Letting someone go is one of the highest-stakes decisions a business owner makes. Done without care, it can trigger a claim before the Fair Work Commission, a court action for breach of contract, or both. Yet many Australian employers still rely on instinct rather than process, or use the phrase "wrongful termination" without realising it does not map cleanly onto any single cause of action in Australian law.
This article explains the three main legal frameworks that govern dismissal in Australia, breaks down what each one requires of you as an employer, and identifies where businesses most often come unstuck. It covers:
- the difference between unfair dismissal, unlawful termination, and general protections claims
- your core procedural and notice obligations under the Fair Work Act 2009 (Cth) and the National Employment Standards
- the special rules that apply if you employ fewer than 15 people
- the common mistakes that turn an otherwise defensible dismissal into a live claim
The three frameworks: unfair dismissal, unlawful termination, and general protections
Australian law does not use "wrongful termination" as a term of art. When employment ends badly, a former employee may bring a claim under one or more of three distinct frameworks, each with different eligibility rules, time limits, and remedies.
Unfair dismissal
Under s 385 of the Fair Work Act 2009 (Cth), a dismissal is unfair if it was harsh, unjust or unreasonable, was not consistent with the Small Business Fair Dismissal Code (where applicable), and was not a case of genuine redundancy. The Fair Work Commission assesses harshness by looking at whether there was a valid reason related to capacity or conduct, whether the employee was notified of that reason, whether they were given an opportunity to respond, and whether a support person was unreasonably refused.
To be eligible, an employee must have completed the minimum employment period: six months for employees of employers with 15 or more staff, or 12 months for employees of small businesses (those with fewer than 15 employees). Under s 394(2) of the Act, an application must be lodged within 21 days of the dismissal taking effect. The Commission can extend this only in exceptional circumstances.
Unlawful termination
Section 772 of the Fair Work Act 2009 (Cth) prohibits termination for specific reasons regardless of how the process was conducted. Prohibited grounds include temporary absence from work due to illness or injury, trade union membership or activity, taking or seeking parental leave, filing a workplace complaint, and discrimination on the basis of race, sex, age, disability, religion, pregnancy, marital status, or family and carer responsibilities, among others.
Unlawful termination differs from unfair dismissal in a critical way: it focuses on why you dismissed the employee, not how. Even a procedurally perfect termination can be unlawful if the underlying reason was prohibited. The 21-day application deadline applies here as well.
General protections
Section 340 of the Fair Work Act 2009 (Cth) prohibits an employer from taking adverse action against an employee because they have, or have exercised, a workplace right. Adverse action includes dismissal, injury in employment, and any alteration of the employee's position to their detriment. Workplace rights include entitlements under an award, enterprise agreement, or the Act itself, as well as the right to make a complaint or enquiry to a regulator.
Unlike unfair dismissal, general protections claims are not subject to a minimum employment period, which means even a new employee dismissed on their first week can bring one. The burden of proof also reverses: once an employee establishes that adverse action was taken, the employer must prove the action was not taken for a prohibited reason.
Your obligations when ending employment
Provide correct notice
The National Employment Standards set minimum notice periods based on continuous service:
- up to 1 year of service: 1 week
- more than 1 year and up to 3 years: 2 weeks
- more than 3 years and up to 5 years: 3 weeks
- more than 5 years: 4 weeks
Employees aged over 45 who have completed at least 2 years of continuous service are entitled to an additional week on top of whichever period applies to them.
You may pay in lieu of notice instead of requiring the employee to work out the period, but the payment must be equivalent to what the employee would have earned had they worked. Notice is not required where dismissal follows serious misconduct.
If a modern award or enterprise agreement sets a longer notice period than the NES minimum, the award or agreement prevails.
Follow procedural fairness
A valid reason to dismiss is not enough on its own. The process matters. Before making a final decision, you must:
- tell the employee specifically why dismissal is being considered
- give them a genuine opportunity to respond before you decide
- allow them to have a support person present in any meeting where dismissal is discussed, if they request one
- consider their response in good faith before acting
Skipping or compressing these steps is one of the most common reasons a Commission member finds a dismissal harsh or unreasonable, even where the underlying conduct or performance issue was real.
