Denise McKay v Department of Family and Community Services [2018] NSWIRComm 1069 | Case summary

Submissions and Consideration

The appellant submitted that but for the suspension and termination of her employment she would have elected to return to full-time work following the end of her period of acting as a Casework Manager. She gave evidence, which was not challenged in cross-examination, that she would have returned to full-time employment in order to support the family. Counsel for the appellant submitted that was compelling evidence.
One has to bear in mind in assessing that type of evidence that it is ex post facto subjective evidence of intention. It is quite possible for the witness to believe that is what she would have done but it is not necessarily conclusive.
In that regard it is necessary to have regard to the objective factors. It is noteworthy that the appellant had been working full-time in the relieving position prior to her suspension and when she was reinstated she returned on a full-time basis. Both of those factors point in favour of acceptance of her evidence. Equally it is understandable that there was an economic driver to justify a desire to work full-time. That is more readily understandable in the context of her husband working from home in a flexible way that allows him to care for their child. No evidence was given of the means by which the appellant would arrange for the care of her child in her husband's absence. An inference may be drawn that she had some means of addressing that responsibility, because she did work full-time for a period while her husband was in custody. Whether those arrangements would be sustained over a longer period was left to speculation.
Militating against acceptance of the proposition was the fact that during the period of her suspension and following her termination she made no attempt to find alternative employment. That reduces the potency of the evidence of an economic driver, as does the significant financial assistance of her mother.
The suggested explanation for not seeking employment was that she was concentrating on recovering her employment with the respondent. An inference may be drawn that there was also the advantage of being able to care for her child by not obtaining paid employment.
When approached by Alive4Life she accepted that employment. The hours she worked with Alive4Life do not point in favour of full-time or part-time employment given that they varied from 8 to 35 hours per week. So that is a neutral factor.
Anticipating a submission by the respondent that the Commission should have regard to the earnings of the appellant at Alive4Life counsel submitted that; 1. The Commission lacks jurisdiction to reduce the amounts to compensate the appellant for what she would have earned but for the suspension and termination, by earnings obtained from other employment; and 2. Even if the Commission had jurisdiction it would exercise its discretion against such an approach.
Before detailing the appellant's submission on this point it is convenient to set out ss 100C and 100D of the Act: 100C Decisions with respect to appeals (1) (Repealed) (2) The Commission, in relation to a disciplinary appeal, may decide to allow or disallow the appeal or make such other decision with respect to the appeal as it thinks fit. (3) Without limiting the generality of subsection (2), if in relation to a disciplinary appeal it appears to the Commission that the employer failed to comply with the rules of procedural fairness in making the decision appealed against, the Commission: (a) is not required to allow the appeal solely on that basis and may proceed to decide the appeal on its merits, or (b) may quash the decision and remit the matter back to the employer with such directions (if any) as to which stage of the disciplinary process in relation to the matter may be recommenced by the employer. (4) The decision of the Commission in respect of an appeal is, except as provided by section 197B, final and is to be given effect to by the employer against whose decision the appeal was brought. 100D Orders by Commission with respect to payment of salary and continuity of employment (1) Without limiting section 100C, if the Commission decides to allow a disciplinary appeal, the Commission may: (a) if the employee has paid a fine imposed by the employer or his or her pay has been forfeited-order the employer to repay the amount of any such fine or forfeited pay, and (b) order the employer to pay the employee an amount stated in the order that does not exceed the remuneration the employee would, but for the decision of the employer, have received from the employer, and (c) order that any period of employment of the employee with the employer is taken not to have been broken by the decision of the employer. (2) Any such order by the Commission must be given effect to by the employer. (3) Nothing in subsection (1) enables the Commission to make an order for compensation in the case where a person is not reinstated or does not continue in employment. (Emphasis added)
The submission as to the Commission's jurisdiction is based upon the text of s 100D. Counsel submitted: "So looking at 100D itself, Commissioner, if the Commission decides to allow a disciplinary appeal, which it has, in effect, at least the Supreme Court has made it that way, there's a reference in (a) to a fine, we're not concerned with (a) at all. (c), I've pointed out, Commissioner, is something which the respondent/department accepts should be made, that order, for the continuity of the employment. And we're really only concerned then with (b) (read). Pausing there for a moment. The form of that provision alerts the Commission to the fact that we're concerned there with the counterfactual, precisely the type of question or issue which I've been putting to the Commission this morning about what would have happened in the event that she had not been suspended and in circumstances where her husband was in gaol. But what is important about that provision, your Honour, being 100D, is it ends there and there is a contrast to be made between section 100D and section 89 of the same Act which is similar and equivalent in the sense that it concerns consequential orders, money orders, but in cases of unfair dismissal. What is noticeable about that is if one turns to subsection (6) of 89, it specifically said (read). It appears it's not entirely clear how high or strongly that submission's being put by the respondent currently but it certainly appears in its submissions as an issue. We say the fact that that subsection does not appear in the section 89 is a very strong indication that the Commission wouldn't take those matters into account under section 100D."
