Unfair dismissal is a legal term used in Australian employment law when an employee’s termination of employment is deemed harsh, unjust, or unreasonable.

Under the Fair Work Act 2009, eligible employees who believe they have been unfairly dismissed can apply to the Fair Work Commission for a remedy, which may include reinstatement or compensation. 

To be eligible, employees must have completed the minimum employment period, be covered by a modern award or enterprise agreement or earn below the high-income threshold, and lodge their application within 21 days of dismissal.

Definition under Australian Law

Unfair dismissal occurs when the Fair Work Commission determines that a dismissal was:

• Harsh: Disproportionate to the conduct or performance issue
• Unjust: The employee was not guilty of the alleged misconduct or poor performance
• Unreasonable: Based on evidence that would not reasonably support the decision

The Fair Work Commission considers several factors when determining if a dismissal was unfair, including whether:

• There was a valid reason for the dismissal related to capacity or conduct
• The employee was notified of that reason
• The employee had an opportunity to respond
• The employee had access to support during any discussions about the dismissal
• The employee had been warned about unsatisfactory performance before dismissal
• The size of the employer’s business affected procedures followed
• The absence of dedicated human resource management specialists affected procedures followed
• Any other matters the Commission considers relevant

Eligibility Requirements

Minimum Employment Period

Employees must have completed:

• 6 months of continuous service for businesses with 15 or more employees
• 12 months of continuous service for small businesses (fewer than 15 employees)

Coverage and Income Threshold

Employees must either:

• Be covered by a modern award
• Be covered by an enterprise agreement
• Earn less than the high-income threshold ($162,000 per annum as of July 2023, indexed annually)

Timeframe for Applications

Applications must be lodged with the Fair Work Commission within 21 days of the dismissal taking effect, unless an extension is granted in exceptional circumstances.

Exclusions

Certain categories of dismissal are excluded from unfair dismissal protections:

• Genuine redundancy
• Fixed-term contracts ending at their specified time
• Casual employees not engaged on a regular and systematic basis
• Probationary employees who haven’t completed the minimum employment period
• Trainees at the end of their training arrangement
• Employees dismissed for serious misconduct

Small Business Fair Dismissal Code

Small businesses (fewer than 15 employees) are subject to the Small Business Fair Dismissal Code, which:

• Provides a simplified process for managing dismissals
• Creates a “safe harbour” for employers who comply with the Code
• Requires documentation of warnings for performance issues
• Allows for summary dismissal for serious misconduct
• Sets out procedural fairness requirements

The Unfair Dismissal Claim Process

Lodging an Application

• Applications must be submitted to the Fair Work Commission
• Filing fee applies ($80.60 as of 2024, may be waived in cases of financial hardship)
• Application forms can be completed online or submitted by post

Employer Response

• Employers have 7 days to respond to the application
• They may raise jurisdictional objections or address the substantive claims
• The response must include details of the dismissal and supporting evidence

Conciliation

• Most cases begin with a telephone conciliation conference
• A Fair Work Commission conciliator facilitates discussions between parties
• Approximately 80% of cases are resolved at this stage
• Outcomes may include financial settlements, statements of service, or apologies

Formal Hearings

If conciliation is unsuccessful:

• A formal hearing or conference is scheduled
• Parties may represent themselves or seek permission for legal representation
• Evidence is presented including witnesses and documentation
• The Commission makes a binding determination

Appeals

• Decisions may be appealed with permission from the Full Bench of the Commission
• Appeals must identify a significant error of fact or law
• Time limits apply for lodging appeals

Possible Remedies

Reinstatement

• The primary remedy preferred by the Commission
• Return to the original position or a comparable position
• Includes restoration of lost continuity and benefits
• May be deemed inappropriate if the working relationship has irretrievably broken down

Compensation

If reinstatement is inappropriate, compensation may be ordered:

• Capped at lesser of 26 weeks’ pay or $81,000 (as of 2023/24)
• Calculated considering factors including:
  • Length of service
  • Remuneration that would have been received
  • Efforts to mitigate loss
  • Any misconduct that contributed to the dismissal
  • Any other relevant matters
• Compensation is not available for shock, distress, or humiliation

Difference Between Unfair Dismissal and Other Claims

Unfair Dismissal vs. General Protections

Unfair dismissal focuses on whether the dismissal was harsh, unjust, or unreasonable, while general protections claims:

• Protect workplace rights and freedom of association
• Prohibit dismissal for discriminatory reasons
• Have no high-income threshold
• Can be made by prospective employees and independent contractors
• May involve uncapped compensation
• Require proof the adverse action was taken for a prohibited reason

Unfair Dismissal vs. Wrongful Dismissal

• Unfair dismissal is a statutory claim under the Fair Work Act
• Wrongful dismissal is a common law claim for breach of employment contract
• Wrongful dismissal typically concerns notice periods or serious breaches of contract
• Remedies for wrongful dismissal are based on contractual damages

Costs and Representation

Legal Costs

• Each party generally bears their own legal costs
• The Commission may order costs in exceptional circumstances, such as:
  • Frivolous or vexatious applications
  • Unreasonable act or omission causing the other party to incur costs
  • Claims or responses with no reasonable prospect of success

Representation

• Parties may represent themselves
• Legal representation requires permission from the Commission
• Union representatives may appear for members
• Employer association representatives may appear for member organisations

Employer Best Practices

Procedural Fairness

To minimise unfair dismissal risks, employers should:

• Implement clear policies and procedures
• Provide regular feedback and performance reviews
• Document all performance or conduct concerns
• Issue formal warnings where appropriate
• Allow employees to respond to allegations
• Consider alternatives to dismissal
• Provide support during disciplinary meetings
• Follow a fair and transparent process

Documentation Requirements

Maintain thorough records including:

• Employment contracts and position descriptions
• Performance reviews and feedback
• Warnings and improvement plans
• Meeting notes from disciplinary discussions
• Evidence of misconduct or performance issues
• Termination letters stating reasons for dismissal

Recent Developments and Trends

COVID-19 Impact

Recent cases have addressed:

• Dismissals related to vaccination requirements
• Redundancies during economic downturn
• Remote work performance management issues
• Stand-down provisions

Workplace Bullying and Psychosocial Hazards

Increasing recognition of:

• Psychological injury in the workplace
• Employer duty of care for mental health
• Bullying as a contributing factor in unfair dismissal claims
• Need for thorough investigation of complaints

Social Media Conduct

Emerging case law regarding:

• Dismissal for out-of-hours social media activity
• Acceptable use policies
• Reputational damage to employers
• Privacy considerations