Fair Work Act 2009

s.604 - Appeal of decision

Fearon Howard Real Estate Pty Ltd T/A Ray White (Balmain)

Appeal against decision PR724455 of Deputy President Dean at Sydney on 11 November 2020 in matter number U2020/8238 - permission to appeal granted - appeal upheld.

[1] Ms Megan Smith has applied for permission to appeal and, if permission is granted, appeals against a decision (the Decision)[1] and an associated order[2] of Deputy President Dean, both made on 11 November 2020. The Deputy President found that Ms Smith had been unfairly dismissed from her employment with Fearon Howard Real Estate T/A Ray White (Balmain) (the Respondent) and determined that compensation of $10,000 should be paid. It is only in relation to the determination of the amount of compensation that Ms Smith appeals.

[2] Directions were issued with respect to the filing of submissions as to permission and the merits of the appeal. Subsequent to filing materials both parties indicated they were content for the Full Bench to determine permission to appeal and the appeal on the basis of written submissions.

[3] Ms Smith was employed as a salesperson and commenced her employment with the Respondent in October 2017. Her duties were to prospect, list and sell properties. Her employment was terminated on 26 May 2020. Ms Smith was employed on a wage with a debit/credit commission structure, meaning her wage was debited from her future commission payments.

[4] In her Decision, the Deputy President considered the evidence in relation to Ms Smith's performance and determined that the evidence did not support a finding of a valid reason for dismissal in relation to her capacity or conduct. In particular the Deputy President said that Ms Smith's requests to receive JobKeeper payments could not provide a valid reason for her dismissal.

[5] After considering the remaining criteria in s.387 of the Fair Work Act 2009 (Cth) (FW Act) the Deputy President determined that the decision to dismiss Ms Smith was harsh, unjust and unreasonable.[3]

[6] Following this, the Deputy President turned to consider what remedy should be afforded Ms Smith.

[7] The Deputy President first determined that reinstatement was not appropriate. Having reached that conclusion the Deputy President turned her mind to compensation. The Deputy President considered each of the criteria in s.392 of the FW Act and found as follows:

"Remuneration received, or likely to be received (s392(2)(c))

[64] While the evidence in this regard is limited, I consider that it is likely that Ms Smith's employment would not have continued for a lengthy period if the friction that had developed between Ms Smith and Ms Fearon was not resolved. While there is clearly an element of speculation in determining specifically how long Ms Smith would have remained employed, I consider it would not have been longer than six months.

Remuneration earned and income likely to be earned (s392(2)(e) and (f))

[65] Ms Smith gave evidence that she commenced alternative employment on 22 June 2020, approximately four weeks' after her dismissal. She received the JobSeeker payment between 26 June 2020 and 21 August 2020 for which she received a total amount of $6,320.50.

[66] Ms Smith's employment with Ray White Balmain from 11 October 2017 to 26 May 2020 is a relatively short period and I consider it does not support reducing or increasing the amount of compensation ordered.

[67] There is no evidence before me as to the effect of an order for compensation might have on the viability of Ray White Balmain.

[68] Ms Smith was successful in obtaining alternative employment after her dismissal. This was a reasonable effort to mitigate her loss. I do not consider it appropriate to reduce the amount of compensation otherwise calculated for this factor.

[69] There are no other matters relevant to this consideration. Specifically, I do not consider it necessary to discount or increase the amount for 'contingencies'. This step is a means of taking into account the possibility that the occurrence of contingencies to which Ms Smith was subject might have brought about some change in earning capacity or earnings.

[70] The amount of compensation does not include a component for shock, humiliation or distress.

[71] In Hanson Construction Materials Pty Ltd v Pericich[4], the Full Bench said that:

"Sprigg is a useful servant, but is not to be applied in a rigid determinative manner. In deciding the amount of a compensation order the Act directs that the Commission 'must take into account all of the circumstances of the case' including the particular matters set out at s.392(2)(a) to (g)."

[72] Ms Smith's base wage was $916.95 per week. She seeks 22 weeks' pay which she says equates to $65,736, and which is inclusive of commission.

[73] Having considered all of the matters necessary in determining an appropriate quantum of compensation, I find that $10,000 is appropriate in all of the circumstances.

[74] This amount is approximately equivalent to four weeks' remuneration, and is less than the amount of remuneration Ms Smith would have been entitled in her employment with Ray White Balmain during the 26 weeks immediately before the dismissal. I am satisfied there is no basis to reduce the amount by reason of s 392(5) of the Act.

[8] An order reflecting the conclusion was issued separately.[5]

[9] Ms Smith's notice of appeal asserts 5 errors in the Decision.

