Unfair Dismissal – how to calculate damages

When filling in the Form F2 Unfair Dismissal Application you will be asked a simple but important question “what outcome are you seeking by lodging this application?”.

This is complicated because almost always an ex-employee will be seeking damages but the problem is how much?

Under section 392 of the Fair Work Act 2009 (the Act) states that the maximum amount of compensation that can be awarded is capped at the lessor of either 6 months’ pay or half the high-income threshold.  But what does this really mean.

Section 392(2) of the Act sets out the criteria as:

  1. the effect of the order on the viability of the employer’s enterprise;
  2. the length of the applicant’s service;
  3. the remuneration that the person would have received if the person would not have been dismissed;
  4. the efforts of the applicant to mitigate the loss suffered because of the dismissal;
  5. the amount of remuneration the applicant would have earned from employment or other work during the period between the dismissal and order for compensation;
  6. the amount of income the applicant would have earned between the order for compensation and when the compensation is paid; and
  7. any other relevant matter.

The above is a lot to think about.  To make matters even more complicated there is also a formula developed called The Sprigg Formula which is used to work out the appropriate amount of compensation.  The Sprigg Formula was developed out of a case back in 1998 which is still good law today as proved by a recent decision made on 6 January 2017 following the formula.

The Sprigg Formula is as follows:

  1. estimate the likely amount the applicant would have received if the employment has not been terminated;
  2. deduct any earnings accrued since termination of the employment;
  3. deduct an amount to account for any contingencies;
  4. calculate the impact of any taxation; and
  5. apply the legislative cap.

In Bob Millard v K & S Freighters Pty Ltd t/as K&S Freighters [2017] FWC 105 the above test played out as follows:

  1. notwithstanding past issues of misconduct Millard’s employment would have continued for at least another 6 months = $83,200
  2. Mr Millard found alternative employment on a lower salary and was unemployed for 5 weeks. This was deducted and the figure was reduced to $67,288;
  3. Mr Millard received 3 weeks pay in lieu of notice, this was deduced from the overall figure making it $57,688; and
  4. Mr Millard’s earnings involved overtime which may or may not have continued and the Commissioner deducted 20% for contingencies making the total figure to be $46,151.

When coming to a figure that you will likely receive in a decision is difficult but with some genuine consideration of the situation and using the above as a guide hopefully you will be able to come to a figure that you can put the form and take to a conciliation conference.

If you have any questions about the above or want some help just give me a call.  Remember MJT Law has a fixed fee of $600 to attend the conciliation conference and act as your advocate.