A former employee contacts you out of the blue — or sends a formal letter — claiming they were dismissed improperly. You need to work out quickly what kind of claim you are actually facing, because unfair dismissal and wrongful dismissal operate in entirely different legal systems, with different eligibility thresholds, different forums, and different remedies. Choosing the wrong framework wastes time and money for everyone.
Two different legal systems
The first thing to understand is that these are not two names for the same thing. Unfair dismissal is a statutory claim administered by the Fair Work Commission under the Fair Work Act 2009 (Cth). Wrongful dismissal is a common law claim brought in a court for breach of the employment contract. The same termination can theoretically give rise to both, but most employers and former employees end up pursuing only one — and which one depends heavily on the facts.
There is also a third category worth naming so you can rule it out: general protections claims under the Fair Work Act 2009 (Cth). These arise when a dismissal is connected to the exercise of a workplace right (such as making a complaint or taking personal leave). General protections are outside the scope of this article, but if the employee's grievance centres on something they did rather than how the termination was handled, that path deserves separate consideration.
Factors distinguishing the two claims
Whether the employee clears the eligibility threshold
Unfair dismissal has a gatekeeping requirement. Under the Fair Work Act 2009 (Cth), a person is only protected from unfair dismissal if they have completed the minimum employment period with their employer. That period is:
- 6 months for employees of businesses with 15 or more employees
- 12 months for employees of a small business (an employer with fewer than 15 employees at the relevant time, counted by headcount including the dismissed employee and regular casuals)
Wrongful dismissal has no minimum employment period. An employee dismissed on their second week can bring a common law claim if the contract was breached. This matters practically: if the former employee does not meet the minimum period for unfair dismissal, a wrongful dismissal claim in court may be the only route available to them — and to you.
High income employees may also be excluded from the unfair dismissal jurisdiction if they earn above the high income threshold and are not covered by a modern award or enterprise agreement. That exclusion does not apply to wrongful dismissal.
What the employee is actually complaining about
The nature of the grievance shapes which claim fits:
- Process complaint ("I was not warned, not given a chance to respond, dismissed in a harsh or unreasonable way"): this maps to unfair dismissal, which assesses whether the dismissal was harsh, unjust or unreasonable.
- Contract complaint ("I was not given my notice, or the dismissal breached a specific term of my contract"): this maps to wrongful dismissal.
- Redundancy that wasn't genuine: unfair dismissal, because the Act expressly addresses purported redundancies that do not meet the genuine redundancy test.
These categories can overlap. A dismissal without contractual notice that was also procedurally harsh could support both claims. In practice, the employee's choice of forum is often driven by cost and speed.
The forum each claim requires
| Unfair dismissal | Wrongful dismissal | |
|---|---|---|
| Forum | Fair Work Commission | Court (Federal Circuit and Family Court of Australia, or state courts) |
| Application deadline | 21 days after the dismissal takes effect | Standard limitation period (usually 6 years for contract claims) |
| Who drives the case | Applicant must put on evidence | Plaintiff litigates as in any civil case |
| Cost | Lower filing fees; representation restrictions apply at conciliation | Can be expensive; solicitor costs apply throughout |
The 21-day deadline for unfair dismissal is strict. The Commission can grant an extension only in exceptional circumstances, and "I did not know about the deadline" is not enough on its own. For employers, the implication is that you should document the termination date clearly and ensure the former employee receives written confirmation — the clock starts the day after dismissal takes effect, and disputes about the date can become their own issue.
For wrongful dismissal, courts apply the ordinary civil litigation timeframe. The proceedings are more formal, take longer, and cost more for both parties.
The remedies each path produces
This is often the most important factor for employers calculating exposure.
Unfair dismissal remedies under the Fair Work Act 2009 (Cth) include:
- Reinstatement — the primary remedy; the Commission must consider it before compensation
- Compensation — capped at the lesser of 26 weeks' remuneration or half the high income threshold (for dismissals from 1 July 2025, the compensation cap is $91,550)
- The compensation figure can be further reduced by factors such as the employee's failure to mitigate, any misconduct, and the likely length of continuing employment
Wrongful dismissal remedies are damages only, and the measure is narrow:
- Damages represent what the employee would have earned during the contractual notice period (or reasonable notice if the contract is silent)
- Courts very rarely order reinstatement or specific performance of an employment contract
- There is no statutory cap, but damages are naturally limited by the length of the notice period — often weeks, sometimes months for senior executives
For most terminations involving non-executive employees, unfair dismissal compensation will be the larger exposure. For senior employees on long notice periods and high salaries, wrongful dismissal damages can be substantial.
