[2018] FWC 679

The attached document replaces the document previously issued with the above code on 1 February 2018.

The wording “(change amount)” has been omitted from paragraph [31] on page 7.

Charlie Austin

Associate to COMMISSIONER CIRKOVIC

Dated 08/02/2018

[2018] FWC 679

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.394—Unfair dismissal

Robert Johnson
v
North West Supermarkets T/A Castlemaine IGA-
(U2017/1404)


COMMISSIONER CIRKOVIC	MELBOURNE, 1 FEBRUARY 2018

Application for an unfair dismissal remedy - compensation.

1. Background

[1] Mr Johnson was employed as a delicatessen assistant with North West Supermarkets Pty Ltd T/A Castlemaine IGA (the Respondent) from October 2008. 1 On 7 February 2017, he was summarily dismissed for theft after having taken two 100-gram samples of smoked salmon and prosciutto, along with a ham bone from the IGA.2 The items in question were given to Johnson by Ms Penny Royal, his direct supervisor and manager.3

[2] Mr Johnson made an application for relief from unfair dismissal on 9 February 2017 (the Application). 4 On 1 June 2017, Deputy President Hamilton handed down a decision (First Instance Decision),5 dismissing the Application.

[3] The Deputy President had found Mr Johnson to have taken the items of produce from the Castlemaine IGA where he worked. The Deputy President also found that, although Mr Johnson’s action was authorised by a supervisor, it breached company policy and constituted a valid reason for his dismissal. There was also evidence before the Deputy President that it had been the practice for at least 18 months that Ms Royal would bundle up excess produce or samples provided by potential suppliers, to give to staff members to take home at the end of a shift. 6 This practice was not limited to the deli section of the IGA, and a number of other managers would allow staff to take items home for no charge.7

[4] On 25 July 2017, a Full Bench of the Commission granted the Applicant permission to appeal the First Instance Decision 8 (the Permission Decision) on the basis that he had made out an arguable case that the proportionality of summary dismissal to the conduct in the case was not considered. In that respect, the Appeal Bench was satisfied that the appeal attracted the public interest as the decision at first instance was disharmonious with other decisions of the Commission which have emphasised the importance of proportionality being considered.
On 28 August 2017, the Full Bench allowed the Applicant’s appeal and set aside the First Instance Decision 9 (the Merits Decision). The reasons for allowing the Applicant’s appeal are encapsulated in the passage below:

“We have concluded that the Deputy President’s decision was affected by appealable error for the reason we identified in our decision on permission to appeal, namely the failure to consider the question of proportionality of summary dismissal to Mr Johnson’s conduct. This is an important consideration that bears on the question of whether or not the termination was harsh, unjust or unreasonable. 10 It will sometimes be possible to establish that a particular matter requiring consideration by a member has been taken into account, even though it is not expressly and specifically dealt with in the decision. However, based on our review of all of the materials filed in this appeal, there is not in our view a sufficient basis to conclude that the Deputy President considered, but simply did not record, that he took into account the proportionality of summary dismissal in this case.”11

[5] The Full Bench then proceeded to rehear the application and in that context noted that the only issue in contention was whether the dismissal was ‘harsh, unjust or unreasonable’ (s. 385(b)).

[6] The Full Bench dealt with the question of remedy at paragraphs [35]-[47] and was satisfied that it was appropriate to make an order for a remedy, but that as reinstatement was not sought it would be inappropriate to order reinstatement. As to the question of compensation the Appeal Bench concluded:

“We are minded to make an order for compensation in this matter, however, we cannot adequately assess the quantum of such an order on the basis of the limited material currently before us. Neither party has satisfactorily addressed the matters we are obliged to take into account (under s. 392(2)(a) to (g)) in determining the amount of compensation to be ordered.

Given the deficiencies in the material currently before us we have decided to remit the question of the amount of compensation to be ordered to Commissioner Cirkovic for determination.” 12

[7] The matter has been remitted to me to determine the appropriate award of compensation. The compensation proceedings were the subject of a hearing on 30 October 2017 and the following written submissions were filed:

• Outline of Submissions of the Applicant on Compensation, dated 27 September 2017.

• Response to Applicant’s Submission on Compensation (undated).

• Correspondence of Ms O’Neill dated 8 November 2017.

• Correspondence from the Respondent on Mitigation, dated 9 November 2017.

2. The Assessment of Compensation

[8] This decision concerns the amount of compensation to be ordered. In assessing compensation, it is necessary to take into account all the circumstances of the case, including the specific matters identified in s 392(2)(a) to (g), and to consider the other relevant requirements of s 392.

[9] 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. 13 This approach was articulated in the context of the current legislative framework in Bowden v Ottrey Homes Cobram and District Retirement Villages.14 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’...”

