing with each matter required to be dealt with in s.392(2) in turn and assessing compensation in accordance with the approach taken in Sprigg v Paul’s Licensed Festival Supermarket. 6 In accordance with that approach the Commissioner first found that, for the purpose of s.392(2)(a), there was no evidence that any order for compensation would affect the viability of A1 Distributions, and then in relation to s.392(2)(b) took into account that Mr Humphries’ length of service was five years and three months. In relation to s.392(2)(c), which concerned “the remuneration that the person would have received, or would have been likely to receive, if the person had not been dismissed”, the Commissioner’s conclusions were as follows:
“[85] Whilst prior to the dismissal Mr Humphries had been verbally counselled in relation to two other minor matters, I do not believe these would have impacted his on-going employment had the dismissal not occurred.
[86] Mr Humphries asserted his financial circumstances required him to work. This does not appear to be in dispute. Mr Humphries stated he had intended to work for another 3 years before retiring.
[87] In the circumstances I believe it is reasonable to assess compensation in this matter on the basis that Mr Humphries would, on the balance of probabilities, have remained in employment for a further period of 2 years, however I discount this by 50% as it is possible that Mr Humphries may have ceased work earlier due to ill heath, capacity, dismissal or other reasons. This arises from the length and nature of Mr Humphries employment, his work performance, age and what I know of his injury.”
[12] Under s.392(2)(d) (mitigation of loss), the Commissioner found that Mr Humphries had “actively sought alternative employment without success”. 7 Under s.392(2)(e) and (f) (“the amount of any remuneration earned by the person from employment or other work during the period between the dismissal and the making of the order for compensation” and “the amount of any income reasonably likely to be so earned by the person during the period between the making of the order for compensation and the actual compensation”) the Commissioner found:
“[89] Mr Humphries was in receipt of workers compensation payments at the 100% level for six months prior to his dismissal. In the absence of his return to work Mr Humphries would be entitled to an additional six months payments at 100% of his earnings and then payments at 80% for an additional 12 months. These payments must be considered as income, however it is not guaranteed that they will be received, on that basis I have discounted the workers compensation income by 50%.”
[13] The Commissioner then under s.392(2)(g) took into account that Mr Humphries was not paid the five weeks’ notice to which he was entitled on termination. His final conclusions were as follows (footnotes omitted):
“[92] The maximum compensation limit in this case would be the lesser of 26 weeks remuneration or half the high income threshold immediately before the dismissal. The amount of compensation awarded is less than this limit.
[93] Taxation is to be paid on the amount determined.
[94] I believe that the compensation confirmed below is appropriate having regard to all of the circumstances of this matter and the considerations specified by the Act.
[95] I award compensation in the amount of $32,305.00.”
[14] The calculation used to arrive at the amount of $32,305.00 appears to have been as follows:
(1) Mr Humphries would have been employed for a further 12 months if he had not been dismissed. The starting point of the calculation was therefore 52 weeks x $1,775.00 (the weekly wage at the time of dismissal) = $92,300.00.
(2) Deducted from this was an amount of $59,995.00 calculated as follows:
The 26 weeks @ 100% of 1,775 per week |
= $46,150.00 |
52 weeks @ 80% of 1,775 per week |
= $73,840.00 |
Subtotal |
= $119,990.00 |
Reduce by 50% |
= $59,995.00 |
(3) $92,300.00 less $59,995.00 equals $32,305.00. This is less than the cap on compensation under s.392(5), which is $46,150.00 (26 x $1,775.00), and therefore is the compensation amount.
The Appeal - consideration
[15] Section 392 of the FW Act relevantly provides as follows:
392 Remedy - compensation
Compensation
(1) An order for the payment of compensation to a person must be an order that the person's employer at the time of the dismissal pay compensation to the person in lieu of reinstatement.
Criteria for deciding amounts
(2) In determining an amount for the purposes of an order under subsection (1), the FWC must take into account all the circumstances of the case including:
(a) the effect of the order on the viability of the employer's enterprise; and
(b) the length of the person's service with the employer; and
(c) the remuneration that the person would have received, or would have been likely to receive, if the person had not been dismissed; and
(d) the efforts of the person (if any) to mitigate the loss suffered by the person because of the dismissal; and
(e) the amount of any remuneration earned by the person from employment or other work during the period between the dismissal and the making of the order for compensation; and
(f) the amount of any income reasonably likely to be so earned by the person during the period between the making of the order for compensation and the actual compensation; and
(g) any other matter that the FWC considers relevant.
