Fair Work Act 2009

s.394 - Application for unfair dismissal remedy

Application for an unfair dismissal remedy - dismissal unfair - remedy determined -reinstatement inappropriate - assessment of compensation - s.392(2)(c) and efforts to mitigate loss considered - compensation assessed at $8,625.00 gross, plus Superannuation.

• [1] On 20 July 2022, Ms Ningyun Jessica Zhang made an application to the Fair Work Commission for an unfair dismissal remedy pursuant to s.394 of the Fair Work Act 2009 (the Act). The Respondent to Ms Zhang's unfair dismissal application is Kevin Australia Pty Ltd (Respondent).

• [2] On 29 July 2022, the Respondent filed a Form F3 - Employer Response to application for an Unfair Dismissal Remedy (Form F3) in which it raised the jurisdictional objection that it was small business employer at the time of Ms Zhang's dismissal and the dismissal was consistent with the Small Business Fair Dismissal Code (Code).

• [3] Having had regard to ss.397-399 of the Act and having consulted with the parties, I conducted a determinative conference on 13 October 2022. Ms Zhang was represented by her lawyer Mr Vincent Cheng, permission having been granted pursuant to s.596 of the Act. The Respondent was represented by its Director, Ms Lu Zhao with assistance from an interpreter. Ms Zhang and Ms Zhao gave evidence.

Initial matters to be considered - s.396 of the Act

• [4] Firstly, Ms Zhang's dismissal took effect on 9 July 2022 and her application was filed on 20 July 2022, such that it was made within the 21-day period required by s.394(2) of the Act (s.396(a)).

• [5] Secondly, there is no dispute that Ms Zhang is a person protected from unfair dismissal. Ms Zhang commenced employment with the Respondent on 28 January 2020 and was employed on a full -time basis as a Shop Manager/Beauty Therapist. Ms Zhang had therefore completed the minimum employment period immediately before her dismissal and her gross weekly earnings of $1,653 at the time of her dismissal were less than the high income threshold (s.396(b)).

• [6] In the context of matters raised by this application it is next convenient to consider whether the dismissal was a case of genuine redundancy (s.396(d)). The Respondent has not claimed the dismissal was a case of genuine redundancy and nor does the material before me suggest this was the case.

• [7] Finally, s.396(c) of the Act requires me to consider whether the dismissal was consistent with the Code before turning to deal with the issue of whether the dismissal was unfair.[1]

• [8] The Code is also referred to in s.385(c) of the Act and the Note to s.385 states, "For the definition of consistent with the Small Business Fair Dismissal Code: see section 388."

• [9] Section 388 of the Act then provides:

(1) The Minister may, by legislative instrument, declare a Small Business Fair Dismissal Code.

(2) A person's dismissal was consistent with the Small Business Fair Dismissal Code if:

(a) immediately before the time of the dismissal or at the time the person was given notice of the dismissal (whichever happened first), the person's employer was a small business employer; and

(b) the employer complied with the Small Business Fair Dismissal Code in relation to the dismissal."

• [10] The definition of a "small business employer" for the purpose of the Act is in s.23 as follows:

(1) A national system employer is a small business employer at a particular time if the employer employs fewer than 15 employees at that time.

(2) For the purpose of calculating the number of employees employed by the employer at a particular time:

(a) subject to paragraph (b), all employees employed by the employer at that time are to be counted; and

(b) a casual employee is not to be counted unless, at that time, he or she has been employed by the employer on a regular and systematic basis.

(3) For the purpose of calculating the number of employees employed by the employer at a particular time, associated entities are taken to be one entity.

(4) To avoid doubt, in determining whether a national system employer is a small business employer at a particular time in relation to the dismissal of an employee, or termination of an employee's employment, the employees that are to be counted include (subject to paragraph (2)(b)):

(a) the employee who is being dismissed or whose employment is being terminated; and

(b) any other employee of the employer who is also being dismissed or whose employment is also being terminated."

• [11] The Respondent asserts it had three employees at the time of the dismissal and there is nothing before the Commission suggesting the Respondent was not a "small business employer" at the time of Ms Zhang's dismissal.