• (a) Jobseeker was erroneously considered as income earned for the purpose of determining compensation;

• (b) Jobseeker is a social security payment, replacing Newstart and it is well established that such payments should be excluded from remuneration earned when calculating compensation;

(c) The principal enunciated in Hanson Construction Materials Pty Ltd v Pericich[6] was apparently applied with no explanation as to how it was applied to the circumstances of the case;

(d) The way in which the final compensation amount was arrived at is not apparent from the decision;

(e) The decision incorrectly concluded that Ms Smith was earning income after 4 weeks of employment without an evidentiary basis.

[10] An appeal under s.604 of the Act is by way of rehearing, however the Commission's powers on appeal are only exercisable if there is error on the part of the primary decision-maker.[7] An appeal may only be made with the permission of the Commission. This appeal is one to which s.400 of the Act applies. Section 400 provides:

"(1) Despite subsection 604(2), the FWC must not grant permission to appeal from a decision made by the FWC under this Part unless the FWC considers that it is in the public interest to do so.

(2) Despite subsection 604(1), an appeal from a decision made by the FWC in relation to a matter arising under this Part can only, to the extent that it is an appeal on a question of fact, be made on the ground that the decision involved a significant error of fact."

[11] In Coal & Allied Mining Services Pty Ltd v Lawler and others,[8] the Full Court of the Federal Court characterised the test under s.400 as 'stringent'.

[12] The fact that the Member at first instance has made an error is not necessarily a sufficient basis for the grant of permission to appeal in the public interest.[9] The task of assessing whether the public interest test is met is a discretionary one involving a broad value judgment.[10] In GlaxoSmithKline Australia Pty Ltd v Makin, a Full Bench identified some of the considerations that may attract the public interest:

"[27] Although the public interest might be attracted where a matter raises issues of importance and general application, or where there is a diversity of decisions at first instance so that guidance from an appellate court is required, or where the decision at first instance manifests an injustice, or the result is counter intuitive, or that the legal principles applied appear disharmonious when compared with other recent decisions dealing with similar matters, it seems to us that none of those elements is present in this case."[11]

[13] In determining whether permission to appeal should be granted, it is unnecessary and inappropriate for the Full Bench to conduct a detailed examination of the grounds of appeal.[12] However, it is necessary to engage with the appeal grounds to consider whether they raise an arguable case of appealable error.

[14] The appeal in this matter raises an issue of importance and general application surrounding the appropriate deduction for social security payments in the calculation of compensation pursuant to s.392(2) of the Act. We are satisfied that the Deputy President has not clearly articulated her reasoning in drawing her conclusion as to the appropriate quantum of compensation. In this respect the Decision manifests an injustice and so we are satisfied that it is in the public interest for permission to appeal to be granted, and we do so.

[15] Before considering the grounds of appeal it is worth setting out the approach generally adopted by Members of the Commission in determining the amount of compensation following a finding of unfair dismissal.

[16] The Full Bench of the Commission in Bowden v Ottrey Homes Cobram and District Retirement Villages[13] (Bowden) enunciated the approach to be taken under the current legislative framework to the determination of compensation. The Full Bench in Bowden endorsed the approach in Ellawala v Australian Postal Corporation[14] (Ellawalla) where the Full Bench of the AIRC articulated the approach to the determination of compensation in respect of s.170CH(7) of the WR Act, prior to the Work Choices amendments. The Full Bench in Bowden commenced its review of Ellawala as follows:

"[24] In Ellawala the Full Bench commenced its analysis of the correct approach 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 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."

[17] Sprigg is a reference to Sprigg v Paul's Licensed Festival Supermarket_._[15]

[18] Whilst we endorse the approach in Bowden, the determination of compensation outlined in Ellawala, with all due respect to that Full Bench, has abbreviated the test set out in Sprigg and any member relying on Ellawala (or decisions which have used the Sprigg approach outlined in Ellawala) may fail to correctly determine compensation where social security (or workers compensation) payments are involved.

[19] The Full Bench of the AIRC in Sprigg said:

"26. Ross VP addressed the construction of the relevant provision through a detailed examination of decisions by Members of the Court. The substance of his decision is adequately summarised in the following passages:

"It can be seen that the approach taken in a number of cases in the Industrial Relations Court is to assess the appropriate amount of compensation in the light of all relevant circumstances, including the remuneration that the employee would have received, or have been likely to have received, if the employer had not terminated the employment and, if that amount exceeds the permissible figure, reduce the compensation to that figure.[16] The following general principles regarding reinstatement and compensation may be extracted from the cases referred to:

(5) Lost remuneration is a fundamental element in assessing compensation though it is not the only matter that may be considered: Krupp-Geir v Open Family (Australia) Inc.

(6) In assessing the amount of compensation to be awarded the following approach has been adopted by the Court:

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.

STEP 2: Deduct moneys earned since termination. Workers compensation payments are deducted but not social security payments. The failure of an applicant to mitigate his or her loss may lead to a reduction in the amount of compensation awarded.