…
Compensation cap
(5) The amount ordered by the FWC to be paid to a person under subsection (1) must not exceed the lesser of:
(a) the amount worked out under subsection (6); and
(b) half the amount of the high income threshold immediately before the dismissal.
(6) The amount is the total of the following amounts:
(a) the total amount of remuneration:
(i) received by the person; or
(ii) to which the person was entitled;
(whichever is higher) for any period of employment with the employer during the 26 weeks immediately before the dismissal; and
(b) if the employee 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 employee for the period of leave in accordance with the regulations.
[16] The well-established approach to the assessment of compensation under s.392 of the FW Act, taking into account the matters specified in s.392(2), is to apply the “Sprigg formula” derived from the Australian Industrial Relations Commission Full Bench decision in Sprigg v Paul Licensed Festival Supermarket. 8 This approach was articulated in the context of the FW Act in Bowden v Ottrey Homes Cobram and District Retirement Villages9. 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’...”
[17] The identification of this starting point amount “necessarily involves assessments as to future events that will often be problematic” 10. 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.11
[18] In this case, the critical factual consideration relevant to the assessment of compensation was that, having been on workers’ compensation benefits for a period of about six months prior to 21 March 2016 because of a shoulder injury, Mr Humphries then suffered a re-injury upon his return to work on 21 March 2016 and prior to his dismissal on 29 March 2016. This caused him to go back on workers’ compensation benefits, and he remained on such benefits at the time of the hearing before the Commissioner. The incapacity caused by this re-injury was necessarily determinative of Mr Humphries’ future earnings capacity, whether he was dismissed or not.
[19] We consider that the Commissioner failed adequately to take account of this factual situation, and this caused him, with respect, to depart from the well-established approach we have described and to err in his assessment of compensation in the following respects:
(1) In determining, for the purpose of s.392(2)(c), the remuneration amount Mr Humphries would have received or would have been likely to receive had he not been dismissed, the Commissioner failed to proceed on the basis that Mr Humphries would in any event have still been on workers’ compensation benefits because of his injury and would have remained so unless he became fit for a full or partial resumption of his duties. To the extent that Mr Humphries would have remained employed for a further 12 months, in the absence of medical evidence demonstrating that a return to work was likely, the amount of remuneration for the purpose of s.392(2)(c) (or Step 1 in the Sprigg formula) should have been calculated on the basis of the workers’ compensation benefits he had received or would receive, not his weekly wage at the time of dismissal. It was common ground that under s.39 of the Return to Work Act 2014 (SA) (RTW Act), Mr Humphries was entitled to 100% of his normal wages for the first 12 months off work and 80% thereafter. Taking into account the first six months of injury prior to 21 March 2016, that meant that Mr Humphries would have received the 80% amount from about September 2016. The Commissioner over-estimated the starting point amount by calculating the whole period of anticipated employment using the full weekly wage.
(2) In relation to s.392(2)(e), the amount of remuneration which Mr Humphries had received from the date of his dismissal to the date of the Order (or at least to the date of the hearing) was a known or ascertainable amount. It consisted of the actual amount of the workers’ compensation payments which Mr Humphries had received over that period. However the Commissioner, in considering s.392(2)(e) and (f) in a “rolled-up fashion”, made the past workers’ compensation payments as well as the likely future payments subject to a contingency factor of 50%. While there was a logical basis to subject future payments to a contingency factor, there was no basis to subject the past payments to any such contingency factor because it was known that they had actually been paid. This meant that the deduction from the starting point figure required under s.392(2)(e) was under-estimated.
(3) In relation to s.392(2)(e) and (f), the Commissioner calculated the remuneration that Mr Humphries had received or would receive by reference to workers’ compensation payments at 100% of normal wages for six months and 80% of normal wages for a further 12 months - that is, he assessed it over a period of 18 months. This was inconsistent with the 12 months estimate of further employment under s.392(2)(c). As stated by the Full Bench in Ellawala v Australian Postal Corporation 12 (cited with approval in Bowden13):
“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.”
[20] We therefore consider that the Decision was attended by appealable error. Accordingly, permission to appeal having been granted, we order that:
(1) That part of the Decision concerned with the assessment and determination of compensation is quashed.
(2) The Order is quashed.
Re-determination of compensation amount
[21] It remains necessary to re-determine the amount of compensation to be awarded to Mr Humphries for his unfair dismissal. We propose to undertake that task ourselves rather than remitting the matter to a single member of the Commission. We note at the outset that it was not in dispute that it was appropriate for an order for compensation to be made.