• [12] As to whether the Respondent complied with the Small Business Fair Dismissal Code in relation to the dismissal, it is necessary to examine the terms of the Code. The Code declared by the Minister pursuant to s.388(1) is as follows:

It is fair for an employer to dismiss an employee without notice or warning when the employer believes on reasonable grounds that the employee's conduct is sufficiently serious to justify immediate dismissal. Serious misconduct includes theft, fraud, violence and serious breaches of occupational health and safety procedures. For a dismissal to be deemed fair it is sufficient, though not essential, that an allegation of theft, fraud or violence be reported to the police. Of course, the employer must have reasonable grounds for making the report.

In other cases, the small business employer must give the employee a reason why he or she is at risk of being dismissed. The reason must be a valid reason based on the employee's conduct or capacity to do the job.

The employee must be warned verbally or preferably in writing, that he or she risks being dismissed if there is no improvement.

The small business employer must provide the employee with an opportunity to respond to the warning and give the employee a reasonable chance to rectify the problem, having regard to the employee's response. Rectifying the problem might involve the employer providing additional training and ensuring the employee knows the employer's job expectations.

In discussions with an employee in circumstances where dismissal is possible, the employee can have another person present to assist. However, the other person cannot be a lawyer acting in a professional capacity.

A small business employer will be required to provide evidence of compliance with the Code if the employee makes a claim for unfair dismissal to Fair Work Australia, including evidence that a warning has been given (except in cases of summary dismissal). Evidence may include a completed checklist, copies of written warning(s), a statement of termination or signed witness statements."

• [13] Ms Zhang was summarily dismissed on 9 July 2022 and in completing question 4 of the Small Business Fair Dismissal Code Checklist (Checklist) that deals with summary dismissal, the Respondent asserted Ms Zhang:

a) Had been stealing money and/or goods;

b) Defrauded the business;

c) Threatened Ms Zhao and other employees and clients with violence, or actually carried out violence in the workplace; and

• d) Was dismissed for serious misconduct for the reasons said to have been outlined in the Form F3.[2]

• [14] Question 5 of the Checklist asks "Did you dismiss the employee for some other form of serious misconduct?" and the Respondent answered this in the affirmative, thereafter referring to an "enclosed statement of termination" which was the Form F3. A description of the reasons for the dismissal was outlined in answer to question 3.1 of the Form F3 as follows:

• Poor performance in failing to seek new customers or cooperate with other staff and having a 'poor service attitude';
• Misconduct, comprising negligence because the safe in the store was stolen and product was lost and Ms Zhang's refusal to communicate with customers and constant complaining;
• Theft of goods, in that Ms Zhang received an eye bag injection at one of the Respondent's stores but instead of paying for this, asked the attending nurse to charge a client instead. Further, the Respondent accused Ms Zhang of having siphoned off company product instead of displaying it, with the ultimate intention of stealing it; and
• Assault, which was said to have comprised the making of 'personal attacks on the other staff's life' and threats to sue Ms Zhao.

• [15] The Respondent expanded on some of these matters in section 4 of the Respondent's Outline of argument: merits document.[3] The particulars of the alleged stealing were repeated and the poor performance was detailed under a heading stating that Ms Zhang "defrauded the business." The alleged threats said to have been made by Ms Zhang towards Ms Zhao concerned threats to compromise Ms Zhao's visa status and demands for extra payments.

• [16] In assessing whether the Respondent complied with the summary dismissal section of the Code, it is necessary to firstly determine whether the Respondent genuinely held the belief that Ms Zhang's conduct was sufficiently serious to justify immediate dismissal. Secondly, it is necessary to consider whether the Respondent's belief was, objectively speaking, based on reasonable grounds.[4]

• [17] While Respondent alleged a theft of money and/or goods, I am not satisfied it genuinely held the belief that there was a theft of goods by Ms Zhang that was sufficiently serious to justify her immediate dismissal. This is because the alleged theft took place in March 2020 and the Respondent has acknowledged Ms Zhang "refunded the money." The Respondent also asserted that Ms Zhao gave Ms Zhang a verbal warning and elected to allow her to continue in her employment.[5] For her part, Ms Zhang denies having had made any admission of stealing and further denies having received a warning. She says that she made payment for the treatment at the end of the month in question and produced what she claimed was a record of that payment.[6]

