Remedies and risk
A finding of unfair dismissal doesn’t automatically produce a payout. The Commission must first ask whether the person should get their job back — and only if that’s inappropriate does it move to compensation, which is calculated, capped and can be reduced to nothing.
What you’ll be able to do
- Explain why reinstatement, not compensation, is the Act’s starting point — and when that primacy actually gives way.
- Work through the s.392(2) compensation factors in the order the Commission actually uses them, including the cap and the mandatory misconduct reduction.
- Recognise the practical ways a remedy can end up smaller than expected — or at nil — even where the dismissal was unfair.
The gateway: s.390
Before any remedy is available at all, the Commission must be satisfied of two things: that the person was protected from unfair dismissal, and that they were unfairly dismissed [2023] FWC 2900 at [113]. Even then, making an order is discretionary, not automatic — the Full Bench has described the question of whether to order any remedy once unfairness is found as “remain[ing] a discretionary one” [2026] FWC 2050 at [47], and whether the applicant has actually suffered financial loss can bear on that discretion [2026] FWC 2050 at [47].
Critically, s.390(3) builds in a sequence: the Commission must not order compensation unless it is first satisfied that reinstatement is inappropriate [2023] FWC 2900 at [113]. Compensation is never a free first choice.
Reinstatement comes first — s.391
The Act’s object provisions give reinstatement primacy among remedies. As one decision put it, reading the objects clause, “it is clear the legislature intended to give primacy to reinstatement in circumstances where an employee has been unfairly dismissed” [2020] FWC 416 at [122]. That primacy has a procedural bite: a Full Bench has held that the requirement to find reinstatement inappropriate before considering compensation “does not provide licence to search for a reason to order an employee’s reinstatement when that is not appropriate” [2020] FWC 416 at [123] — in other words, primacy means consider it properly first, not find a way to grant it regardless.
An order for reinstatement can come with two further orders under s.391(2)-(3): one to maintain continuity of employment and service, and one to restore remuneration lost because of the dismissal. Neither is automatic — both are expressed as orders the Commission “may” make if it “considers it appropriate to do so” [2020] FWC 416 at [129], and an order to restore lost pay in particular is a genuinely discretionary exercise: the Commission may decline it, or make only a partial order, where the employee engaged in misconduct [2020] FWC 416 at [133].
Is reinstatement appropriate? The loss of trust and confidence test
The most common argument against reinstatement is that trust and confidence between the parties has broken down to the point the relationship can’t be restored. The test, quoted and applied across decisions, comes originally from Perkins v Grace Worldwide (Aust) Pty Ltd (1997) 72 IR 186 — not independently located in this corpus, but quoted at length in the decisions below. The core proposition: “trust and confidence is a necessary ingredient in any employment relationship” and a loss of it is relevant to reinstatement’s practicability only “provided that such loss of trust and confidence is soundly and rationally based” [2020] FWC 416 at [124].
That test isn’t a rubber stamp for the employer’s say-so. A Full Bench has distilled several guardrails:
Loss of trust and confidence — the guardrails
- It’s a relevant consideration, but not the sole or necessary one, in deciding whether reinstatement is appropriate.
- Each case turns on its own facts; most employment relationships can withstand some friction.
- The claim must be soundly and rationally based, and the onus is on the party asserting it.
- An employer’s reluctance to shift its view of the employee’s guilt, despite the Commission’s contrary findings, is not itself a sound basis for the claim.
- Difficulty or embarrassment in re-employing someone the employer believed guilty of wrongdoing doesn’t, on its own, show a loss of trust and confidence.
Those five points are drawn from a Full Bench decision discussing Perkins, quoted in [2020] FWC 416 at [125] — itself not independently located in this corpus and flagged below. A related Full Bench authority on the same question (also flagged) makes the point sharply: dismissing someone for misconduct nearly always produces some loss of trust on the employer’s part, but “that question cannot be answered solely by reference to the views of management witnesses. All of the circumstances should be taken into account” [2020] FWC 416 at [126].
Applied — reinstatement ordered. A university lecturer dismissed for performance was reinstated. The Commission found little evidence the relationship was “irretrievably broken, or so untenable as to serve as an impediment to her reinstatement” [2020] FWC 416 at [127], and concluded reinstatement was appropriate [2020] FWC 416 at [128]. The Commission went on to order reinstatement, an unbroken continuity of service, and lost remuneration [2020] FWC 416 at [137]. Permission to appeal that outcome was later refused by a Full Bench majority [2020] FWCFB 3571 at [66], so it stood.