[22] We determined at the hearing to admit further evidence adduced by each party. A1 Distributions relied upon an affidavit sworn by Ms Tracey Anne Kerrigan, a solicitor, on 4 November 2016, which annexed a number of documents. Mr Humphries relied upon a further witness statement made by himself on 23 November 2016, which also has a number of documents annexed, and a witness statement made by his wife, Ms Lizabeth Humphries, on the same date. The matters which appear to us to be relevant arising from this additional evidence are as follows:
[23] It is also necessary to pay some attention to the provisions of the RTW Act, because they are relevant to assessing what Mr Humphries future income-earning prospects are. We have already referred to the amounts of compensation Mr Humphries is liable to receive because of his injury. In addition to the following rights and obligations under the RTW Act are relevant:
[24] Of critical importance is that the obligation on the employer in s.18(1) to provide suitable employment, and the right of the employee to seek an order from the Tribunal under s.18(5) if such suitable employment is not provided upon the provision of written notice under s.18(3), survives any dismissal of employee after the commencement of the incapacity for work. This was confirmed by the Tribunal (Deputy President Judge PD Hannon) in Walmsley v Crown Equipment Pty Ltd 14, which said (footnote omitted):
“[98] The question arose during the course of submissions as to whether, assuming no invalidity on constitutional grounds, s 18 of the RTW Act empowered the Tribunal to order that an employer provide suitable employment to a worker who had been dismissed after the compensable injury and before invoking the s 18 jurisdiction. Each of counsel for the applicant, the Attorney-General and the Corporation contended that the Tribunal had such power, and that the provision applied whether or not the worker remained in employment or had been dismissed.
[99] The position adopted by counsel for Crown, in raising the constitutional issue of inconsistency with s 394 of the FW Act, necessarily assumed that s 18 of the RTW Act purported to confer power on the Tribunal to make an order for re-employment of a dismissed worker. However, as I understood its submissions, Crown contended in the alternative that if s 18 was valid, it did not allow for an order for re-employment of a dismissed worker, and was intended to apply only to a worker who had remained in employment since the relevant injury.
[100] In my view the RTW Act contemplates that the remedy under s 18 is available to a worker whether or not that worker has been dismissed from his or her employment subsequent to the compensable injury. The remedy is available to a “worker” as against an “employer”. Under s 4, both “worker” and “employer” are defined to include a “former worker” and a “former employer”. There is nothing in s 18 to suggest that this extended meaning should not apply in that jurisdiction. Further, as observed above, s 20(1) of the RTW Act, a provision in Part 2 Division 3 in which s 18 appears, contemplates that an injured worker may be dismissed lawfully with appropriate notice. There is no indication in the RTW Act that any such dismissal will result in the s 18 remedy no longer being available to the dismissed worker.”
[25] We will assess compensation having regard to these matters.
Remuneration that would have been received if the dismissal had not occurred (s.392(2)(c))
[26] We consider that, had he not been dismissed, Mr Humphries would have been employed by A1 Distributions for at least another 2 years. We accept that his desire had been to continue to work for A1 Distributions for another 3 years, but we consider his age and his injury would probably have caused the employment to end sooner than that.
[27] The income that Mr Humphries has received since his dismissal to the date of this decision consists, as earlier stated, of his workers’ compensation payments - presumably paid by reference to his weekly income of $1,815.00 (although the precise figure is not clearly ascertainable on the material before us. He was paid at 100% of weekly income until September 2016, and at 80% since that time. The income he would have earned over the same period had he not been dismissed would have been the same.
[28] Mr Humphries would have continued to be paid at 80% of his former weekly earnings until the 104 weeks of weekly compensation ceased in about September 2017 unless he recovered sufficiently to return to work at his full former rate of pay. On the medical evidence before us there was some prospect that that would have occurred, but only if Mr Humphries underwent the surgery recommended by Dr Wallwork. Mr Humphries has not decided to undergo such surgery, so we can only assess that there is a 50% prospect that he would have done so had he not been dismissed. If he did, there is a 60% chance the surgery would be successful and he would be able to return to pre-injury duties and earn his full weekly wage. Allowing for recovery, the earliest time Mr Humphries could have returned to work if the surgery occurred and was successful would be about March 2017, one year on from the date of his dismissal. That makes an overall chance of 30% of a return to work at the pre-injury rate for the last 12 months of the 2-year period. That represented a 30% chance of receiving an additional 20% remuneration in the period March-September 2017, and a 30% chance of receiving the whole amount of $1820 from September 2017 until March 2018. For the last six months period, if there had not been a return to work, Mr Humphries might have received social security benefits or lump sum compensation, but we do not propose to take this into account for the purpose of the calculation.
