Alfred Health v Ron Slamowicz

[2020] FWC 6286

[2020] FWC 6286

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.400A - Application for a costs order against a party

Alfred Health
v
Ron Slamowicz
(C2020/8050)

DEPUTY PRESIDENT COLMAN MELBOURNE, 23 NOVEMBER 2020

Application for costs – compensation awarded for unfair dismissal was less than the amount offered in settlement – not a significant difference – nature of Commission’s assessment of compensation – no unreasonable act or omission

[1] This decision concerns an application by Alfred Health (hospital) for a costs order against Mr Ron Slamowicz pursuant to s 400A of the Fair Work Act 2009 (Cth) (Act).

[2] Mr Slamowicz made an application for an unfair dismissal remedy pursuant to s 394, in which he contended that he had been unfairly dismissed from his employment with the hospital. Mr Slamowicz submitted that he was constructively dismissed by the hospital when it purported to accept his resignation while ignoring the condition that he had attached to it. The hospital objected to the application on the jurisdictional ground that it had not dismissed Mr Slamowicz because he had resigned unconditionally. It further contended that, if there had been a dismissal, it was not unfair.

[3] In a decision dated 27 October 2020, 1 I concluded that Mr Slamowicz’s employment had been terminated on the hospital’s initiative, and that the hospital had therefore dismissed him. I further concluded that the dismissal of Mr Slamowicz had been unfair because, among other things, there was no valid reason for the dismissal. I considered that it was appropriate to order a remedy of compensation and that, taking into account the matters in s 392 of the Act, compensation should reflect nine weeks’ pay, being an amount of $6,919.45, less taxation as required by law.

[4] Prior to the hearing of the unfair dismissal application, the hospital had made an open offer to Mr Slamowicz to settle the matter for a gross sum of $8,000. Mr Slamowicz rejected that offer. The hospital now contends that, given its offer exceeded the amount of compensation that Mr Slamowicz obtained, his rejection of it constituted an unreasonable act or omission that caused it to incur costs in the amount of $13,496. The hospital asks the Commission to make an order under s 400A requiring Mr Slamowicz to pay these costs.

[5] Mr Slamowicz denies that there was any unreasonable act or omission on his part and says that the costs application should be dismissed.

[6] The parties agreed that the application should be determined on the papers.

Framework

[7] Section 400A of the Act provides as follows:

“Costs orders against parties

(1) The FWC may make an order for costs against a party to a matter arising under this Part (the first party) for costs incurred by the other party to the matter if the FWC is satisfied that the first party caused those costs to be incurred because of an unreasonable act or omission of the first party in connection with the conduct or continuation of the matter.

(2) The FWC may make an order under subsection (1) only if the other party to the matter has applied for it in accordance with section 402.

(3) This section does not limit the FWC’s power to order costs under section 611.”

[8] It is necessary to consider whether Mr Slamowicz “caused … costs to be incurred because of an unreasonable act or omission … in connection with the conduct or continuation of the matter.”

Background and submissions

[9] The background to Mr Slamowicz’s unfair dismissal application is set out in my decision of 27 October 2020 at [4] to [15]. My factual findings are recorded at [16] to [21]. I do not propose to summarise these matters, which are well known to the parties. I will briefly describe the settlement discussions that occurred between the parties.

[10] On 5 October 2020, Mr Slamowicz’s unfair dismissal application was the subject of a member-assisted conciliation. Each party made offers to settle the matter but no agreement was reached. On 8 October 2020, the hospital made an open offer to Mr Slamowicz to settle the matter for a payment of $8,000 with deduction of taxation of approximately $1,360 (the open offer). The hospital’s letter of 8 October 2020 stated:

“Section 400A of the Fair Work Act 2009 (Cth) provides that the Fair Work Commission may make an order for costs against a party to an unfair dismissal claim for costs incurred by the other party if the Commission is satisfied that the first party caused those costs to be incurred by an unreasonable act or omission of the first party in connection with the conduct or continuation of the matter. That is, the Commission may make an order for costs against you, for costs incurred by Alfred Health, if the Commission is satisfied that Alfred Health incurred those costs because of an unreasonable act or omission by you.