Applied — reinstatement refused on genuine loss of trust. Contrast that with a two-person medical imaging clinic where both the employee and the practice owner agreed their relationship had broken down. The Commission found “the degree of bitterness between the parties and the plethora of accusatory statements made, rendered reinstatement inappropriate” [2020] FWC 4840 at [3], noting both sides’ “level of tolerance for the other is zero” before concluding reinstatement was “clearly not appropriate” [2020] FWC 4840 at [8]. Even so, the decision was careful to record that reinstatement is only a “presumptive” remedy, not an entitlement: “there is no right to reinstatement consequent upon a finding that a person has been unfairly dismissed” [2020] FWC 4840 at [7].
Reinstatement can also fail for reasons that have nothing to do with “trust and confidence.” In one matter the applicant had already found other work and the Commission simply wasn’t satisfied the employer would treat him appropriately if he returned, concluding it was “inappropriate to order reinstatement” [2023] FWC 2900 at [118] without needing the full loss-of-trust framework. In another, reinstatement failed because the applicant hadn’t sought it, had already started a new job, and the valid reason for dismissal was threats of violence against people who still worked there [2026] FWC 2050 at [46].
Compensation — s.392
Once reinstatement is ruled out, compensation becomes available — but only if the Commission also considers it appropriate in all the circumstances, and only calculated through the factors in s.392(2):
s.392(2) — what the Commission must take into account
- The effect of the order on the viability of the employer’s enterprise.
- The length of the person’s service.
- The remuneration the person would have received, or would likely have received, had they not been dismissed.
- The person’s efforts (if any) to mitigate their loss.
- Remuneration earned since the dismissal, up to the date of the compensation order.
- Income reasonably likely to be earned between the order and the actual payment.
- Any other matter the Commission considers relevant.
This is usually applied through what’s known as the Sprigg formula, named for a 1998 AIRC Full Bench decision not independently in this corpus. A Full Bench has described it as “the well-established approach to the assessment of compensation under s.392”, with its first step being to work out what the applicant would have received had they not been dismissed — the “Anticipated Period of Employment” [2021] FWCFB 280 at [32]. That first step is unavoidably speculative, as the Full Bench that first articulated it acknowledged: “there is a speculative element involved in all such assessments… assessment of relative likelihoods is integral to most assessments of compensation or damages in courts of law” [2021] FWCFB 280 at [33].
A full worked example
One decision walks through every s.392(2) factor against a dismissed 18-year-old casual worker, and is worth following step by step:
- Viability. No evidence an award would affect the employer’s viability [2023] FWC 2900 at [123].
- Length of service. “Just over six months’ service. This is not a long period of time.” [2023] FWC 2900 at [124]
- Anticipated remuneration. The Commission found he would likely have continued for six weeks, calculated as 38 hours × $28.01 × 6 weeks = $6,386.28 [2023] FWC 2900 at [127].
- Mitigation. Not satisfied he’d made “strident efforts” to find other work, so one week was deducted [2023] FWC 2900 at [128].
- Earned since dismissal / likely to earn. Nothing earned in the relevant period, and the forward-looking factor wasn’t relevant on these facts [2023] FWC 2900 at [130].
- Misconduct (s.392(3)). None found, so no reduction [2023] FWC 2900 at [135].
- Shock, distress or humiliation (s.392(4)). Expressly excluded from the amount [2023] FWC 2900 at [136].
- Compensation cap (s.392(5)-(6)). The high income threshold was $162,000 (half of that is $81,000) — comfortably above the amount assessed, so the cap didn’t bite [2023] FWC 2900 at [138].
- Order. $6,386.28 less the one-week mitigation deduction of $1,064.38, leaving $5,321.90 plus superannuation, payable within 14 days [2023] FWC 2900 at [141].
The cap and the statutory language
The cap itself is set directly by the statute: compensation must not exceed the lesser of a specified 26-week remuneration figure and half the high income threshold immediately before dismissal, and the amount ordered must not include anything for “shock, distress or humiliation, or other analogous hurt” [2023] FWC 2900 at [120]. A separate decision frames the underlying purpose plainly: compensation exists “to provide a person who has been unfairly dismissed with reparation for losses reasonably attributable to the unfair dismissal. It is not intended to be punitive.” [2020] FWC 4840 at [9]
How compensation can end up smaller than expected — or at nil
Three different mechanisms can take an otherwise-calculable compensation amount down to little or nothing. They are not interchangeable, and advisers should be precise about which one is actually in play.