[29] The amount Mr Humphries would have earned but for the dismissal may therefore be calculated as follows:
26 x $1820 = |
$47,320.00 |
52 x $1456 (80% x $1820) = |
$75,712.00 |
30% x 26 x $364 (20% x $1820) = |
$2,839.20 |
30% x 26 x $1820 = |
$14,196.00 |
TOTAL = |
$140,067.20 |
[30] Thus the “starting point” amount is $140,067.20
Remuneration earned (s.392(2)(e)) and income reasonably likely to be earned (s.392(2)(f) and (g))
[31] 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). Remuneration reasonably likely to be earned from the date of any compensation order to the date the compensation is paid is to be taken into account under s.392(2)(f). 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, we consider, a relevant amount to be taken into account under s.392(2)(g) in accordance with the Sprigg formula. This would include any future workers’ compensation payments likely to be made.
[32] The unusual but critical feature of this case is that it is not possible to identify any basis upon which Mr Humphries’ dismissal could have affected the remuneration he has and is likely to receive in the future over the period of anticipated employment. Having suffered a re-injury to his shoulder, his income over the 2-year period of anticipated employment was determinable by reference to his rights under the RTW Act, which were not as explained affected by his dismissal. The workers’ compensation payments he has actually received since his dismissal to date are the same as he would have received had he not been dismissed. Likewise there is no basis to conclude that Mr Humphries’ future rights to workers’ compensation payments, and his future prospects of a return to work at his pre-injury rate of pay, were in any way affected by his dismissal. He remains in the same position by reason of his injury.
[33] In mathematical terms, that means the actual and likely income of Mr Humphries in the two-year period from the date of his dismissal would be the same as the amount calculated for the purpose of s.392(2)(c) - $140,067.20. That amount is deducted from the starting point amount and leaves zero compensation.
Length of service (s.392(2)(b)) and other matters (s.392(2)(g))
[34] We note that in the Decision the Commissioner found that Mr Humphries’ was denied five weeks’ pay in lieu of notice because he was summarily dismissed for serious misconduct which he determined had not actually occurred. 15 We consider that this is a matter connected to Mr Humphries’s length of service and is therefore to be taken into account under s.392(2)(b), and/or is a relevant matter under s.392(2)(g). We consider that Mr Humphries should be compensated for this loss which he suffered because of his unfair dismissal. Five weeks’ pay at $1,820.00 per week gives a total of $9,100.00. We will not attempt to assess this amount net of taxation, but simply require this amount to be paid subject to any deduction of taxation required by law.
Viability (s.392(2)(a))
[35] An order for compensation in the amount of $9,100.00 would not affect the viability of A1 Distributions.
Mitigation efforts (s.392(2)(d))
[36] We agree with the Commissioner that Mr Humphries has made reasonable efforts to mitigate his loss by seeking alternative employment. 16 There will be no adjustment on this score.
Misconduct (s.392(3))
[37] Based on the findings of the Commissioner, Mr Humphries did not commit any misconduct requiring a deduction under s.393(3).
Compensation cap (s.392(5))
[38] The amount of compensation proposed is below the compensation cap.
Instalments (s.393)
[39] We do not consider that there is any reason for compensation to be made by way of instalments.
Conclusion
[40] The amount of compensation which is derived from the above considerations is $9,100.00, less deduction of any tax as required by law. We consider that is an appropriate amount of compensation in all the circumstances. A separate order will be issued giving effect to this conclusion.
VICE PRESIDENT
Appearances:
S. Richter of counsel for A1 Distributions.
D. Fabbro of counsel and P. Botros solicitor for A. Humphries.
Hearing details:
2016.
Melbourne:
10 October and 12 December.
3 Decision at [10]
4 Decision at [3]
5 Decision at [11]
6 Print R0235, (1998) 88 IR 21
7 Decision at [88]
8 Print R0235, (1998) 88 IR 21
9 [2013] FWCFB 431; 229 IR 6
10 Smith v Moore Paragon Australia Ltd PR942856, [2004] AIRC 57; (2004) 130 IR 446 at [32]
11 Ibid
12 Print S5109, [2000] AIRC 1151
13 [2013] FWCFB 431 at [24]; (2013) 229 IR 6
14 [2016] SAET 4
15 Decision at [90]
16 Decision at [88]
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