• [18] As to the allegation that Ms Zhang siphoned off stock with the intention of stealing it, there was no theft of that stock because the Respondent actually acknowledged the said stock was found after Ms Zhang's employment was terminated.[7] Further, Ms Zhang admitted to putting the stock to one side but said she did so because it had been fire-damaged and was not suitable for use. The other component of the theft allegation is that Ms Zhang was observed using the Respondent's skin products. This is a generalised claim and it would seem that if this occurred during the course of Ms Zhang's employment, it occurred with Ms Zhao's knowledge and acquiescence, because it was never addressed. Further, none of the alleged theft, use of product or siphoning of goods were raised with Ms Zhang as a basis for her dismissal on the day she was dismissed. Therefore, even if the Respondent genuinely held the belief that there was theft sufficiently serious to justify immediate dismissal, which I doubt given its inaction throughout the employment relationship and the absence of any reference at the point of termination, I do not consider the Respondent's belief in relation to alleged theft was, objectively speaking, based on reasonable grounds.

• [19] To the extent the Respondent has alleged poor performance or 'misconduct' and 'assault' as part of serious misconduct allegations, it did not indicate that it had dismissed Ms Zhang because of her unsatisfactory conduct, performance or capacity to do the job or any 'assault' when terminating her employment or completing the Small Business Fair Dismissal Code Checklist. The evidence before the Commission comprised the testimony of Ms Zhang and Ms Zhao. Having observed them giving evidence, I have not been persuaded that there were serious issues of performance raised with Ms Zhang during the course of her employment. This weighs against a finding that the Respondent genuinely held the belief that Ms Zhang's performance was sufficiently serious to justify immediate dismissal. I am also not persuaded there were any instances of 'assault' or threats perpetrated by Ms Zhang. Therefore, even if Ms Zhao genuinely held the belief that there were performance issues or instances of assault sufficiently serious to justify immediate dismissal, I do not consider her belief was, objectively speaking, based on reasonable grounds.

• [20] Additionally, I am not persuaded there was compliance by the Respondent with the "Other dismissal" requirements under the Code. Putting the dispute about whether a verbal warning was issued in March 2020 to one side, there was no evidence that the Respondent gave Ms Zhang a reason why she was at risk of being dismissed in the period leading up to her dismissal. There is conflicting evidence regarding whether or not Ms Zhang was verbally warned during her employment. Certainly, there is no evidence of any written warnings and I am satisfied there was never any indication from the Respondent, either orally or in writing, that Ms Zhang risked being dismissed if there was no improvement in her performance. Ms Zhang was dismissed without having been given an opportunity to respond to any warning or having been given a reasonable chance to rectify the problems the Respondent has alleged since it commenced responding to this unfair dismissal application. I have not been persuaded there were discussions relating to performance or conduct or the possibility of termination in the period leading up to Ms Zhang being notified of her immediate dismissal on 9 July 2022.

• [21] Having considered whether the dismissal of Ms Zhang was consistent with the Code, I am not satisfied it was (s.396(c)).

Section 385 of the Act - was the dismissal unfair?

• [22] As to the circumstances set out at s.385 of the Act, there is no question or dispute that Ms Zhang was dismissed (s.385(a)). As concluded in the preceding paragraph, I am satisfied the dismissal was not consistent with the Code (s.385(c)) and as outlined in paragraph [6] above, I am satisfied the dismissal was not a case of genuine redundancy within the meaning of s.389 of the Act (s.385(d)).

• [23] This leaves s.385(b) and in determining whether the dismissal was harsh, unjust or unreasonable, I must have regard to s.387 of the Act:

In considering whether it is satisfied that a dismissal was harsh, unjust or unreasonable, the FWC must take into account:

(a) whether there was a valid reason for the dismissal related to the person's capacity or conduct (including its effect on the safety and welfare of other employees); and

(b) whether the person was notified of that reason; and

(c) whether the person was given an opportunity to respond to any reason related to the capacity or conduct of the person; and

(d) any unreasonable refusal by the employer to allow the person to have a support person present to assist at any discussions relating to dismissal; and

(e) if the dismissal related to unsatisfactory performance by the person--whether the person had been warned about that unsatisfactory performance before the dismissal; and

(f) the degree to which the size of the employer's enterprise would be likely to impact on the procedures followed in effecting the dismissal; and

(g) the degree to which the absence of dedicated human resource management specialists or expertise in the enterprise would be likely to impact on the procedures followed in effecting the dismissal; and

(h) any other matters that the FWC considers relevant."