There followed a discussion with Counsel as to the validity of comparing s 89(6), which relates specifically to an order for compensation made where reinstatement or re-employment is impracticable, and s 100D (1)(b). Counsel then submitted: "In other words, that section would apply in different circumstances to this one because in this particular case, and we can say this at least, there's an order that the employment not be terminated and there be a continuity of employment through the whole period. So taking on board what the Commission says, there is a better reason to say that that section wouldn't apply in the present circumstances. In taking up that point, Commissioner, the effects of an order which the respondent/department doesn't dispute should be made, the result of an order that the employment be continuous, is that there was a continuous employment contract of that employee, being Ms McKay, through that period with all the attendant responsibilities, obligations, rights, et cetera, under the various provisions. In other words, she has exactly what she should have under the Act including in respect of pay. If the Commissioner is going to make an order that there be a continuity of employment through that period, it would be contradictory for that order to then say, despite the fact that you have, under the Act award, et cetera, these entitlements including the pay, there's going to be a reduction in pay. Those two orders can't stand together. And more than that we say they couldn't stand together because it would involve, if there was a continuity of employment, the Commission, in a sense, reaching into the contract between the parties and changing it without an explicit power to do so under the Act and that could not happen, we say. If there was such a thing which was envisaged by the legislature that, despite the continuing contract, this Commission could change the pay, it would explicitly have said the Commission could do that and it does not." (Emphasis added)
The submission is misconceived. First the order under s 100D (1)(c) does not have the effect of making the employment contract continuous. "Continuity" is but a short hand description of the order. The paragraph provides for an order that deems the period of employment with the employer not to have been broken. Thus for matters such as extended or long service leave the employee is not required to begin accruing rights afresh. The calculation of those rights may be affected, just as may be the case for an extended period of leave without pay, but the service is taken not to be broken.
Second, the context in which the paragraph appears requires a different construction.
The context begins with the words of s 100D(1). The subsection makes clear that the section only operates if the Commission decides to allow the appeal in some way. That and the opening words of the subsection drive one back to s 100C(2). That subsection clearly vests a broad discretion in the Commission enabling it to "allow or disallow the appeal or make such other decision with respect to the appeal as it thinks fit". Section 100D expressly does not limit s 100C. The construction for which the appellant contends would limit the powers vested in the Commission by s 100C.
Next, the language of paragraph (1)(b) permits the Commission to order an amount that does not exceed what the employee would have earned but for the decision of the employer. That is, the Commission may order the amount the employee would have earned or something less. It cannot award more. Were it intended that the Commission could only award what the employee would have earned the section could have easily provided so.
Further, the construction which the appellant proposes would mean that once the Commission decided to make an order under s 100D(1)(c) there would be no discretion to make an order under s 100D(1)(b) because the effect of the former is, on the appellant's proposed construction, to require the employer to pay the remuneration the employee would have earned. If the employer did not, the employee could sue for underpayment. In effect it would render paragraph (1)(b) otiose.
It may be suggested that the paragraph would still have work to do in the absence of an order under (1)(c). That would mean that the Commission would be required to make a choice whether to make a remuneration order or a continuity order. That is inconsistent with the broad powers conferred on the Commission by s 100C and therefore not a construction which is harmonious with the other provisions of the legislation.
The effect of the submission is to constrain, in one way or another, the discretion of the Commission which the provisions so evidently grant in order to enable the Commission to do justice between the parties. In that context I note the first of the Objects of the A listed in s 3 of the Act is: 3 Objects The objects of this Act are as follows: (a) to provide a framework for the conduct of industrial relations that is fair and just, … That is another aspect of the context which militates against the appellant's submission.