Won the case, got nothing
A dismissal was found unfair for lack of process and personal circumstances, but the applicant’s own conduct — threatening a director — had contributed to it. The Commission found compensation “appropriate… but that the compensation amount is nil”, expressly because that conduct “contributed to his dismissal”. [2026] FWC 2050 at [48]
A finding of unfair dismissal and a finding that the employee’s own conduct contributed to it can coexist. s.392(3) is mandatory once that contribution is found — the Commission must reduce the amount, and that reduction can go all the way to zero.
Nil at first instance, corrected to $7,029.90 on appeal
A decision found reinstatement inappropriate for genuine loss of trust and confidence, assessed a 6-week anticipated employment period, and then deducted the applicant’s entire post-dismissal earnings from that period — producing nil. On appeal, the Full Bench found this misapplied the Sprigg formula: she’d found new work (at a lower rate) only partway through the 6 weeks, so the proper approach was to offset only the shortfall between what she would have earned and what she actually earned, not her full new earnings against the full anticipated period. [2021] FWCFB 280 at [34]
Mitigation only offsets the actual shortfall in income during the overlapping period, not the applicant’s gross alternative earnings against the full assessed period. Getting the arithmetic right is not a formality — it decided the difference between nil and over $7,000 here.
Reinstatement isn’t only about trust and confidence
Reinstatement was refused not because of any breakdown of trust, but because the applicant hadn’t asked for it, had already started new employment, and the underlying valid reason was threats of violence against people still working there. [2026] FWC 2050 at [46]
Don’t assume a reinstatement argument always has to run through the Perkins “loss of trust and confidence” framework. Practical facts — a new job already started, safety to remaining staff — can settle the question without it.
Adviser checklist
- Threshold
- Reinstatement
- Compensation — building the number
- Compensation — reductions and limits
Practice scenario: the warehouse supervisor
Fictional scenario. Write your answers, then reveal the model answer.
Fictional scenario. Priya has worked as a shift supervisor at a regional logistics warehouse for four years. She was dismissed last month after a client complained about a delivery error; the Commission has just found the dismissal unfair because Priya was never told about the complaint and was given no chance to respond before being let go — the error itself was, on the evidence, largely the client’s own data mistake.
Priya says she wants her job back and has not sought other work. The warehouse’s general manager says the team has “moved on” and would find it awkward to have her back, but accepts under questioning that nobody has said anything hostile about her personally, and no one disputes she was a reliable and well-regarded supervisor before this incident. Priya was on $72,000 a year plus a vehicle allowance. Since her dismissal (six weeks ago), she has done some reading about applying for roles but has not yet submitted any applications.
- Reinstatement: On these facts it looks likely to be appropriate. There’s no soundly or rationally based loss of trust and confidence — “awkwardness” and the team having “moved on” are the kind of discomfort the authorities say isn’t enough on its own. No safety issue, no new job already started, and the applicant wants reinstatement. The employer would need something more concrete — a genuine, evidenced breakdown in the working relationship — to displace the Act’s starting preference for giving her the job back.
- If reinstatement were nonetheless found inappropriate: The anticipated employment period would likely run well beyond six weeks given four years’ clean service and no performance issues — this isn’t a short-tenure case like the casual worker example above. Her very limited mitigation efforts (six weeks without a single application) would likely support some deduction, though probably modest given how recently the dismissal occurred. No misconduct on her part to trigger s.392(3). No shock/distress component. The cap (half the high income threshold) is unlikely to bind at her salary level over a realistic anticipated period.
- Biggest risk to the employer: Treating “the team would find it awkward” as if it were a loss-of-trust-and-confidence case. Awkwardness isn’t the test — a soundly and rationally based breakdown is. Without more, this risks reinstatement being ordered regardless of the employer’s preference, with continuity of service and lost pay orders likely to follow.
Where it could land, depending on what further evidence shows:
Decisions cited
Check each paragraph reference against the published decision on the FWC website before relying on it. Colson v Barwon Health, Nguyen and Le v Vietnamese Community in Australia, Perkins v Grace Worldwide, Regional Express Holdings v Richards, Sprigg v Paul’s Licensed Festival Supermarket, Bowden v Ottrey Homes Cobram and Vennix v Mayfield Childcare are cited as quoted or referred to in later decisions and still need checking in the original — none is independently located in this corpus pass. The first-instance compensation figure in Thurston v Bunbury Medical Imaging was overturned on appeal (see Thurston v Bunbury Medical Imaging Pty Ltd (appeal) below) — it’s included here only for its reinstatement reasoning and as a worked example of a compensation-calculation error, not as a correct final number. Rows marked “partial” confirm the proposition pinpoint only.