• [24] Ms Zhang gave evidence that at approximately 3.00pm on 9 July 2022, Ms Jamie Zheng, approached her and said words to the effect of:

"I am the new investor of this business and will take over the management of this business with a new team...You are not going to like this, but you are terminated immediately, and you should pack your bags and leave now. Leave all the company property here and also delete all our clients contacts from your phone."

• [25] Ms Zhang said she was shocked and that she told Ms Zheng that she would telephone Ms Zhao because she was unaware of who Ms Zheng was. When Ms Zhang telephoned Ms Zhao, she informed her that she had been approached by Ms Zheng and advised that her employment was terminated. Ms Zhang said Ms Zhao replied with words to the effect of "Just listen to her [Ms Zheng]" to which Ms Zhang replied "You can fire me if you want, I need you to give me reasons in writing. If you want me to handover company property to a stranger, you need to instruct me in writing as well." Ms Zhao confirmed she would send Ms Zhang an email with those instructions. Following the telephone conversation, Ms Zhang said she was advised by Ms Zheng that she would be paid two weeks' notice and provided with a reference. Ms Zhang said that when she requested three weeks' notice because she was over the age of 45, Ms Zheng replied with words to the effect of "You should be happy that you are getting any payment."

• [26] At 4.52pm on that day, Ms Zhao sent an email to Ms Zhang (Termination Email) which stated:

Thank you for your work at the shop. In view of the long-term underperformance of the shop, we regret to inform you that we will officially terminate your employment today. We will provide you with the following document in writing within 3 working days as required by law:

(2) On time-payment of your salary and superannuation for this week

Please cooperate by handing over your shop keys, company and other items in your possession and delete all contact details relating to the company's customers, suppliers etc. thank you for your cooperation.

• [27] Following receipt of the Termination Email, Ms Zhang returned all company property and left the premises.

• [28] Having outlined the criteria in s.387 of the Act, I am under a duty to consider each of these criteria in reaching my conclusion and will do so below.

Was there a valid reason for dismissal relating to Ms Zhang's capacity or conduct? - s.387(a)

• [29] In considering whether the dismissal of Ms Zhang was harsh, unjust or unreasonable, I am required to take into account whether there was a valid reason for the dismissal related to her capacity or conduct (including its effect on the safety and welfare of other employees). The reason or reasons should be "sound, defensible and well founded"[8] and should not be "capricious, fanciful, spiteful or prejudiced".[9]

• [30] Ms Zhang submits there was no valid reason for dismissal relating to her capacity or conduct.

• [31] The Respondent outlined the basis for the dismissal of Ms Zhang when submitting that her dismissal was consistent with the Code. I have outlined the various allegations of theft made by the Respondent above and have made various findings in relation to each of them. On balance, I am not persuaded the allegations of theft have any basis. The Respondent submits there were other issues. As to other conduct issues, I have already outlined that I am not persuaded there were any instances of 'assault' or threats perpetrated by Ms Zhang. I am also not persuaded that Ms Zhang refused to communicate with clients of the business. I accept Ms Zhang's evidence that one of the ways she managed communications with customers was via the Wechat account.[10]

• [32] The allegations regarding Ms Zhang leaving the store premises and being uncontactable were denied. I am left therefore with having to weigh one party's version against the other's and ultimately, because I am not satisfied that these issues were raised with Ms Zhang during her employment, I am not persuaded that I should accept Ms Zhang's account in this respect. As such, I am not satisfied that these allegations are capable of constituting a valid reason for Ms Zhang's dismissal.

