Heidi Black v Baker Heart and Diabetes Institute
[2024] FWC 3570
•23 DECEMBER 2024
| [2024] FWC 3570 |
| FAIR WORK COMMISSION |
| DECISION |
Fair Work Act 2009
s.394—Unfair dismissal
Heidi Black
v
Baker Heart and Diabetes Institute
(U2024/4175)
| DEPUTY PRESIDENT CLANCY | MELBOURNE, 23 DECEMBER 2024 |
Application for an unfair dismissal remedy – reinstatement inappropriate – order for compensation appropriate – assessment of compensation – compensation assessed at $83,750 gross, less taxation required by law.
On 28 November 2024, I determined that the dismissal of Mrs Heidi Black by Baker Heart and Diabetes Institute (the Respondent) was unfair,[1] and outlined the following in relation to remedy:
“[73] Section 390 of the Act provides that, if the Commission is satisfied a person was protected from unfair dismissal and determines that that they were unfairly dismissed, it may order either reinstatement or compensation. Compensation can only be ordered, however, if the Commission is satisfied that reinstatement is ‘inappropriate’ (s.390(3)(a)).
[74] In this case, Mrs Black does not seek reinstatement and has submitted that it is not appropriate. The Respondent agrees. In circumstances where reinstatement is not sought, I am satisfied that reinstatement is inappropriate. I must then consider whether an order for the payment of compensation is appropriate in all the circumstances of the case, and if so, what that amount should be. Taking into account my finding that the dismissal was unfair and the reasons for that conclusion I have outlined above, and being satisfied an order for reinstatement is inappropriate, I consider that an order for payment of compensation is appropriate in all the circumstances.
[75] Section 392 of the Act sets out the criteria for deciding the amount of compensation but I consider the material currently before the Commission addressing compensation should be updated so that it is possible for me to assess a level of compensation that is appropriate, having regard to all the circumstances of this case. In particular, up to date particulars addressing ss.392(2)(d), (e) and (f) are required.”
At a directions hearing on 10 December 2024, I discussed the considerations in s.392 of the Fair Work Act 2009 (the Act) with the parties and thereafter issued directions for the filing and service of updated submissions. This decision deals with the assessment of compensation.
Section 392
Section 392 of the Act sets out the criteria for deciding an amount of compensation, 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.
Misconduct reduces amount
(3) If the FWC is satisfied that misconduct of a person contributed to the employer’s decision to dismiss the person, the FWC must reduce the amount it would otherwise order under subsection (1) by an appropriate amount on account of the misconduct.
Shock, distress etc. disregarded
(4) The amount ordered by the FWC to be paid to a person under subsection (1) must not include a component by way of compensation for shock, distress or humiliation, or other analogous hurt, caused to the person by the manner of the person’s dismissal.
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.”
Consideration
Pursuant to s 392(1) of the Act, the Commission may order that the Respondent pay an amount of compensation to Mrs Black in lieu of reinstatement. The assessment of compensation I am required to undertake is directed towards the remuneration lost in consequence of Mrs Black having been unfairly dismissed.
The method for calculating compensation under s.392 of the Act was considered by a Full Bench of the Commission in Johnson v North West Supermarkets T/A Castlemaine IGA (Johnson) in the following way:
“[41] The well-established approach to the assessment of compensation under s 392 is to apply the ‘Sprigg formula’, derived from the Australian Industrial Relations Commission Full Bench decision in Sprigg v Paul Licensed Festival Supermarket. This approach was articulated in the context of the current legislative framework in Bowden v Ottrey Homes Cobram and District Retirement Villages. 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’...”
[42] The identification of this starting point amount ‘necessarily involves assessments as to future events that will often be problematic,’ but, as the Full Bench observed in McCulloch v Calvary Health Care Adelaide, ‘while the task of determining an anticipated period of employment can be difficult, it must be done.’
[43] 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.”[2]
(my emphasis, references omitted)
The Sprigg formula was discussed and refined in Ellawala v Australian Postal Corporation[3] as follows:
“[31] The principles applicable to determining an amount to be ordered in lieu of reinstatement are dealt with in Sprigg. In that case the Full Bench endorsed the following approach:
Step 1: Estimate the remuneration the employee would have received, or have been likely to have received, if the employer had not terminated the employment (remuneration lost).