Apply the Small Business Fair Dismissal Code if it applies to you
If you employ fewer than 15 people, you must comply with the Small Business Fair Dismissal Code. Under the Code, you can dismiss without notice or warning only where serious misconduct applies. For all other dismissals based on conduct or capacity, you must have warned the employee that their employment is at risk, given them a reason, and given them an opportunity to respond. If you can show the Code was followed, the Commission will generally find the dismissal fair.
Pay out all entitlements
At the time of dismissal you must pay all wages accrued to the final day, any accrued and unused annual leave, and (where applicable) long service leave. If the role is made redundant, redundancy pay under the NES applies once the employee has at least one year of continuous service, though small business employers (fewer than 15 employees at the time notice is given) are generally exempt from the NES redundancy pay obligation.
A genuine redundancy requires that the role is no longer required, that you have complied with any consultation obligations in the applicable award or agreement, and that there is no reasonable opportunity to redeploy the employee within your business or an associated entity. A dismissal dressed up as redundancy to avoid a performance process will not be treated as genuine.
Where employers most often go wrong
Even employers acting in good faith can expose themselves to a claim through one of the following errors:
Treating probation as a risk-free zone. Employees in the minimum employment period cannot claim unfair dismissal, but they can still bring a general protections claim from day one, and anti-discrimination laws apply from the moment of engagement. Dismissing a probationary employee for a prohibited reason or without notice remains legally actionable.
Not following your own procedures. If your employment contracts or workplace policies set out a disciplinary or performance management process, you are bound by it. The Commission will scrutinise whether the contractual process was followed, and deviation from it can make an otherwise defensible dismissal procedurally unfair.
Misclassifying redundancy. Genuine redundancy under the Act requires that the role itself is no longer required, that relevant consultation obligations have been met, and that redeployment within the business is not reasonably available. Using "redundancy" as an exit mechanism for a performance problem does not satisfy these requirements and will not protect you from an unfair dismissal claim.
Dismissing during or shortly after protected leave. Terminating an employee who is on parental leave, personal/carer's leave, or who has recently made a complaint about a workplace matter is likely to give rise to a general protections or unlawful termination claim, regardless of the stated reason for dismissal.
Delaying final pay. Withholding or delaying payment of entitlements opens the door to a separate underpayment or breach of contract claim on top of any dismissal claim.
How Artificer Legal can help
Dismissal disputes move quickly, and the consequences of a misstep compound. The 21-day application window means a claim can be filed and notified to you before you have had time to locate the relevant documents. An employment lawyer at Artificer Legal can assist you in several practical ways:
- reviewing your employment contracts, policies, and any applicable award or enterprise agreement before you take action, to confirm your obligations and map the correct process
- advising on whether a proposed reason for dismissal is defensible as a valid reason under the Act and whether the procedural steps have been met
- drafting the communications used during the process, including show-cause letters, meeting notices, and termination letters, to ensure they do not inadvertently create liability
- responding to a Commission application, preparing your statement of position, and representing your business at conciliation or conference
- reviewing and updating your standard employment documentation after a matter closes, to reduce the chance of the same issue arising again
The earlier you get advice, the more options you have. A short conversation before dismissal is far less costly than managing a claim after the fact.
Putting it all together
The most important thing to understand about employment termination in Australia is that process and substance are equally important. Having a legitimate reason is necessary but not sufficient. The Fair Work Commission will look at whether the employee knew the reason, had a chance to respond, and was treated fairly throughout. For small businesses, the Small Business Fair Dismissal Code sets out a practical checklist that, if followed, provides meaningful protection.
Key points to carry forward:
- "Wrongful termination" is not a defined Australian legal concept; claims arise under unfair dismissal (s 385), unlawful termination (s 772), or general protections (s 340) of the Fair Work Act 2009 (Cth), and each has different rules
- Unfair dismissal requires the employee to have completed the minimum employment period (6 months, or 12 months in a small business with fewer than 15 employees); general protections claims do not
- Applications to the Commission must be lodged within 21 days of dismissal taking effect, with very limited scope for extension
- NES minimum notice periods scale with length of service and apply regardless of what the contract says, unless the award or agreement is more generous
- Small businesses (fewer than 15 employees) are generally exempt from NES redundancy pay but must follow the Small Business Fair Dismissal Code
- The safest position is documented warnings, a genuine opportunity to respond, a support person offered, and final pay calculated correctly before the last day