STEP 3: The remaining amount of compensation is discounted for contingencies.

STEP 4: The impact of taxation is calculated to ensure that the employee receives the actual amount he or she would have received if they had continued in their employment.

STEP 5: The legislative cap on compensation is applied...[17]

[20] That no deduction is to be made for social security payments was affirmed by the Full Bench in McCulloch v Calvary Health Care Adelaide[18]:

"[32] The FWC, and its predecessors, have not deducted social security payments in the manner proposed by the respondent on the basis that such payments do not constitute 'remuneration earned ... from employment or other work' for the purposes of s.392(2)(d). This issue was specifically addressed in Kennedy and Cumnock No.1 Colliery Pty Ltd[19] where the Full Bench said:

"We note that allowance is generally not made for social security payments in assessing an amount to be ordered in lieu of reinstatement pursuant to s.170CH(6): Sprigg v Paul's Licensed Festival Supermarket (1998) 88 IR 21; Australian Postal Commission v Ellawalla 17 April 2000, [Print S5109]. The relevant part of the decision in each of these cases was influenced to some extent by the decision in Shorten v Australian Meat Holdings Pty Ltd (1996) 70 IR 360."[20]

[33] The Full Bench then went on to say at [11]:

"It is not our intention that the remuneration lost should be discounted for social security payments which the applicant is required to repay. Equally we think it would be inequitable to permit recovery of lost remuneration from the employer when social security payments referable to loss of income could be retained."[21]

[34] The most recent consideration of this issue appears to have been in Kim Lee Jarvis v Crystal Pictures Pty Ltd[22] in which Cloghan C declined to make any deduction on account of the receipt of Centrelink payments, for the following reasons:

"[74] I should note for the benefit of both parties that Ms Jarvis advised that during between her termination of employment and 15 April 2010, she received Centrelink payments. Ms Jarvis did not disclose the amount received. For my purposes under s.392(e) of the Act, I do not consider Centrelink payments as "...remuneration earned by [Ms Jarvis] from employment or work during the period between the dismissal and the making of the order for compensation". Further, I do not consider it "relevant" for the purposes of s.392(g) of the Act, as it would be inappropriate for Australian taxpayers to effectively subsidise compensation (foregone wages) payable to an employee, where the employer has instantly dismissed that employee unfairly.

[75] Having said that, if the Centrelink payments received by Ms Jarvis have to be repaid or there is discretion for repayment, that is a matter between Ms Jarvis and the relevant Commonwealth officers."[23]

[21] The requirement to give adequate reasons was stated by the Full Bench in Barach v University of New South Wales[24]:

"[16] The duty to give adequate reasons for decision has been considered on many occasions.[25] Important public policy considerations underlie this duty. In particular, the reasons for decision must be sufficient to allow the parties to exercise such rights of appeal as may be available and to enable an appeal bench to determine whether or not error has occurred in relation to a decision. Consequently the reasons given must articulate the essential grounds for reaching the decision and must address material questions of fact and law in a manner which discloses the steps which lead to a particular result. However the reasons for decision of a tribunal member need not be lengthy or elaborate and need not spell out every detail in the reasoning process or deal with every matter of fact or law which was raised in the proceedings."

[22] We now turn to consider each of the grounds of appeal.

[23] In the Decision (at [64]) the Deputy President said, in relation to remuneration earned and income likely to be earned:

"Ms Smith gave evidence that she commenced alternative employment on 22 June 2020, approximately four weeks' after her dismissal. She received the JobSeeker payment between 26 June 2020 and 21 August 2020 for which she received a total amount of $6,320.50."

[24] Jobseeker is the name currently applied to social security benefits.

[25] It can be gleaned from the Decision that the Deputy President, in determining compensation, took into account the Jobseeker payments received by Ms Smith following the termination of her employment.

[26] Whilst Ms Smith apparently received the Jobseeker payments after the commencement of her new employment, that is a matter for Ms Smith to resolve with the relevant Government agency. It is not remuneration earned by Ms Smith from employment post the termination of her employment or remuneration that should otherwise be taken into account.[26]

[27] Ms Smith says that there is a divergence of decisions of the Commission on the treatment of social security payments in determining compensation such that guidance on the matter is required from this Full Bench. Conversely the Respondent says that the question of whether social security payments should be deducted is well settled and no guidance is required from this Full Bench.

[28] To the extent that the Deputy President did not follow the established authority in the Decision and did make a deduction for, or otherwise took into account, Jobseeker payments the Deputy President was in error.

[29] While this matter alone may not provide sufficient grounds on which to grant the appeal, it needs to be considered in conjunction with the following grounds.