How the Small Business Fair Dismissal Code changes the picture
If your business employs fewer than 15 people, the Small Business Fair Dismissal Code is directly relevant to the unfair dismissal path. A dismissal is not unfair if the Commission is satisfied it was consistent with the Code. The Code creates two tracks:
- Serious misconduct (theft, fraud, violence, serious safety breaches): summary dismissal is permitted without warning if the employer had reasonable grounds for the belief
- Other dismissals: the employer must have warned the employee that their conduct or performance was at risk, given them an opportunity to respond, and provided reasonable time to improve
Compliance with the Code is a defence — but only in the unfair dismissal forum. It has no bearing on a wrongful dismissal claim, which turns solely on the contract and any implied terms.
The conciliation step and settlement dynamics
Unfair dismissal applications go to conciliation before any hearing. Most settle at that stage. For employers, this creates a relatively contained and predictable process: pay a negotiated sum, get a deed of release, move on. The proceedings are private.
Wrongful dismissal in court is more adversarial. Discovery is broader, timelines are longer, and the cost of getting to a hearing is higher. Settlement happens, but the pressure points are different and the cost of a contested case is materially greater.
When each claim is usually pursued
Most terminated employees who clear the minimum employment period will bring an unfair dismissal application rather than a wrongful dismissal claim, because:
- The 21-day deadline creates urgency and the Commission is the obvious first port of call
- The conciliation process is faster and cheaper than litigation
- Legal representation at conciliation is restricted, keeping costs down
- The statutory compensation cap provides a ceiling the employer can calculate
Wrongful dismissal tends to be pursued when:
- The employee does not meet the minimum employment period for unfair dismissal
- The employee's contract includes a long notice period (making the damages figure significant)
- A specific contractual term was breached — a bonus clause, a deferred equity arrangement, a specific process requirement
- The employee is a senior executive who has excluded themselves from the unfair dismissal jurisdiction by earning above the high income threshold without award coverage
Both claims can run simultaneously in theory. In practice, the Commission will consider whether a concurrent court proceeding makes it inappropriate to continue the unfair dismissal application.
How Artificer Legal can help
Deciding which exposure is real — and how large it is — requires reading the employment contract alongside the facts of the termination. An Artificer Legal employment lawyer can help you:
- Assess whether the former employee is actually eligible for an unfair dismissal application (checking employment period, business size, award or agreement coverage, and income threshold)
- Calculate the realistic compensation ceiling for an unfair dismissal claim versus the notice damages in a wrongful dismissal claim
- Review whether the dismissal process is defensible under the Small Business Fair Dismissal Code if it applies
- Prepare a response to an unfair dismissal application lodged with the Commission, including conciliation strategy
- Advise on settlement terms and the terms of any deed of release
Acting quickly matters. The employer's response to an unfair dismissal application is due within a short period after the application is served, and preparation for conciliation begins almost immediately. Getting advice before conciliation — not after — puts you in a better position.
The call most employers get wrong
The most common mistake is treating every dismissal dispute as an unfair dismissal claim without checking eligibility first. If the former employee has not served the minimum employment period, or falls outside the jurisdiction for another reason, filing an unfair dismissal application is not open to them — and if you respond to it as though it is a live risk, you may negotiate away money you do not legally owe. Check eligibility before you assess quantum.
The second most common mistake is underestimating wrongful dismissal for senior employees. Where a contract specifies six months' notice for a CEO-level role, the damages for breach of that clause can dwarf anything available through the Commission. For those employees, the contract terms are the primary risk, and they deserve careful review before any termination decision is made.
The central heuristic is this: the legal framework that applies is determined by the employee's characteristics and the nature of the breach — not by what the employer chooses to call the situation. Identify the right forum early, calculate the exposure in that forum, and respond accordingly.