[10] The identification of this starting point amount ‘necessarily involves assessments as to future events that will often be problematic,’ 15 but, as the Full Bench observed in McCulloch v Calvary Health Care Adelaide,16 ‘while the task of determining an anticipated period of employment can be difficult, it must be done.’17

[11] 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. 18

[12] Before turning to the assessment of total remuneration I note that the evidence of Mr Johnson was largely unchallenged by the Respondent at first instance. In particular, there was no challenge whatsoever to the following evidence:

(i) The Applicant worked for the Respondent since October 2008 and had an unblemished work history prior to his dismissal. 19

(ii) The Applicant earned $548.21 per week (before tax). 20

(iii) The Applicant was 63 years old at the time of the dismissal. 21

(iv) The Applicant had a ‘hobby business’ that generated $7,000 of income per year. 22

Remuneration that would have been received if the dismissal had not occurred (s.392(2)(c))

[13] Given the length of the Applicant’s service, his prior unblemished record and his age, I find that Mr Johnson would have remained working for the Respondent for at least 12 months and would have received $28,506.92 over that period ($548.21 per week x 52). This is the starting point for my assessment of compensation. I find that, had he not been dismissed, Mr Johnson would have earned $28,506.92.

Remuneration earned (s.392(2)(e)) and income reasonably likely to be earned (s.392(2)(f))

[14] After his dismissal Mr Johnson was able to earnother remuneration. In a further submission of 8 November 2017 the Applicant provided an update as to Mr Johnson’s employment status, as follows:

1. Mr Johnson commenced casual employment with a labour hire company on 7 June 2017. In his role, Mr Johnson has been assigned to cleaning duties and is placed by the labour hire company in a particular location to carry out that work for the company’s clients. Mr Johnson is currently assigned to the Bendigo Hospital.

2. Mr Johnson is paid $23.53 per hour as his ordinary casual rate.

3. Between 7 June 2017 and 10 October 2017, Mr Johnson earned $2,997.65 before tax.

4. Mr Johnson has not worked since 10 October 2017

[15] From this submission, I conclude that the Applicant earned $2,997.65 before tax from his casual employment. Furthermore the Applicant submits that Mr Johnson generates $7,000 per annum from his ‘hobby business’. No submissions were made that I should not take this income into account. Therefore I propose to deduct $9,997.65 ($7,000 + $2,997.65) from the last remuneration amount at paragraph [13] above.

Length of service (s.392(2)(b))

[16] I do not consider that Mr Johnson’s length of service calls for any upward or downward adjustment to the compensation amount that should otherwise be ordered.

Other matters (s.392(2)(g))

[17] Because I do not deal with any significant element of future economic loss, there is no basis for any deduction for contingencies. In relation to taxation, compensation will be determined as a gross amount and it will be left to the Respondent to deduct any amount of taxation required by law. No submissions were made that I should make an allowance as to any long service leave accrued so I do not propose to do so.

Viability (s.392(2)(a))

[18] There was no evidence that an order of compensation would have any effect on the Respondent’s viability. There will be no deduction form the compensation amount on this score.

Mitigation efforts (s.392(2)(d))

[19] Mr Johnson has made some, albeit limited, attempts to mitigate his loss during the 12 month period following his dismissal. However greater efforts on his part may have led to additional alternative employment.

[20] In his witness statement in the first instance proceedings Mr Johnson says that he ‘has applied for a number of jobs since my employment with IGA was terminated. I have yet to be successful in finding work’. 23 Attached to his witness statement are copies of application letters he had sent to various employers since his dismissal.24 That material shows that Mr Johnson applied for four positions in February 2017 (on 13, 23 and 27 February 2017).

[21] In a submission dated 9 November 2017 the Respondent contended that the Applicant had failed to mitigate his loss.

[22] I propose to make a deduction of 25 per cent ($7,127) from the compensation amount on account of his limited efforts to mitigate loss.

Misconduct (s.392(3))

[23] At paragraphs [31] – [34] of the Merits Decision the Full Bench made the following observations about Mr Johnson’s misconduct:

“[31] Mr Johnson’s conduct involved a breach of policy but, as we have indicated, there were mitigating circumstances. Two important contextual considerations mitigate Mr Johnson’s conduct.

[32] First, the taking of the items was authorised by Mr Johnson’s direct supervisor. Mr Johnson’s evidence in this regard was unchallenged by the Respondent. In particular, Mr Blake did not contest Mr Johnson’s claim that his supervisor had authorised him to take the items. Rather, he said that he had no knowledge of any authorisation having been given by the supervisor. The Deputy President accepted that Mr Johnson had been authorised to take the items. We take the same view.

[33] Second, there was unchallenged evidence that eight other employees were also engaged in the same practice. We note, that Mr Blake’s evidence was that he was unaware of any such practice, but he did not lead any evidence to suggest that there was no such practice. Further, Mr Johnson’s evidence as to the practice was unchallenged.