• [33] As to performance issues capable of being characterised as capacity or conduct, the Respondents alleges Ms Zhang performed poorly in failing to seek new customers or cooperate with other staff and for exhibiting a 'poor service attitude.' However, I have reviewed the Wechat messages produced by Ms Zhang and consider these indicate the manner in which she communicated with customers and engaged with another member of staff (Ms Miranda Li) about the business.[11] I have also considered evidence given by Ms Zhang that she had raised the need to hire more staff and undertake advertising with Ms Li, and have noted her assertion that the store was making a profit.

• [34] Ms Zhang submits the alleged grounds for dismissal relating to her conduct were only raised by the Respondent after the termination of her employment in the Form F3. It is clear the relationship between the parties deteriorated in the period following Ms Zhang's dismissal.

• [35] Based on the evidence before the Commission, I am not persuaded there was a valid reason for Ms Zhang's dismissal related to her capacity or conduct.

• [36] As I am not satisfied there was a valid reason for the dismissal related to Ms Zhang's capacity or conduct, this factor is not relevant to the present case_._[12]

Opportunity to respond to any reason related to capacity or conduct - s.387(c)

• [37] As I have not found there was a valid reason for the dismissal related to Ms Zhang's capacity or conduct, this factor is not relevant to the present case.[13]

Unreasonable refusal by the employer to allow a support person - s.387(d)

• [38] The question of a support person is not a relevant consideration in the circumstances of this case. The issue did not arise and in any event, there was no unreasonable refusal by the Respondent to allow Ms Zhang a support person at discussions relating to her dismissal.

Warnings regarding unsatisfactory performance - s.387(e)

• [39] The reason given to Ms Zhang at the time of her dismissal was that she was being terminated "in view of the long-term underperformance of the shop." Ms Zhang gave evidence that the feedback she had received from Ms Li, to whom she said she had reported, was that she had been doing a good job. To the extent that the dismissal can therefore be characterised as a termination on the basis of Ms Zhang's unsatisfactory performance, I repeat my findings at [20] above:

a) I am satisfied there was never any indication from the Respondent, either orally or in writing, that Ms Zhang risked being dismissed if there was no improvement in her performance;

b) There is no evidence of any written warnings; and

1. I have not been persuaded there were discussions relating to performance and the possibility of termination in the period leading up to Ms Zhang being notified of her immediate dismissal on 9 July 2022.

• [40] The absence of any warnings regarding unsatisfactory performance weighs in favour of a finding that Ms Zhang's dismissal was unfair.

Impact of the size of the employer on procedures followed - s.387(f) and Absence of dedicated human resources management specialist/expertise on procedures followed - s.387(g)

• [41] I note that the size of the Respondent was outlined as being an entity of three employees. As such, I consider the size of the Respondent had an impact on the procedures followed. More relevant in this case is the apparent absence of dedicated human resource management specialists or expertise and I am satisfied this had an impact on the procedures followed.

• [42] Section 387(h) of the Act requires the Commission to take into account any other matters it considers relevant.

• [43] Ms Zhang worked for the Respondent for over 2 years and her period of employment coincided almost entirely with the onset and persistence of the COVID-19 pandemic. Working through this period introduced operational challenges for both parties. The capacity of the business to trade as normal was impacted.

• [44] Ms Zhang said the dismissal caused her a great degree of stress and humiliation. Her dismissal was communicated to her without notice, by a person who, as far as she was aware, held no position of authority with the Respondent.

• [45] Ms Zhang also said that being over 45 years of age, it has been difficult to obtain new employment, particularly as there had been a lack of training opportunities for her when employed by the Respondent.

• [46] Ms Zhao gave evidence that Ms Zhang was provided with two weeks' pay ($3,306.00 gross) for the period up until 25 July 2022 and was paid $4,577.54 in accrued annual leave entitlements. Ms Zhao appears to have been unaware that Ms Zhao was entitled to a third week of notice on account of being over 45 years of age.[14]

• [47] Both Ms Zhang and Ms Zhao levelled accusations against each other about their respective behaviour and personal qualities. After the determinative conference had been underway for some time, Ms Zheng weighed in as well in relation to Ms Zhang. While it is clear relations have broken down since Ms Zhang's dismissal, I have not been persuaded things were as toxic between the parties while the employment was on foot. This is because aside from the testimony I heard at the determinative conference, there is little, if any, additional evidence that went to the nature of the relationship between the parties. That which was adduced appeared to comprise Wechat messages between Ms Zhang and Ms Li. These messages disclose no direct criticism of Ms Zhao and nor do they disclose disquiet with Ms Zhang's performance. They are not of the same tenor as the testimony received at the determinative conference.