There appears to be an absence of authority on this point but I am fortified in my view by the ex tempore reasons of Commissioner Newall referred to at [7].
The Commissioner was at that time determining a motion, filed by the appellant, to set aside a Notice to Produce requiring documents evidencing moneys earned by her in the period her employment was interrupted by the impugned decision of the employer. It was submitted that any such earnings could not be relevant to the exercise of the Commission's discretion under s 100D(1). The arguments referred to at [26] and [27] of this decision were advanced in support of that proposition.
Commissioner Newall rejected the submissions. He said: "I must say at the outset I cannot accept that proposition. I do not accept that were in order to be made under (c) that it would have the effect, of itself, of vesting in the appellant her full contractual entitlements including as to salary and whatever else, superannuation and so forth, during the period. There is no authority for the proposition that such a deeming provision has that effect and on my reading of the statute it appears to me to be wrong. With respect to counsel advancing it, it appears to me to be wrong for a number of reasons; essentially because it is apparent that orders under (b) and (c) are not disjunctive, but conjunctive and that could not be so were the construction that counsel urges upon the Commission to be correct. Secondly, it appears to me were that to be the case, it would render otiose the provisions not only of subs (b) of subs 100D(1), but also the whole proposition that the Commission may make an order under (b). It appears to me sufficiently clear that under s 100D(1) the discretion exercised in the Commission, which neither counsel contested existed, arising from the word "may", which necessarily is a word conferring discretion, is necessarily fettered by subs 100D(1)(b), but fettered in this way. That subsection provides that the Commission may make an order that the employer pay the employee an amount provided in the order and that is my first point, that there is a specific sum to be stated in the order, not a blanket order saying you must pay everything you might have paid had she not been here I had the employee not been here. The Commission has to identify a figure. Further, that figure has to be one which does not exceed the remuneration the employee would, but for the decision of the employer, have received from the employer. That clearly provides that there is a cap upon the number, the figure, that the Commission might order, but it also appears to me to mean that the sum might well be nothing or less than the notional full amount. … In the absence of any authority suggesting otherwise, in my view the position is that the word "may" under s 100D(1) combined with the words to which I have just gone in subs (1)(b) mean that the Commission is able to have regard to whether or not it considers an order under (c) to be apt and if it makes an order under (c), it may have regard to income that may have been received by the dismissed employee during the period of time for which their employment was interrupted."
The Commissioner's reasoning closely accords with mine. I find that it is open to the Commission to make an order which takes into account earnings from personal exertion during the period her employment was interrupted.
I do not think the payments from Centrelink are relevant. Counsel for the appellant also suggested income from investments should be ignored. There was no evidence of that kind in this case but in general terms I agree with that proposition.
Counsel for the appellant submitted the only basis, as a matter of discretion, for taking the personal exertion income into account would be if it constituted some form of windfall gain to the appellant. I do not think that is correct. It seems to me the section is directed to enabling the Commission to consider where the balance of justice lies. In considering that, it is necessary to recall that this is not an award of damages for wrongful dismissal but compensation for an unfair dismissal which interrupts an employee's capacity to earn income.
The general approach is that an employee who has been found to have been unfairly dismissed and, as a result, reinstated should not suffer a loss of income and benefits because a period necessarily elapsed in the time it took to hear and determine the case: Terrigal Memorial Country Club Ltd v Federated Liquor and Allied Industries Employees Union of Australia, NSW Branch [1992] 46 IR 145 at 151 - 152. Equally the legislation, in placing a cap on what may be awarded, ensures the employee does not gain an advantage from the ability, brought about by the dismissal, to work elsewhere and still be compensated for not being able to pursue the primary employment.
One may then ask: what is the incentive for the appellant/applicant to find alternative employment? The first response is the certainty of ongoing income when the outcome of the litigation is uncertain. The second response is related to the concept of mitigation of loss.
A wronged party is expected to mitigate loss by making reasonable efforts to minimise the loss flowing from the decision under challenge. In its function, mitigation is closely aligned with causation and remoteness. At issue is the striking of a fair balance between the parties, to fairly compensate the plaintiff without unduly penalising the defendant. The same principles of mitigation apply in tort and contract. The doctrine of mitigation relieves the defendant from paying that portion of the loss over which the plaintiff had full control and should prudently have avoided. [1]
There is also a public interest to be considered. As there can be no certainty of outcome, the employer may be vindicated and the employee left without an income which at some point is likely to redound to the cost of the community. Secondly, the community should not be deprived of the skills of employees by reason of their hope or expectation of eventual economic redress. On the other hand, the economic benefits of employment are not its only advantages. There is very much a social aspect to employment which is not compensated to the employee by money. There are positive health advantages to being actively involved in the workforce [2] . These advantages are of benefit to employees and the community.