Step 2: Deduct monies earned since termination.
Step 3: Discount the remaining amount for contingencies.
Step 4: Calculate the impact of taxation to ensure that the employee receives the actual amount he or she would have received if they had continued in their employment.
[32] Any amount provisionally arrived at by application of these steps is subject to whether offsetting weight is given to other circumstances, including those that need now to be taken into account under paragraphs 170CH(7)(a), (b) and (c). The legislative cap on the amount able to be ordered is then applied pursuant to ss.170CH(8) and (9).
[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". This amount is then reduced by deducting monies earned since termination. Only monies earned during the period from termination until the end of the "anticipated period of employment" are deducted. An example may assist to illustrate the approach to be taken.
[35] In a particular case the Commission estimates that if the applicant had not been terminated then he or she would have remained in employment for a further 12 months. The applicant has earned $3,000 a month for the 18 months since termination, that is $54,000. Only the money earned in the first twelve months after termination - that is $36,000 - is deducted from the Commission's estimate of the applicant's lost remuneration. Monies earned after the end of the "anticipated period of employment", 12 months after termination in this example, 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.
[36] The next step is to discount the remaining amount for "contingencies". This step is a means of taking into account the possibility that the occurrence of contingencies to which the applicant was subject might have brought about some change in earning capacity or earnings.
…
[45] In relation to the fourth step set out in Sprigg we note that the usual practice is to settle a gross amount and leave taxation for determination.”
(my emphasis, references omitted)
In Balaclava Pastoral Co Pty Ltd t/a Australian Hotel Cowra v Darren Nurcombe,[4] the Full Bench stated that in quantifying compensation, it is necessary to set out, with some precision the way in which the various matters required to be taken into account under s.392(2) (and s.392(3) if relevant), and the steps in the Sprigg formula, have been assessed and quantified. The Full Bench also proffered that the way in which a final compensation amount has been arrived at should be readily apparent and explicable from the reasons of the decision-maker.
Section 392(2) of the Act prescribes that, in making such an order for an amount of compensation, the Commission must take into account all of the circumstances of the case, including the factors listed in that subsection. I have taken into account all of the factors listed in that subsection, as set out below.
Remuneration that Mrs Black would have received or would have been likely to receive, if she had not been dismissed: s.392(2)(c)
Mrs Black submits that the Commission should award her the maximum entitlement available, $83,750 because she would have remained in employment with the Respondent for at least a further 12 months. The Respondent submits that in all the circumstances, Mrs Black’s further employment may have been as low as a few months and/or that her earning capacity may nevertheless have been affected because she had not fully recovered from her medical conditions when she returned to work in February 2024.
As was outlined by the Full Bench in Johnson, the identification of the starting point amount in s.392(2)(c) “necessarily involves assessments as to future events that will often be problematic”.[5] It has previously been held that an assessment of the likely period of employment is not to be conducted in a vacuum but rather against the backdrop of the circumstances of the dismissal and the reasons for concluding that the dismissal was unfair.[6]
I have noted that Mrs Black was employed by the Respondent for 7 years and 4 months, during which time she was promoted three times. Mrs Black had no previous warnings with the Respondent and nor had any performance issues arisen prior to the allegations that led to her dismissal. She submitted there had been no findings of misconduct made that would have placed her employment in jeopardy. Mrs Black said that at the time of her return, she had recovered from feeling burnt out and was ready and willing to continue her career with the Respondent. She attested to having been very excited about going back to work following her absence and described having drafted a list of projects that she was proposing to implement over the ensuing 12 months, providing details of what they covered.[7]
The Respondent submitted that having regard to the circumstances concerning Mrs Black’s employment, her health and her workplace conduct, a reasonable estimate of lost remuneration, but the dismissal, was less than the twelve months put forward by Mrs Black. Firstly, the Respondent submitted that had it applied either a caution or performance management,[8] there was a risk that Mrs Black:
May have been subject to further disciplinary action; or
May have been dismissed if she engaged in further inappropriate conduct and breached a caution or failed to meet the expectations of the Respondent following performance management.