• [48] Having considered each of the matters specified in s.387 of the Act, I am satisfied the dismissal of Ms Zhang was harsh because the Respondent terminated her without warning or having raised the issues upon which it now relies. Additionally, the dismissal came after two challenging trading years and was effected by a person who had not, to Ms Zhang's knowledge, previously held any position of authority with the Respondent. Moreover, she arrived at Ms Zhang's place of work unannounced.

• [49] Further, I am satisfied on the material and evidence before me that the dismissal was unjust and unreasonable because it had no sound, defensible or well-found basis. There was no valid reason for the dismissal related to Ms Zhang's capacity or conduct and nor was the dismissal related to unsatisfactory performance. I am not satisfied Ms Zhao's dismissal was consistent with the Code or that it was a case of genuine redundancy within the meaning of s.389 of the Act.

• [50] Accordingly, I find that Ms Zhang's dismissal was unfair. Ms Zhang's application for unfair dismissal remedy is therefore granted.

• [51] In the circumstances where I have found Ms Zhang was protected from unfair dismissal at the time of being dismissed and that she has been unfairly dismissed, s.390 of the Act prescribes that a remedy is available. Accordingly, I am required to determine whether to order the reinstatement of Ms Zhang or, if I am satisfied that reinstatement is inappropriate, an order for compensation if I am satisfied that such an order is appropriate in all the circumstances.[15]

• [52] Ms Zhang does not seek reinstatement and has submitted the following:

"The employer is a small business and the dismissal was a humiliating experience for the Applicant. The Applicant does not wish to return to the employer's business as the trust relationship has broken down irretrievably. The Applicant has found new employment and will start in October 2022."

• [53] Having regard to this submission and the circumstances of this case, I am satisfied it is inappropriate to order reinstatement.[16] I must therefore consider whether it is appropriate in all the circumstances to make an order for payment of compensation[17] and if so, what that amount should be.

• [54] Taking into account my finding that the dismissal was unfair and the reasons for that conclusion I have outlined above, and since I am satisfied an order for reinstatement is inappropriate, I consider that an order for payment of compensation is appropriate in all the circumstances. I am not persuaded the material before me suggests otherwise. Section 390(3)(b) of the Act is therefore satisfied.

• [55] Section 392 of the Act sets out the criteria for deciding an amount of compensation. The assessment of compensation I am required to undertake is directed towards the remuneration lost in consequence of Ms Zhang having been unfairly dismissed.

• [56] Section 392 specifically prohibits including any component of compensation for shock, distress or humiliation, or other analogous hurt, caused to Ms Zhang by the manner of her dismissal and, via a compensation cap, imposes an upper limit of compensation that may be ordered.

(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.

(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.

(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.

(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.

(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:

(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."

• [58] In considering each of the criteria in s.392 of the Act, it is useful to refer to the statement of principles to be applied in the assessment of compensation by the Full Bench of the Commission in Johnson v North West Supermarkets T/A Castlemaine IGA (Johnson):[18]

"[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."[19]

• [59] In Balaclava Pastoral Co Pty Ltd t/a Australian Hotel Cowra v Darren Nurcombe,[20] 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.

• [60] Ms Zhang seeks an order for compensation to cover the period from the date of her dismissal on 9 July 2022 until the date she expected to commence new employment on 22 October 2022, a period of 15 weeks.

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

• [61] Ms Zhang stated that her gross earnings were $1,653.00 per week and she worked 45 hours per week.[21] This was not disputed by the Respondent. As such, I will assess compensation using a gross weekly salary of $1,653.00.

• [62] I have outlined above that I have not been persuaded that there were issues of performance raised with Ms Zhang prior to her dismissal on 9 July 2022. I consider that if the Respondent had in fact had issues with Ms Zhang prior to this, or issues with "the long-term underperformance of the shop", it had not disclosed these to Ms Zhang. It was not the case that Ms Zhang was at the point of resigning and there is nothing to indicate she did not expect to be in continuing employment with the Respondent.