| Decision | Outcome (confirmed from the text) |
|---|---|
| [2026] FWC 2050 Allouche v Skyco Group Pty Ltd | Dismissal found unfair (unreasonable for lack of notice/opportunity to respond, and harsh given personal circumstances) — confirmed at [44]. Reinstatement found inappropriate because the applicant did not seek it, had found new work, and the valid reason involved threats against remaining staff — confirmed at [46]. Compensation found appropriate in principle but reduced to nil under s.392(3) because the applicant's own conduct contributed to the dismissal — confirmed at [48]-[49]. [49] |
| [2023] FWC 2900 Lee v Hybrid PG Pty Ltd atf Hybrid Property Group | Dismissal found harsh, unjust and unreasonable — confirmed at [112]. Reinstatement found inappropriate — confirmed at [118]. Compensation of $6,386.28 assessed over a 6-week anticipated employment period, reduced by one week ($1,064.38) for inadequate mitigation, not affected by the compensation cap, and ordered at $5,321.90 plus superannuation — confirmed at [127]-[129], [137]-[141]. [141] |
| [2021] FWCFB 280 Thurston v Bunbury Medical Imaging Pty Ltd (appeal) | Permission to appeal granted; the appeal succeeded only on the compensation calculation, which the Full Bench found misapplied the Sprigg formula by offsetting the applicant's full post-dismissal earnings against the full anticipated employment period rather than the shortfall between the two — confirmed at [30], [32], [34]. The appeal was otherwise dismissed (the reinstatement-inappropriate finding was not disturbed). Corrected compensation of $7,029.90 inclusive of superannuation was ordered — confirmed at [36], [40]. [40] |
| [2020] FWCFB 3571 University of Technology Sydney v Zhao | Full Bench majority (Catanzariti VP and Johns C) refused the University's permission to appeal — confirmed at [65]-[66]. Deputy President Colman dissented and would have granted permission, upheld the appeal and quashed the decision, but this was not the majority view, so Dr Zhao's reinstatement at first instance stood. [66] |
| [2020] FWC 4840 Thurston v Bunbury Medical Imaging Pty Ltd | partialReinstatement found inappropriate due to a mutual, soundly-based loss of trust and confidence between the applicant and the practice owner — confirmed at [3], [7]-[8]. The first-instance compensation calculation (nil payable, confirmed at [38]) was overturned on appeal in [2021] FWCFB 280 for misapplying the Sprigg formula; this module relies only on the reinstatement-inappropriate reasoning (which the Full Bench left undisturbed) and uses the compensation calculation as a worked illustration of how that step can go wrong, not as a correct final figure. [8] |
| [2020] FWC 416 Zhao v University of Technology Sydney | Dismissal found 'harsh and unreasonable' — confirmed at [120]. The 'harsh' finding rested on s.387(h) mitigating factors: 14 years of otherwise unblemished service, the career damage of a performance dismissal, very limited alternative employment prospects, and sole caring responsibility for elderly parents plus a mortgage — confirmed at [119]. Reinstatement, continuity of service and lost remuneration ordered — confirmed at [136]-[137]. Permission to appeal was later refused by a Full Bench majority (see [2020] FWCFB 3571), so these orders stood. [120] |
- Colson v Barwon Health [2014] FWCFB 1949 — quoted in [2020] FWC 416 at [123]. Check against the original before relying on it.
- Nguyen and Le v Vietnamese Community in Australia [2014] FWCFB 7198 — quoted in [2020] FWC 416 at [124]. Check against the original before relying on it.
- Perkins v Grace Worldwide (Aust) Pty Ltd (1997) 72 IR 186 — quoted in [2020] FWC 416 at [124]. Check against the original before relying on it.
- Regional Express Holdings Limited t/a REX Airlines v Richards [2010] FWAFB 8753 — quoted in [2020] FWC 416 at [126]. Check against the original before relying on it.
- Sprigg v Paul's Licensed Festival Supermarket (1998) 88 IR 21 — quoted in [2021] FWCFB 280 at [32]. Check against the original before relying on it.
- Bowden v Ottrey Homes Cobram and District Retirement Villages Inc T/A Ottrey [2013] FWCFB 431 — quoted in [2021] FWCFB 280 at [32]. Check against the original before relying on it.
- Vennix v Mayfield Childcare Limited [2020] FWCFB 1001 — quoted in [2026] FWC 2050 at [47]. Check against the original before relying on it.