Unfair dismissal remedies: reinstatement vs compensation

Posted on March 6th, 2018

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If an employee has been unfairly dismissed, there are two potential remedies that may be ordered by the Fair Work Commission (‘FWC’): reinstatement and compensation.

Reinstatement is the primary remedy for unfair dismissals. According to section 391 of the Fair Work Act, an order by the FWC for reinstatement should relate to the position that the person occupied immediately prior to their dismissal, or an alternative position on terms which are no less favourable than the previous position. In circumstances where the position no longer exists with the employer, an order for reinstatement may be made to an equivalent position within an associated entity of the employer.

If an order for reinstatement is made, the FWC may also make an order for restoration of an employee’s lost pay resulting from the dismissal.

An order for compensation will only be made as a remedy to unfair dismissal in circumstances where reinstatement would be inappropriate. Reinstatement may be considered inappropriate where:

  1. There is a loss of trust and confidence in the employment relationship
  2. The position previously occupied by the employee is no longer available; or
  3. The employee is not able to perform the requirements of the position.

In determining the amount of compensation to be ordered, the FWC must take into account all the circumstances of the case including the effect of the order on the viability of the employer’s enterprise, the length of the person’s service with the employer and the efforts of the employee to mitigate the loss suffered because of the dismissal. If the FWC is satisfied that an employee’s misconduct contributed to the employer’s decision to dismiss the person, the FWC must reduce the amount it would otherwise order.

Katie ThompsonKatie Thompson is a Solicitor at Mullane & Lindsay Solicitors and practises in the Commercial dispute resolution and litigation team. If you require any assistance in this area please contact Katie Thompson to arrange a consultation or contact our Newcastle or Sydney office. 

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