So there are many reasons underpinning encouraging employees to pursue reasonable mitigation strategies.
The primary position of the respondent in relation to the orders for compensation was that, apart from her finite period as Casework Manager, the appellant had since her return from maternity leave on 22 May 2012 worked in her substantive position of Caseworker on a part-time basis. Thus any calculation of what she would have received should be based on the part-time rate for a Caseworker. Accordingly, the maximum that should be awarded to her was: 1. An amount calculated at the rate of Casework Manager (Clerk Grade 9) on a full-time basis from the date of her suspension until 31 December 2015; and 2. An amount calculated at the lower rate of Caseworker (Clerk Grade 3/7) on a part-time basis of 21 hours per week from 31 August 2016 to the date of reinstatement on 26 March 2018.
In cross-examination Ms McKay agreed she had been paid up until 31 December 2015 as a Casework Manager. but wasn't sure whether it was at the full-time rate for the whole period. She also agreed she had been paid at the part-time rate for a Caseworker from 1 January 2016 to 30 August 2016. Notwithstanding the 2 payslips tendered by the Appellant the position in relation to the basis on which Ms McKay was paid for the period to 31 December 2015 remains unclear. That will need to be addressed by the parties in accordance with the orders and directions I make.
The respondent's second argument is that the appellant had a duty to mitigate. The evidence in relation to that was as I have summarised at [12(5)] and [15] above. The respondent submits that the compensation should be reduced by the failure to attempt to mitigate and at least by the earnings from Alive4Life.

Conclusions and Orders

The first area of dispute is whether I should make an order awarding any compensation to the appellant. On the general principles outlined in these reasons I have decided it is appropriate to award remuneration in accordance with s 100D(1)(b). Having decided to do so, I express my agreement with Commissioner Newall that the Act requires me to determine and state an amount in the order. There is insufficient precision in the evidence to allow me to calculate the amount.
The next question then relates to the calculation of the amount.
The competing considerations here concern the basis, that is full-time or part-time, and whether mitigation should play a part. If the appellant was employed on a part-time basis there would be greater capacity on her part to take secondary employment. Although she would need approval for that in accordance with established policies refusal would have logically been on the basis that she should return to full-time employment with the respondent. The obvious competing scenarios emerging from these observations are part-time without mitigation or full-time with mitigation.
Doing the best I can to do justice between the parties, I propose to determine that the amount be calculated as follows: 1. There is an acceptance that the appropriate rate of pay for the appellant for the period from her original suspension to 31December 2015 is at the rate for a Casework Manager on a full-time basis. It is unclear how much she has been paid. The parties will need to verify that by reference to the pay records. If it cannot be agreed then the pay records will need to be produced to the Commission for determination of the amount, if any, which remains outstanding for that period. 2. Thereafter the amount should be calculated at the rate of Caseworker on a full-time basis until 25 March 2018 with appropriate adjustment for salary progression over that period. 3. An amount representing the additional pro rata annual leave in the period between 1 January 2016 and 30 August 2016 as a result of that period being treated as full-time rather than part-time. 4. From the total of (1), (2) and (3) there shall be a deduction for the income earned from employment with Alive4Life including any in the period from 6 March 2018 to 25 March 2018. 5. Having regard to the expenses incurred by the appellant in pursuing her claim I do not propose to make any further reduction for the failure to make any attempt to mitigate prior to accepting the employment with Alive4Life.
I make the following orders and directions: 1. Order that the period of employment of Ms McKay with the respondent is taken not to have been broken by the decision of the respondent to dismiss her. 2. Order that the respondent pay an amount calculated in accordance with [52] of these reasons. 3. Direct the parties to have discussions and provide each other with such documentation as necessary to facilitate that calculation. 4. Direct the appellant to file short minutes giving effect to these orders within 21 days. 5. I grant liberty to apply in the event of disagreement about the calculation.

Denise McKay v Department of Family and Community Services

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