Secondly, the Respondent relied on the medical certificate completed by Mrs Black’s general practitioner on 23 January 2024, in which it was recommended that Mrs Black “stick to her contracted hours of work and avoid doing any more than this” upon her return to work.[9] The Respondent also relied on the medico-legal examiner’s endorsement of this opinion, outlined in the report dated 9 February 2024.[10] The Respondent contended that had Mrs Black reverted to her previous behaviours in working long hours in her role as the head of the HR department, there was “an appreciable risk” that the Applicant would suffer a relapse of her medical issues. The Respondent suggested that such a relapse may not have ended Mrs Black’s employment on medical grounds but rather, she may have had to take periods of unpaid leave (depending on her accumulated leave entitlements), which could have impacted her capacity to earn income. The Respondent submitted that Mrs Black’s future employment period may have been as short as a few months, and/or her earning capacity may have been affected because she has not fully recovered from her medical problems.
I have noted that having become overwhelmed, burnt out and exhausted, Mrs Black was absent from her employment with the Respondent for nearly four months and had commenced medication for anxiety and depression. However, Mrs Black followed her medical advice, was able to take the time needed to recuperate and when cleared to return to work, came armed with medical advice suggesting that she should avoid working outside of her contracted hours. She has met the attendance requirements for the positions she has held since her dismissal.
There was nothing before me to suggest that Mrs Black would be leaving the Respondent in the short term. She had revealed her excitement at returning to work and disclosed her plan to implement a number of projects. The General Manager role represents the pinnacle of Mrs Black’s career to date as an HR practitioner and follows her previous demonstrations of dedication to the Respondent during which she covered multiple roles within challenging budgetary parameters. I am not of the view that Mrs Black would have engaged in further inappropriate conduct, breached a caution or failed to meet the expectations of the Respondent upon completion of a period of performance management. Mrs Black demonstrated professionalism and engagement during the investigation process. She participated seriously and advocated for her retention. Aged 53 and having been promoted three times, Mrs Black has every incentive to serve and succeed in her role as General Manager. As her subsequent attempts to find alternative employment in the period following her dismissal has revealed, positions at the general manager/senior leadership level are difficult to secure.
My assessment for the purposes of s.392(2)(c) is that Mrs Black would have remained in employment with the Respondent for a further period of at least 12 months, earning remuneration comprising $184,500 salary plus $20,295 superannuation.
“Remuneration earned” – s.392(2)(e) and “Income reasonably likely to be earned” – s.392(2)(f) and s.392(2)(g).
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) of the Act. In addition, income 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) of the Act.
Mrs Black was unemployed for just over 11 weeks following her dismissal and earned no income in this period between 28 March 2024 and 16 June 2024. She completed an engagement as a casual employee between 17 June 2024 and 28 July 2024 with The Next Step Recruitment & Consulting Pty Ltd, earning a total gross sum of $13,120.45.
Mrs Black commenced a permanent full-time role as Manager ER and Workplace Experience at Better Health Network on 29 July 2024. She remains in this employment. Mrs Black produced a payslip covering her pay period from 25 November 2024 until 8 December 2024 which revealed gross ‘year to date’ earnings of $39,959.40 gross.
Mrs Black’s employment agreement with Better Health Network indicates that she is contracted for 76 hours work per fortnight at an hourly rate of $68.32. This renders a gross fortnightly payment of $5,192.32. There is nothing to suggest this would not have been earned during the 9 December 2024 - 22 December 2024 period or that this employment will not be continuing, at least in the short term.
Therefore, by adding the three totals in paragraphs [18]-[20] together, I have assessed the gross earnings of Mrs Black for the purposes on s.392(2)(e) of the Act to be $58,272.17.
To be added to this is the amount assessed for the purposes of s.392(2)(f), i.e. any income reasonably likely to be earned by Mrs Black between now and the actual compensation. I assess Mrs Black’s gross earnings for this forthcoming 3-week period to be $7,788.48 ($2,596.16[11] x 3).
As such, the total amount for the purposes of ss.392(2)(e) and (f) is $66,060.65.
Any remuneration likely to be earned after the date upon which the compensation is to be paid until the end of the one year period of anticipated employment, is a relevant amount to be taken into account under s.392(2)(g) in accordance with the Sprigg formula.[12] With there being approximately a 11 further weeks from 13 January 2025 until 27 March 2025, this equates to a further $28,557.76 (11 x $2,596.16).
