Compensation for shock and humiliation only awarded in exacerbating circumstances

Cases

Compensation for shock and humiliation only awarded in exacerbating circumstances

In instances where a claim that a termination was harsh, unjust and unreasonable is substantiated, and reinstatement is considered an inappropriate remedy, the Commission may make an order for compensation as an alternative remedy.

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In instances where a claim that a termination was harsh, unjust and unreasonable is substantiated, and reinstatement is considered an inappropriate remedy, the Commission may make an order for compensation as an alternative remedy. Such an order may include a component of compensation for shock, humiliation and distress suffered. However, such a remedy is only available in extraordinary circumstances. Compensation for shock, humiliation and distress can only be awarded where there is evidence of unusual and exacerbating circumstances.

The decision in Section 45 appeal by Coms21 Limited, Print S3571, [2000] 193 IRCommA, (25 February 2000) derived from a s170CE application by five employees in respect of the termination of their employment. Having held that each of the dismissals was harsh, unjust and unreasonable, the Commissioner at first instance ordered the company to pay compensation in lieu of reinstatement. Of the compensation awarded $4000 was attributed in each case to "shock, humiliation and distress".

Background

The former employees were terminated on 9 March 1999. The common feature amongst the terminated employees was the fact that they were all either related to or closely associated to the company's former Chief Executive Officer. In this respect, the Commission at first instance dismissed the company claim that the true reason for the terminations was redundancy.

On appeal the company submitted that the legislation did not permit compensation for shock, humiliation and distress; and the evidence in this matter did not justify an order compensating the former employees for shock, humiliation and distress.

Does the legislation permit compensation for shock, humiliation and distress?

The company submitted that on its proper construction, s170CH(6) does not permit the Commission to award compensation exceeding what the employee would have received if reinstatement had been ordered. Section 170CH(6) provides that:

If the Commission thinks that the reinstatement of the employee is inappropriate, the Commission may, if the Commission considers it appropriate in all the circumstances of the case, make an order requiring the employer to pay the employee an amount ordered by the Commission in lieu of reinstatement.

To this end, the company contended that the words "...an amount ordered in lieu of reinstatement" should be construed as limiting the Commission to awarding compensation for loss of remuneration.

The Full Bench expressed a number of difficulties with the construction of s170CH(6) advanced by Coms21 Ltd. Section 170CH(7) prescribes the manner in which the Commission should calculate compensation. The Full Bench noted that only two of the circumstances specified in s170CH(7) relate to lost remuneration, thereby suggesting that loss of other kinds may be compensated for.

It was also noted by the Full Bench that prior to the current Act, the power to award compensation for shock, humiliation and distress resided in s170EE of the Industrial Relations Act 1988. This was confirmed by the Full Court of the Industrial Relations Court of Australia in Burazin v Blacktown City Guardian Pty Ltd, (1996) 142 ALR 144. In this matter the Full Bench made the observation that if the Workplace Relations Act 1996 intended to overrule or overturn the Burazin case then there would have been specific indication of that in the terms of s170CH(7). The Full Bench concluded that properly construed s170CH(6) provides that where reinstatement is considered inappropriate, the Commission may make an order for compensation as an alternative remedy, this may include an order for compensation for shock, humiliation and distress.

Whether Commissioner could award compensation for shock, humiliation and distress in this instance?

The Full Bench then turned to consider whether it was open to the Commissioner at first instance, based upon the evidence before him, to award each of the former employees $4000 in compensation for shock, humiliation and distress.

Once again the Full Bench referred to the Burazin case, which held that whilst there is an element of distress in every termination, there must be evidence of unusual exacerbating circumstances for compensation to be awarded. In this matter, the Full Bench believed it to be difficult to glean from the evidence exacerbating circumstances of the kind found in Burazin. Whilst the evidence of the dismissed employees revealed surprise and astonishment, there was no evidence of shock, humiliation and distress that would be in response to exacerbating circumstances. In this instance there was insufficient evidence to support an inference that the dismissed employees suffered shock, humiliation and distress in response to exacerbating circumstances.

The Full Bench held that the Commissioner at first instance also erred in awarding the same amount of compensation to each of the former employees. Such an approach, according to the Full Bench, assumed that the shock, humiliation and distress suffered by each of the dismissed employees was exactly the same.

In granting leave to appeal and upholding the appeal, the Full Bench ordered that the Commissioner's orders be varied by reducing the amount of compensation by $4000 in each case.

 
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