If the offer is not accepted by 12pm Monday, 12 October 2020, and you are not awarded more than the above offer, Alfred Health may seek costs against you on the basis that your non-acceptance of the offer is an unreasonable act or omission on your part pursuant to sections 400A of the Fair Work Act 2009 (Cth).”

[11] On 12 October 2020, Mr Slamowicz rejected the open offer and stated, by return letter: “This matter could be settled without any cost to the Alfred Hospital if they put me on leave from 1 July and I resume work prospectively in my former position or to any agreed role with terms and conditions no less favourable to what I had previously”.

[12] Mr Slamowicz’s unfair dismissal application was heard on 13 October 2020. In my decision of 27 October 2020, I dismissed the hospital’s jurisdictional objection and concluded that the dismissal was unfair. My reasons for doing so are set out at [26] to [33] of the decision. I ordered that Mr Slamowicz be paid compensation in the amount of $6,919.45 with deduction of taxation according to law.

[13] The hospital contends that Mr Slamowicz’s refusal to accept the open offer was an unreasonable act or omission that caused it to incur costs. It says that s 400A captures a broad range of unreasonable conduct including failure to agree to reasonable terms of settlement that could have led to the application being discontinued.

[14] The hospital submitted that it told Mr Slamowicz that it may seek costs if he failed to obtain an amount of compensation that exceeded the settlement offer, and that this is a consideration favouring a conclusion that Mr Slamowicz’s refusal to accept it was unreasonable. This is a relevant consideration however it is also appropriate to take account of the margin by which the offer exceeded the amount of compensation, which in this case was a relatively small amount of $1,080.55 gross, or a little under 15% of the offered amount.

[15] The hospital contended that its open offer was made at an early time when, had it been accepted, the costs that were subsequently incurred, and which are now the subject of the s 400A application, could have been avoided. I take account of this matter however this does not mean that Mr Slamowicz’s decision not to accept the open offer was unreasonable.

[16] The hospital submitted that its open offer was made upon a reasonable basis and was intended to encourage settlement. It said that the letter of offer explained to Mr Slamowicz that, even if he was successful in his claim, his compensable loss could not have exceeded the amount of the offer, in circumstances where his employment had ended because of his refusal to perform all of the duties of his role. But this is not in fact the reason the employment came to an end. The employment ended because the hospital purported to accept a resignation that it did not regard as conditional.

[17] The hospital further or alternatively contended that the reasonableness of its offer, and the unreasonableness of Mr Slamowicz’s rejection of it, is underscored by the Commission’s conclusion in the decision of 27 October 2020 that Mr Slamowicz faced the likelihood of disciplinary action for refusal to comply with a reasonable direction to undertake data entry duties. I agree that this fact limited the likely extent of any order for compensation, however reasonable perspectives could differ on where the line of limitation should be drawn.

[18] The hospital also submitted that Mr Slamowicz made no reasonable offer to settle the matter and instead proposed that the hospital reinstate him and retrospectively treat him as having been on paid leave, which the Commission concluded was an arrangement that the hospital could not agree to, because it would proceed upon a fiction. I agree that this particular proposal was not a reasonable one, at least insofar as it concerned the suggestion that Mr Slamowicz be deemed to have been on leave. But it was not unreasonable to propose a settlement on the basis that the hospital reinstate Mr Slamowicz, in circumstances where the hospital’s primary position was that it had never dismissed him.