Any deduction for contingencies is to be applied to prospective losses, that is a loss occasioned after the date of the hearing.[13] The Full Bench observed in Ellawala v Australian Postal Corporation:
“... A discount for contingencies is a means of taking account of the various probabilities that might otherwise affect earning capacity. At the time of hearing any such impact on an applicant’s earning capacity between the date of termination and the hearing will be known. It will not be a matter of assessing prospective probabilities but of making a finding on the basis of whether the applicant’s earning capacity has in fact been affected during the relevant period.”[14]
Mrs Black was dismissed on 27 March 2024. I have found that, but for her dismissal, she would have remained in her employment with the Respondent for a further period of one year. As the contingency discount only applies to prospective losses, in this case these will be losses occasioned after the date of this decision. Mrs Black submits there is no basis for any deductions for contingencies because more than 8 months have passed since the dismissal and there is nothing to suggest her earning capacity might be affected for the remainder of the assessed employment period.
The Respondent asserts that a deduction for possible contingencies should be applied because there are risks of a relapse of medical issues and of Mrs Black engaging in further inappropriate conduct leading to termination. Although I found that there was conduct that fell short of the level of professionalism reasonably expected,[15] I considered such conduct warranted a caution or performance management on part of the Respondent. This would have allowed Mrs Black the opportunity to improve and as explained above, she had every incentive to do so.
Based on the material before me, I am not persuaded to make any discount for contingencies. I have not been persuaded that Mrs Black’s earning capacity has been affected on an ongoing basis due to a medical condition or that this is a possibility in the near future. In this regard, both Mrs Black’s general practitioner and the medico-legal examiner had cleared her for a return to work with a recommendation that she did not work in excess of her contracted hours. It would appear that Mrs Black has been able to manage the requirements of the two positions in which she has worked since her dismissal and avoid the stressors that she has previously experienced.
Any other matters – s.392(2)(g)
Mrs Black relied on her employment history of having been promoted “through the ranks” and asserted she had made significant sacrifices for the Respondent. She described having been passionate about her work in difficult circumstances and suggested that while she had done everything she could to assist the Respondent, she had not been treated well. Mrs Black submitted these factors weighed in favour of a positive adjustment in the assessment of her compensation. I have noted that Mrs Black was denied five weeks’ pay in lieu of notice because she was summarily dismissed for serious misconduct which I have determined did not actually occur.
Viability – s.392(2)(a)
There has been no evidence or submission advanced to suggest that an order for compensation would have any adverse effect on the viability of the Respondent. There will be no deduction made having regard to this factor.
Length of service – s.392(2)(b)
There is no dispute that Mrs Black had completed 7 years and 4 months of service with the Respondent before her dismissal and Mrs Black submits that this should result an adjustment in her favour. I accept Mrs Black’s period of employment was for a not insignificant period of time which does not weigh in favour of a negative adjustment of the compensation amount.
Mitigation efforts – s.392(2)(d)
The Full Bench of the Commission in McCulloch v Calvary Health Care Adelaide,[16] confirmed that the reasonableness of an applicant’s efforts taken to mitigate loss depends on the circumstances of the case.
Mrs Black placed material in relation to mitigation before the Commission at the hearing that indicated she had applied for 27 positions in the period between her dismissal and 5 June 2024.[17] Mrs Black asserted these mitigation efforts did not cease after she had filed her material and that she continued making applications and attending interviews. As outlined above, the evidence discloses Mrs Black undertook an initial engagement as a casual employee and then secured her current position with Better Health Network on 29 July 2024.
The Respondent submitted that there was nothing in Mrs Black’s material to indicate that she was ill or otherwise disrupted in making job applications during her period of unemployment and it parried with Mrs Black’s job searching efforts, suggesting she could have done more.
I acknowledge there was an 11-week period between the immediate aftermath of Mrs Black’s dismissal and her first performance of new work as a casual employee with The Next Step Recruitment & Consulting Pty Ltd, but I do not consider this weighs against her. It was not unreasonable for Mrs Black to take some time to adjust to her change in circumstances. It was also not unreasonable for her to seek commensurate employment because she had worked hard to achieve her General Manager of Human Resources position. I consider it is to Mrs Black’s credit that she was prepared to mitigate her loss of earnings by taking roles that paid considerably less than her former position with the Respondent.
Having regard to the material before me and the circumstances of this case, I consider that Mrs Black acted reasonably in her mitigation, and I am not persuaded that a deduction in the amount of compensation on account of s.392(2)(d) is warranted in this case.
