The traditional method
The Fair Work Act 2009 ("the FWA") caps the award of compensation to an employee at 26 weeks' (6 months) income. Traditionally, this has been used as the starting point when calculating compensation, with deductions to be made for factors such as:
- any contribution the employee's conduct might have had to their dismissal,
- payment received in lieu of notice, and
- failure by the employee to mitigate their loss by searching for alternate employment after their dismissal.
What happened in Haigh?
However, in the recent case of Brett Haigh v Bradken Resources Pty Ltd T/A Bradken ("Haigh"), the Commission set out a different approach.
Instead of starting at the maximum allowable compensation of 26 weeks' income and then making deductions, the Commission firstly assessed the total amount of compensation the employee should receive based on the employee's actual loss. In this case, factors such as how long the employee would have been employed if not for the unfair dismissal, and how long they have been (and are likely to be) unemployed after the dismissal, led the Commission to calculate that the employee was entitled to compensation equivalent to 12 months' income.
This amount was then capped at the maximum 26 weeks' compensation allowed under the FWA and this is the amount the employee was awarded. This was despite finding that the employee failed to make reasonable attempts to mitigate his loss following his dismissal, the employee's dismissal resulted from misconduct and the fact that the employee had already received five weeks' notice.
The end result for the employee was a much higher amount of compensation than he probably would have received under the traditional method.
Haigh also highlights the fact that under the Fair Work Act, a dismissal can be unfair if it is either harsh, unjust or unreasonable it does not need to be all three! In this case, the dismissal was found to be just and reasonable, but the employee was still eligible for compensation because the dismissal was harsh.
This is terrific news for employees but very tough on employers! This new approach demonstrates that the Fair Work Commission can still award an employee the maximum allowable compensation of 26 weeks' income despite any factors working against the employee, such as their misconduct.
What does this mean for Employers?
Having a valid reason for dismissal will not always be enough to avoid breaching the FWA, if the employer does not follow a sound dismissal process. Therefore it is critical to have appropriate policies and procedures in place to deal with a dismissal.
The decision in Haigh also emphasises the benefits of settling unfair dismissal claims early to avoid risking a larger payout at arbitration.
If you have any queries about unfair dismissal claims, or any other employment issues, please feel free to contact Mitchell Zadow on (03) 8561 3318.
The information contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. Any legal matters should be discussed specifically with one of our lawyers.
Liability limited by a scheme approved under Professional Standards Legislation.
Mitchell is the Managing Principal of our law practice.
He is an Accredited Specialist in Commercial Law (accredited by the Law Institute of Victoria). He also deals with areas of Employment Law, Wills & Estate Planning and Probate. For further information, contact Mitchell on his direct line (03) 8561 3318.