[19] The hospital further contended that Mr Slamowicz was represented by an experienced advocate and therefore had access to appropriate advice, that despite this he rejected an offer that was plainly reasonable because it exceeded the amount that he was awarded in compensation, and that he made no reasonable offer to settle the matter. The hospital contended that these were unreasonable acts or omissions, and that they caused the hospital to incur legal costs. It asked the Commission to order Mr Slamowicz to pay its legal costs pursuant to the schedule of costs contained in the Fair Work Regulations 2009 (Cth) from 9 to 12 October 2020 in the amount of $13,496, as set out in its costs application, and also to pay the costs of the costs application itself.

[20] Mr Slamowicz denied that there was any unreasonable act or omission on his part in the conduct or continuation of his unfair dismissal application. He contended that he gave consideration to the hospital’s offer to settle the matter for $8,000 and noted that he requested the hospital to consider whether it could be subject to salary packaging, which he said it did not do. Mr Slamowicz also said that he conveyed to the hospital that he would consider a settlement offer of $9,000 to $10,000 gross, but that this was rejected.

[21] Mr Slamowicz further contended that the Commission’s decision to award him nine weeks’ pay was based on a range of discretionary judgements such as whether disciplinary issues would have arisen in due course, how long the employment might have continued, and whether he had mitigated his loss. He said that he made his own reasonable judgements on these matters. Mr Slamowicz submitted that the hospital could have avoided the costs it incurred if it had investigated the possibility of salary packaging the settlement amount or accepted his offer to settle for a gross amount of $9,000 to $10,000. He also contended that the Commission had rejected a key pillar of the hospital’s case, namely that it had not dismissed him, and that some of the hospital’s costs were directed at the prosecution of this unsuccessful contention.

Consideration

[22] I am not satisfied that Mr Slamowicz caused the hospital to incur the costs in question because of an unreasonable act or omission on his part in connection with the conduct or continuation of the matter. Section 392(2) of the Act requires the Commission to take into account all of the circumstances, as well as the considerations set out in s 392(2)(a) to (g), most of which are not amendable to any definitive quantification or weighting. In particular, s 392(2)(c) requires the Commission to consider the remuneration the person would have received if the person had not been dismissed. This poses a hypothetical question to which there will rarely be a categorical answer.

[23] In my earlier decision, I set out at [48] what I considered would have occurred if Mr Slamowicz had not been dismissed. This contemplated a series of events culminating in the termination of Mr Slamowicz’s employment some nine weeks later. But it must be recognised that reasonable minds can differ about the counterfactual situation to which s 392(2)(c) refers, and that the Commission’s consideration of this matter often proceeds upon a reasonable hypothesis or best estimate based on the available evidence, rather than on any likelihood or probability. I do not think it was unreasonable that Mr Slamowicz failed to anticipate the particular approach I took to s 392(2)(c) and the analysis and weighing of the other considerations. Plainly enough, I consider my approach to have been a reasonable one. But it was not the only reasonable approach that could have been adopted.

[24] In some cases where an applicant recovers less in compensation than was offered in negotiations (or where an employer rejects an offer that is later exceeded by a compensation order) it may be possible to conclude that a failure to accept the settlement offer was unreasonable. In the present case, Mr Slamowicz’s unfair dismissal application was successful. He defeated the jurisdictional objection raised by the hospital and persuaded the Commission that his dismissal was unfair. The offer of $8,000 represented a little over ten weeks’ pay. The proposition that Mr Slamowicz might, but for his dismissal, have remained employed by the hospital for longer than ten or eleven weeks and earned more than $8,000 was not beyond the bounds of reasonable possibility.

[25] I am not satisfied that Mr Slamowicz’s rejection of the offer was an unreasonable act or omission, nor do I not consider that Mr Slamowicz unreasonably failed to engage in settlement discussions. There is therefore no basis for me to award costs under s 400A. The application for costs under s 400A is dismissed.

DEPUTY PRESIDENT

Determined by written submissions:

Alfred Health, 9 November 2020
Mr Slamowicz, 16 November 2020

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 1   [2020] FWC 5720