Misconduct – s.392(3)
Pursuant to s.392(3) of the Act, the Commission must reduce the amount of a compensation order by an appropriate amount if it is satisfied that the misconduct of a person contributed to the employer’s decision to dismiss them. The Respondent’s submission that the term ‘misconduct’ in s.392(3) “must mean any workplace conduct that is sufficiently serious to take disciplinary action of some sort but falls short of conduct that might warrant termination”, is misconceived.
In paragraph [57] of my decision dated 28 November 2024, I addressed the comment made by Mrs Black and the episode during which she had raised her voice, as follows:
“While these two matters are arguably capable of constituting misconduct, I am more inclined to the view, having regard to the circumstances of this case, that they were actions that warranted a caution and performance management” [18]
Notwithstanding the Respondent’s belief that Mrs Black had engaged in serious misconduct warranting summary dismissal, I did not find that there had been misconduct. Accordingly, I am not required to make any deduction on the basis of this factor.
Compensation cap: s.392(5) & (6)
The amount of compensation I will order does not exceed the compensation cap.
Section 392(5) of the Act caps the amount of compensation the Commission may order. If the appropriate quantum of the compensation initially assessed by the Commission exceeds the cap, the Commission must reduce that amount to the amount of the cap. The compensation cap is the lesser of:
the amount of remuneration received by Mrs Black, or that she was entitled to receive (whichever is higher) for any period of employment with the Respondent during the 26 weeks immediately before the dismissal ($184,500 ÷ 2 = $92,250: s.392(5)(a)); or
half the amount of the “high income threshold”[19] immediately before the dismissal, in this case $167,500 ÷ 2 = $83,750 (s.392(5)(b)).
Mrs Black was dismissed on 27 March 2024. Having regard to s.392(5) of the Act, the statutory compensation cap in this matter is therefore $83,750 gross and the compensation amount I order must not exceed this.
Instalments: s.393
There were no submissions made by the Respondent regarding this factor and I do not consider that there is any reason for compensation to be paid by way of instalments.
Shock, Distress: s.392(4)
The amount of compensation calculated must not and does not include a component for shock, distress, humiliation or other analogous hurt caused to Mrs Black by the manner of her dismissal.
Conclusion
The overarching requirement in assessing compensation is to ensure that the level of compensation is in an amount that is considered appropriate having regard to all the circumstances of the case.[20] In this case, I consider the appropriate amount of compensation to be awarded to Mrs Black is $83,750 gross less taxation required by law.
The order I make will require payment of the compensation amount by the Respondent within 21 days after the date of the order. The order is published contemporaneously with this decision in PR782749.
DEPUTY PRESIDENT
[1] [2024] FWC 3291.
[2] [2017] FWCFB 4453.
[3] Print S5109 (AIRCFB, Ross VP, Williams SDP, Gay C, 17 April 2000).
[4] [2017] FWCFB 429 at [43].
[5] Quoting Smith v Moore Paragon Australia Ltd (2004) 130 IR 446 at [32].
[6] Liu v Xin Jin Shan Chinese Language and Culture School Inc[2021] FWC 479 at [10].
[7] Transcript 22 July 2024 at PN361-362.
[8] Actions I had considered warranted as an alternative to dismissal, see [2024] FWC 3291 at [57].
[9] Digital Court Book (DCB) at 87.
[10] DCB a 98.
[11] 38 hours x hourly rate of $68.32.
[12] Double N Equipment Hire Pty Ltd t/a A1 Distributions v Humphries[2016] FWCFB 7206 at [31].
[13] McCulloch v Calvary Health Care Adelaide[2015] FWCFB 2267 at [21].
[14] Print S5109 (AIRCFB, Ross VP, Williams SDP, Gay C, 17 April 2000) at [44].
[15] [2024] FWC 3291 at [57].
[16] [2015] FWCFB 2267 at [23], citing Biviano v Suji Kim Collection PR915963 at [34].
[17] DCB at 143-161.
[18] [2024] FWC 3291 at [57].
[19] Defined in s.333 of the Act, which in turn refers to the Fair Work Regulations 2009 (Cth) - see Regulation 2.13.
[20] McCulloch v Calvary Health Care Adelaide[2015] FWCFB 873 at [29].
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