Grounds 3 & 4 - No apparent reason for the decision

[30] In the Decision, the Deputy President set out each of those matters she was required to take into account in considering compensation in accordance with s.392(2)(a)-(g). She did not, on a consideration of each of these factors, indicate the amount of compensation calculated by their application.

[31] The Deputy President does appear to have applied the decision in Hanson in coming to her conclusion that $10,000 in compensation is appropriate (at [71]-[73] of the Decision).

[32] In so doing the Deputy President has not given an indication as to how this figure of $10,000 was arrived at, and if the application of Hanson resulted in an increase or decrease of the amount otherwise determined. Further, there is no indication as to what matters were taken into account in concluding that $10,000 was adequate compensation_._ This error on the part of the Deputy President is compounded by her finding that there were no other relevant matters to take into account under s.392(2)(g) of the FW Act in determining the amount of compensation. Clearly there were other matters the Deputy President took into account. The failure to identify "other matters" limits any understanding of why an adjustment to an amount otherwise determined is necessary or why the final amount of compensation ordered is warranted.

[33] Considered overall, it is not apparent from the Decision the basis on which the Deputy President reached her conclusion as to compensation. The essential grounds, including any factual basis, for reaching the decision are not adequately set out. How the application of Hanson affected the compensation amount otherwise determined is unclear.

[34] It would be wrong, in our view, to consider that the decision in Hanson provides the grounds to disregard an amount of compensation otherwise determined using established authority in Bowden and Ellawalla. The Full Bench in Hanson said:

"Sprigg is a useful servant, but is not to be applied in a rigid determinative manner. In deciding the amount of a compensation order the Act directs that the Commission 'must take into account all of the circumstances of the case' including the particular matters set out at s.392(2)(a) to (g)."

[35] In taking into account "all of the circumstances" it is necessary to articulate those circumstances and provide reasons as to why an amount arrived at is considered appropriate. This did not occur in this case.

[36] When the failure to provide adequate reasons is considered in conjunction with a lack of clarity as to the consideration of Jobseeker payments we consider that the Decision is attended by appealable error.

Ground 5 - Ms Smith was earning income after 4 weeks

[37] In considering this ground of appeal we note the minimal evidence of Ms Smith in relation to her earnings and her apparent unwillingness to disclose her commission or likely commission payments. We also note that neither party engaged with the Deputy President on how commission payments earned but not yet paid should be treated in determining compensation.

[38] Given our conclusions above, we do not need to further consider this ground of appeal.

[39] For the above reasons, we are satisfied that the decision of the Deputy President is attended by sufficient doubt to warrant its reconsideration.

[40] Permission to appeal is granted and the appeal, insofar as it relates to the determination of compensation, is granted.

[41] The decision, in relation to compensation, is quashed.

[42] The matter of compensation will be referred back to Deputy President Dean for redetermination.

[1] Megan Smith v Fearon Howard Real Estate Pty Ltd T/A Ray White Balmain [2020] FWC 6049.

[2] PR724455.

[4] [2018] FWCFB 5960 at [39].

[5] See PR724455.

[6] [2018] FWCFB 5960.

[7] See Coal and Allied v AIRC [2000] HCA 47; (2000) 203 CLR 194 at [17].

[8] [2011] FCAFC 54 at [43], per Buchanan J, Marshall and Cowdroy JJ concurring.

[9] Lawrence v Coal & Allied Mining Services Pty Ltd, 202 IR 388 at [28], affirmed on judicial review in Coal & Allied Mining Services Pty Ltd v Lawler [2011] FCAFC 54.

[10] O'Sullivan v Farrer [1989], HCA 61, per Mason CJ, Brennan, Dawson and Gaudron JJ; applied in Hogan v Hinch [2011] HCA 4, at [69]; Coal & Allied Mining Services Pty Ltd v Lawler and others [2011] FCAFC 54, at [44]-[46].

[12] Trustee for The MTGI Trust v Johnston [2016] FCAFC 140 at [82].

[13] [2013] FWCFB 431.

[18] [2015] FWCFB 2267.

[19] PR908987; Also see Steggles Ltd v West, Print S5876.

[20] Kennedy and Cumnock No.1 Colliery Pty Ltd, PR908987 at [10].

[22] [2010] FWA 3674.

[23] [2010] FWA 3674 at [75] - [75].

[24] [2010] FWAFB 3307.

[25] See generally Soulemezis v Dudley Holdings Pty Ltd (1987) 10 NSWLR 247, at 269-271, 280; Re Astec Pty Ltd (1992) 45 IR 261; Edwards v Giudice [1999] FCA 1836; (1999) 169 ALR 89 at [10]- [11], [44]-[48]; Alchin v Daley [2009] NSWCA 418 at [35]).

[26] See Kim Lee Jarvis v Crystal Pictures Pty Ltd [2010] FWA 3674 at [74]- [75].

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