• [63] 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".[22] 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.[23]

• [64] If the Respondent had issues with the performance of Ms Zhang and/or the shop at which she had been working, I consider a "fair go all round" required it to raise the issues with Ms Zhang and provide her with an opportunity to respond. Noting however the size of the Respondent and the personal nature of the services it offers its customers, my assessment is that Ms Zhang would have remained in employment with the Respondent for a further period of no more than 12 weeks. Within such period, I consider the parties would have been able to give the task of improving the performance of the business and the quality of their employment relationship their focus and Ms Zhang would have had a reasonable opportunity to respond to performance issues raised by the Respondent. Based on the rate of earnings Ms Zhang was receiving at the date of her dismissal, the gross remuneration she would have received for such a 12-week period would have been $19,836.00 (excluding superannuation)). This is the starting point.

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

• [65] 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. Remuneration 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. However, as outlined above, it was stated by the Full Bench in Ellawala v Australian Postal Corporation:[24]

"Monies earned after the end of the "anticipated period of employment" ... 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."

• [66] Ms Zhang seeks compensation from the date her dismissal took effect (that is, 9 July 2022) to the date of commencement of her new employment (that is, 22 October 2022). Her evidence was that she had not earned any income from 9 July 2022 to the date of the determinative conference, and she did not expect to earn any income until 22 October 2022.

• [67] The evidence before me regarding the state of the Respondent's business was only expressed in broad terms. There was not an agreed position and in the absence of particulars, I am not persuaded to reduce the compensation amount I have assessed on the basis of the impact it might have on the viability of the Respondent.

• [68] The question in applying this factor is whether Ms Zhang has acted reasonably. As held by the Full Bench in McCulloch v Calvary Health Care Adelaide,[25] the reasonableness of an applicant's efforts taken to mitigate loss depends on the circumstances of the case. I have noted the submissions of Ms Zhang that being over 45 years of age, it has been difficult for her to obtain new employment, particularly as there had been a lack of training opportunities for her when employed by the Respondent. Nonetheless, Ms Zhang gave evidence that she had attended four job interviews and secured new employment on 22 August 2022. She says she participated in over 10 training sessions arranged by her new employer, none of which were remunerated. Ms Zhang said the new employer was completing renovations and she expected to commence employment on 22 October 2022. Correspondence from the new employer confirmed the new employment and this starting date.[26]

• [69] Amongst the circumstances the Commission is required to take into account in determining an amount of compensation, is the requirement to assess remuneration earned (and likely to be earned) following the dismissal and the efforts to mitigate the loss suffered because of the dismissal. New employment and/or work generating remuneration, plus efforts to secure these are therefore key considerations. In the circumstances of this case, I consider Ms Zhang made appropriate efforts to mitigate her loss during the 6-week period between her dismissal and 22 August 2022, when she secured her new employment. Her efforts met the 'reasonableness' standard. However, Ms Zhang's duty to mitigate her loss did not cease then. A period of inactivity followed in the 7 weeks that passed until the date of the determinative conference and the material before me, or absence thereof, leaves me unpersuaded that Ms Zhang was prevented from undertaking mitigation efforts after 22 August 2022 due to medical or other grounds. A period of 13 weeks elapsed from the date of Ms Zhang's dismissal until the determinative conference. Having regard to Ms Zhang's inactivity when it came to mitigation in the 7-week period after 22 August 2022 until the determinative conference, I consider a 50% deduction in the amount of compensation to be awarded is warranted.

• [70] Applying this to the sum I calculated in [64] above ($19,836.00 gross) results in a deduction of $9,918.00 and a revised total of $9,918.00 gross.

Length of service - s.392(2)(b) and any other matters - s.392(2)(g)

• [71] Ms Zhang had been employed for approximately 2 years and 4 months at the time of her dismissal. It is necessary to take this into account but as it is not an extensive period of time, there will be no material adjustment either way on account of this factor alone.

