Court orders liquidation after dismissal claim was filed: Is reinstatement appropriate?
The Fair Work Commission (FWC) recently dealt with an unfair dismissal case involving a worker who said he was unfairly dismissed and sought compensation, claiming he would have continued working for the employer if not for the dismissal.
However, the case took a turn when it was revealed that the employer had been ordered into liquidation. This raised questions about the appropriate remedy and whether the FWC could even proceed with the case.
The FWC had previously decided that the worker was unfairly dismissed from his job at a stud farm. However, the situation changed when the Supreme Court of Queensland ordered the employer to be wound up due to insolvency on 6 August 2024. This order came after an application filed with the court on 31 May 2024.
Employer in liquidation
Despite the liquidation, the FWC decided it could continue dealing with the worker's application for an unfair dismissal remedy without the court's permission.
The Commission explained that the relevant sections of the Corporations Act 2001 did not apply to its proceedings, as it is not a court.
The remedy hearing took place on 26 September 2024. The worker represented himself, while the liquidator did not appear but submitted written comments.
The employer's director, who had appeared at the earlier liability hearing, was also absent from the remedy proceedings.
Reinstatement during liquidation?
The FWC first considered whether reinstatement was appropriate. However, it found that reinstatement was not suitable because the worker didn't ask for it and there was no job available due to the employer's liquidation.
The Commission then turned to the question of compensation. It used a method outlined in a previous case called Sprigg to calculate the compensation. This method involves estimating how much the worker would have earned if they hadn't been dismissed, taking away any money earned since then, and considering other relevant factors.
The FWC estimated that if the worker hadn't been dismissed on 3 April 2024, he would have likely kept his job for only 1.5 more weeks, until 13 April 2024. The Commission reached this conclusion based on several facts:
"[The worker] was directed, by way of a letter dated 28 March 2024, to vacate and remove all of his personal belongings from the Stud... [The worker] departed the Stud on 31 March 2024 and moved to his parents' home in Geelong (four hours travelling time from the Stud) as he was unsure that [the employer] would cover the cost of hotel accommodation nearby."
Compensation amid liquidation
The FWC calculated that for this 1.5-week period, the worker would have earned $1,442.31 plus $158.65 in superannuation. The Commission also added compensation for the notice period the worker should have received according to his employment contract, which was one month's pay totaling $4,326.93.
The FWC noted that the worker had started a new job on 15 April 2024, earning more than he did at the stud farm. However, this didn't affect the compensation calculation because it was after the estimated 1.5-week period of continued employment.
The Commission also considered the worker's efforts to find new work:
"I consider it evident that [the worker] made a reasonable effort to mitigate his loss by taking steps to apply for and commence a new role within a period of two weeks from dismissal."
FWC’s decision
After considering all factors, the FWC ordered the employer to pay the worker $5,769.24 gross, minus required tax, plus $158.65 in superannuation. The Commission said:
"I am satisfied that the above analysis takes into account the matters set out in s 392(2) of the Act, and the compensation that I have determined is, appropriately, neither excessive nor inadequate having regard to all the circumstances of the application."
The FWC also noted that the worker might be eligible for the Fair Entitlements Guarantee scheme, which could provide financial assistance for unpaid wages and leave entitlements. The Commission added:
"These matters are separate to the Commission's assessment of compensation as a remedy for [the worker's] unfair dismissal."
This case shows the various factors that can affect unfair dismissal claims, especially when employers face financial difficulties. It underscores the importance of proper termination procedures and the potential financial consequences of unfair dismissals, even in challenging business circumstances.