[34] In light of the mitigating circumstances and the matters referred to by the Appellant, we consider that Mr Johnson’s dismissal was harsh. It follows that Mr Johnson was unfairly dismissed (see s. 385). We now turn to the remedy to be ordered.” 25

[24] I am satisfied that the Applicant’s misconduct contributed to the Respondent’s decision to dismiss him, accordingly s.392(3) provides that I must reduce the amount I would otherwise order under s.392(1) by an appropriate amount on account of the misconduct. I am satisfied that his misconduct requires a deduction under s.393(3) of 10 per cent ($2,851). In all the circumstances, I would have deducted 20 per cent. However in these circumstances where the nature of the misconduct involved approval by a supervisor, I find that 10 per cent is more appropriate.

Compensation cap (s.392(5))

[25] The ‘compensation cap’ is set in s.392(5), which provides that the amount ordered to be paid by the Commission must not exceed the lesser of:

• The total amount of remuneration either received by the person, or to which the person is entitled, for any period of employment with the employer during the 26 weeks immediately before the dismissal, and

• Half the amount of the high income threshold immediately before the dismissal. 26

[26] From 1 July 2016, the high income threshold was $138,900 per annum and from 1 July 2017 it is $142,000. Therefore, the compensation cap is:

• $69,450 for a dismissal that occurred on or after 1 July 2016 and before 1 July 2017, and

• $71,000 for a dismissal that occurred on or after 1 July 2017.

[27] The amount of compensation proposed is below the compensation cap.

Installments (s.393)

[28] I do not consider that there is any reason for compensation to be made by way of instalments.

3. Conclusion

[29] In Balaclava Pastoral Co Pty Ltd t/a Australian Hotel Cowra v Darren Nurcombe 27 a Full Bench recently observed 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. That is to say, 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.

[30] Step 1: Lost remuneration (12 months) $28,506.92

Step 2: Remuneration earned or likely to be earned - $9,997.65

Step 3: Deduction for failure to mitigate loss (25 percent) - $7,127.00

Step 4: Deduction for misconduct (10 percent) - $2,851.00

_________

Provisional amount:$8,531.27

_________

[31] The amount of compensation which is derived from the above considerations is $8,531.27, less deduction of any tax as required by law. I now turn to consider whether the provisional amount of compensation is an appropriate amount of compensation in all the circumstances.

[32] The Respondent’s submission in respect of compensation did not specifically address the matters in s.392 but submitted as follows:

“…should the Full Bench determine to make an order rewarding Johnson for his act of misconduct, it would not be appropriate to award any more than the token period of notice.”

[33] The Applicant submits that the amount of compensation ordered should be an award that is greater than simply the payment of the notice period. It is submitted that if compensation was confined to the notice period only, then the Full Bench would not be making the appropriate allowances for inter alia:

“ (i) the disproportionate reaction of the employer to Johnson’s conduct;

(ii) the fact that at no stage could Johnson be described as dishonest;

(iii) the fact there were no policy refreshers provided by the employer in any way since 2008;

(iv) the denial of procedural fairness and the conduct of the employer in carrying out the dismissal;

(v) the relatively low-paid nature of Johnson’s work; and Johnson’s age, disciplinary history and personal circumstances.”

[34] In the Merits Decision the Full Bench held that:

“We accept that Mr Johnson acted in breach of the Respondent’s policy and that this constitutes a valid reason for termination of his employment. While there was a valid reason for the termination of Mr Johnson’s employment we note that there were a number of mitigating circumstances (we will return to those matters shortly).” 28

[35] The mitigating circumstances referred to above are set out at paragraphs [31] to [33] of the Decision:

“Mr Johnson’s conduct involved a breach of policy but, as we have indicated, there were mitigating circumstances. Two important contextual considerations mitigate Mr Johnson’s conduct.

First, the taking of the items was authorised by Mr Johnson’s direct supervisor. Mr Johnson’s evidence in this regard was unchallenged by the Respondent. In particular, Mr Blake did not contest Mr Johnson’s claim that his supervisor had authorised him to take the items. Rather, he said that he had no knowledge of any authorisation having been given by the supervisor. The Deputy President accepted that Mr Johnson had been authorised to take the items. 29 We take the same view.

Second, there was unchallenged evidence that eight other employees were also engaged in the same practice. 30 We note, that Mr Blake’s evidence was that he was unaware of any such practice, but he did not lead any evidence to suggest that there was no such practice. Further, Mr Johnson’s evidence as to the practice was unchallenged.”31

[36] Mr Johnson’s conduct involved a breach of policy but having regards to the mitigating circumstances referred to above I am not persuaded by the Respondent’s submission that any award of compensation be no more than ‘the token period of notice’. It is observed that the Full Bench concluded in the Merits Decision that the dismissal was harsh not only for the summary nature of the dismissal.

[37] In all the circumstances I am satisfied that the amount of $8,531.27 is an appropriate amount of compensation. I note that the amount ordered is the equivalent of just over 15 weeks’ pay.

[38] In accordance with s.392(1) the amount I propose to order does not include any component by way of compensation for shock, distress or humiliation, or other analogous hurt caused to the Applicant by the manner of his dismissal.

[39] I will order that the Respondent pay the Applicant the sum of $8,531.27, within 7 days of this decision.

Seal of the Fair Work Commission with member's signature