• [72] I accept the evidence from Ms Zhao that Ms Zhang was provided with two weeks' pay in lieu of notice and was paid her accrued annual leave entitlements totalling $4,577.54. Records of payment in net terms were produced.[27] Issues relating to notice are connected with Ms Zhang's length of service and/or are relevant matter under s.392(2)(g).[28] I consider it is appropriate to deduct a component of 2 weeks' pay from the award of compensation to reflect the payment in lieu of notice made to Ms Zhang following her dismissal. A deduction of $3,306.00 gross for the notice payment received from the $9,918.00 assessed at [71] above will be applied. This leaves $6,612.00 gross. However, as outlined above, Ms Zhang was entitled to three weeks' notice. She put this to Ms Zheng on the day she was summarily dismissed and gave evidence that Ms Zheng replied with words to the effect of "You should be happy that you are getting any payment." Happily for Ms Zhang however, parliament has determined the minimum standards for notice of termination and employers are obliged to adhere to them. I consider it appropriate in the circumstances of this case to add an additional weeks' pay to the amount I have assessed. This brings the amount to be awarded to $8,265.00 gross.

• [73] I do not consider there is any basis for any deduction for contingencies in this matter and it will be left to the Respondent to deduct taxation required by law.

• [74] I have found there is no basis to conclude there was misconduct on the part of Ms Zhang that contributed to the decision of the Respondent to dismiss her. I therefore will not make any reduction on account of this factor in the proposed compensation.

• [75] The amount of compensation I order must not exceed the lesser of:

1. the amount Ms Zhang received, or was entitled to receive, during the 26 weeks immediately prior to her dismissal (in this case $1,653.00 gross x 26 weeks = $42,978.00); and

2. half the amount of the high income threshold immediately before the dismissal (in this case $162,000 ÷ 2 = $81,000.00).

• [76] As such, the compensation cap in this matter is $42,978.00 and the amount of compensation proposed must not, and does not exceed this.

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

• [78] While I accept Ms Zhang is aggrieved by the manner of her dismissal, the amount of compensation calculated must not and does not include a component for shock, distress, humiliation or other analogous hurt caused to her as a result.

• [79] I am satisfied that Ms Zhang was protected from unfair dismissal, that the dismissal was unfair and that order for compensation is an appropriate remedy in all the circumstances. 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.[29] In this case, I consider the appropriate amount of compensation to be awarded to Ms Zhang equates to $8,265.00 less taxation as required by law. An order requiring the payment of this amount plus the requisite amount of superannuation within 14 days will be issued with this decision.

Mr V Cheng of Murdock Cheng Legal Practice on behalf of Ms Zhang.

[1] TIOBE Pty Ltd T/A TIOBE v Chen [2018] FWCFB 5726 at [24].

[4] Grandbridge Limited v Mrs Diane Wiburd [2017] FWCFB 6732 at [30].

[8] Selvachandran v Peteron Plastics Pty Ltd [1995] IRCA 333; (1995) 62 IR 371, 373.

[10] Exhibit A5 at DCB pp.73 and 75-84.

[12] Chubb Security Australia Pty Ltd v Thomas Print S2679 (AIRCFB, McIntyre VP, Marsh SDP, Larkin C, 2 February 200), [41]: Read v Gordon Square Child Care Centre [2013] FWCFB 762, [46]-[49].

[14] Fair Work Act 2009 (Cth) - s.117(3)(b).

[15] Ibid - s.390(3).

[16] Ibid - s.390(3)(a).

[17] Ibid - s. 390(3)(b).

[18] [2017] FWCFB 4453.

[20] [2017] FWCFB 429 at [43].

[22] Quoting Smith v Moore Paragon Australia Ltd [2004] AIRC 57; (2004) 130 IR 446 at [32].

[23] Liu v Xin Jin Shan Chinese Language and Culture School Inc [2021] FWC 479 at [10].

[24] Print S5109 (AIRCFB, Ross VP, Williams SDP, Gay C, 17 April 2000).

[25] [2015] FWCFB 2267 at [23], citing Biviano v Suji Kim Collection PR915963 at [34].

[28] Double N Equipment Hire Pty Ltd t/a A1 Distributions v Humphries [2016] FWCFB 7206 at [34].

[29] McCulloch v Calvary Health Care Adelaide [2015] FWCFB 873 at [29].

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