FWC rejects employer's arguments about mitigation, awards four weeks' pay
The Fair Work Commission (FWC) recently dealt with determining compensation for a worker who was found to have been unfairly dismissed by his employer after approximately 14 months of service.
The worker sought compensation based on an agreed hourly rate of $65 and presented evidence from his treating psychologist about how the dismissal affected his mental health and ability to seek new employment. His case highlighted the challenges workers face when proving appropriate compensation amounts following unfair dismissal findings.
The employer disputed the claim by providing financial records showing business constraints, arguing a lower hourly rate applied, and claiming the worker would have been dismissed shortly anyway due to conduct issues.
In November 2024, the Commission issued its initial decision finding that the worker had been unfairly dismissed from his employment. The original decision determined that while reinstatement wasn't appropriate, more evidence was needed to calculate proper compensation.
"[The worker] had been unfairly dismissed from his employment with [the employer]," stated the Commissioner in the original decision. "I gave the parties the opportunity to file and serve any evidence and/or submissions they wanted to rely on so that I could determine the compensation to be payable."
The employer appealed the unfair dismissal finding, but in February 2025, this appeal was rejected. The compensation determination had been put on hold pending this appeal outcome.
Section 392(2) of the Fair Work Act requires all case circumstances be considered when calculating compensation amounts. This provision ensures that decisions reflect the specific situation rather than applying one-size-fits-all formulas.
The worker noted the employer had previously testified that the business was performing well. However, the employer later argued that a significant payment would harm business viability and provided balance sheet evidence supporting this claim.
After reviewing the financial information, the Commissioner acknowledged the potential business impact: "Having considered the contents of the balance sheet, I accept that a significant payment will affect the viability of [the employer's] enterprise."
The Commission also examined how long the employment relationship would likely have continued without the unfair dismissal. Despite the worker's expectation of long-term employment, evidence showed a deteriorating workplace relationship.
"I do not consider [the worker's] employment would have continued for more than two months given the state of the relationship between the parties as at May 2024," the Commissioner noted, establishing a time limitation for calculating lost earnings.
The worker provided documentation from his treating psychologist detailing how both the dismissal and subsequent legal proceedings affected his mental health and ability to work. This evidence explained difficulties in finding new employment following termination.
The employer argued this demonstrated a failure to mitigate losses—a legal requirement in unfair dismissal cases—suggesting his health issues meant he couldn't have worked anyway and therefore wasn't entitled to compensation for this period.
The Commission rejected this reasoning: "I accept that [the worker's] efforts to mitigate his loss were negatively affected by his health issues, and I consider that this should not impact the compensation ordered."
The employer also claimed the worker hadn't earned any income during the relevant period due to these health issues and argued compensation should be limited to just one day's pay, effectively attempting to separate the health impacts from the dismissal itself.
A significant area of contention was the appropriate hourly rate for calculating compensation. The employer maintained the rate should be $55 per hour, while the worker argued for $65 per hour based on their previous arrangement.
The Commissioner referred to findings from the initial decision: "Having found in the First Decision that there was an agreement between the parties that [the worker] and [the employer] would be paid the same weekly rate of pay (ie $65 gross per hour for 38 hours per week), I have calculated the compensation to be payable on this rate of pay."
The employer also claimed the employment would have ended by mid-May 2024 regardless, citing the worker's conduct and "perceived misuse of his position" as grounds that would have justified termination even with proper process.
Additionally, the employer highlighted their small business status, noting they wouldn't have been required to follow extensive procedural fairness requirements even with a different dismissal approach.
The Commission applied the established compensation framework from the Sprigg v Paul's Licensed Festival Supermarket case, which guides unfair dismissal compensation calculations across Australia.
After assessing all factors—including business viability concerns, the deteriorating workplace relationship, health impacts, and the confirmed $65 hourly rate—the FWC reached its determination on the appropriate compensation amount.
"I am satisfied that this amount of compensation takes into account all the circumstances of the case as required by s.392(2) of the Act and that it does not include a component compensating for shock, distress and humiliation," concluded the Commissioner.
The final decision required the employer to pay four weeks' compensation totalling $9,880.00 gross plus superannuation, less required tax, within 28 days of the decision date.
