Unfair Dismissal Explained: What Employers Need to Know

Let’s face it – letting someone go is never easy. It’s one of the most challenging responsibilities in any workplace – emotionally, legally, and professionally. Done right, it protects your business and respects the individual. Done wrong, it can lead to costly consequences, damage your reputation and can lead to an unfair dismissal claim. And that is a situation no employer wants to face. In the 2023-24 financial year, Fair Work Commission received an unprecedented 40,188 applications including unfair dismissal, unlawful termination etc. (marking the highest since 2009). 

In this article, we’ll break down what unfair dismissal means in Australia, who can claim it, and how you can avoid common pitfalls. Our goal is to help you feel more confident and informed when navigating this tricky terrain.  

What is Unfair Dismissal? 

Unfair dismissal happens when an employee is let go in a way that is considered harsh, unjust or unreasonable. It’s not just about why someone was dismissed, but also how the process was handled. 

According to the Fair Work Commission, a dismissal may be unfair if:   

• • The employee was dismissed.  

• • The dismissal was harsh, unjust or unreasonable.  

• • It wasn’t a case of genuine redundancy.

• • If the employer is a small business (fewer than 15 employees), the dismissal didn’t follow the Small Business Fair Dismissal Code.  

Who Can Make a Claim? 

While unfair dismissal laws are designed to protect employees from being treated unjustly, not every employee is automatically eligible to lodge a claim. The Fair Work Commission has set specific eligibility requirements to ensure that claims are made by individuals who have a reasonable expectation of job security and procedural fairness. For example, casual employees may have access to unfair dismissal protections depending on the nature of their employment relationship. 

These rules help balance the rights of employees with the operational needs of employers, especially small businesses. Before an employee can lodge a claim, they must meet certain conditions related to their length of service, employment type, and timing of the application.  

Here are the key criteria:  

• • The employee must have completed the minimum employment period:  

• • 6 months for business with 15 or more employees.  

• • 12 months for small business.  

• • The claim must be lodged within 21 days of the dismissal taking effect.  

• • If the employee earns more than $183,100 per year (as of 1 July 2025), they are only eligible to claim unfair dismissal if they are covered by a modern award or an enterprise agreement.  

3 Common Mistakes Employers Make 

Even with the best intentions, employers can still make mistakes. Dismissals often happen under pressure, and without a clear understanding of the legal requirements, it’s easy to misstep.  

What might seem like a straightforward decision can quickly become complicated if the correct procedures aren’t followed. These missteps can trigger unfair dismissal claims, which are not only costly but can also impact team morale and trust.  

Here are some of the most common mistakes employers make:  

1. Skipping the Process
   Dismissing someone without giving them a chance to respond to concerns or allegations is a red flag. The Fair Work Commission expects employers to follow a fair process, including:  

• • • • Notifying the employee of the reason for dismissal.  
      • Giving them a reasonable opportunity to respond.  
      • Allowing a support person to be present if requested.  

2. Lack of Documentation
   One of the most common and avoidable mistakes is failing to keep proper records. When a dismissal is challenged, the Fair Work Commission will look closely at the evidence provided by both parties. If there’s no documentation to support your decision, it often becomes a matter of one person’s word against another’s.
   Good documentation shows that you’ve acted fairly, communicated clearly, and given the employee opportunities to improve. It also demonstrates that your decision was based on facts, not assumptions or emotions.  Make sure to keep clear records of:
   • • • Performance reviews
       • Written warnings
       • Meeting notes
       • Any support or training offered
         
3. Misusing Probation Periods
   Probation periods are often misunderstood. Some employers assume that they can dismiss an employee at any time during probation without following formal procedures or facing legal consequences. While probation allows for a period of assessment, it doesn’t override the rules around unfair dismissal.
   
   If an employee has completed the minimum employment period – six months for larger businesses or twelve months for small businesses –  they may be eligible to lodge an unfair dismissal claim, even if they are still within their probation period. This means that employers must still follow process, provide valid reasons, and document their decisions. 

   Treat probation as a structured opportunity to assess performance and fit, not as a shortcut to dismissal. If issues arise, address them early, provide feedback, and give the employee a chance to improve.  

Grounds for dismissal: What Counts as a Fair Reason 

To avoid an unfair dismissal claim, employers must have a valid reason for ending someone’s employment. This reason should be clearly linked to the employee’s conduct, capacity, or the operational needs of the business.  

Fair reasons include:  

• • Conduct: Serious misconduct, repeated breaches of company policy, or inappropriate behaviour.  

• • Capacity: Inability to perform the role, even after reasonable support and training.  

• • Operational requirements: Genuine redundancy due to business restructuring or downsizing.  

It’s important to note that even with a valid reason, the dismissal may still be considered unfair if the employer fails to follow a fair and transparent process.  

What Doesn’t Count 

Some reasons for dismissal are considered unlawful and may lead to claims under general protections or discrimination laws. These include dismissing someone because they:  

• • Made a complaint or inquiry about their workplace rights.  

• • Took parental, sick, or carer’s leave.  

• • Are pregnant or have a disability.  

• • Belong to a particular race, gender, religion, or age group.  

These types of dismissals fall under unlawful termination, which is distinct from unfair dismissal but equally serious. Employers must be especially cautious when dismissing employees who may be protected under anti-discrimination or workplace rights legislation.  

What Happens If a Claim is Made? 

If an employee lodges a claim, the Fair Work Commission will usually start with conciliation – a chance for both parties to resolve the issue without going to a formal hearing.  

In case the matter isn’t resolved, it may proceed to a hearing where the Commission will decide whether the dismissal was unfair. If the employer is found guilty, they may be ordered to:  

• • Reinstate the employee 

• • Pay compensation (up to 6 months’ wages, capped at $91,500 as of July 2025) 

How to Avoid Unfair Dismissal Claims 

Avoiding unfair dismissal claims starts with being proactive, informed, and consistent. Here are some practical steps to help you stay compliant and protect your business:  

1. Know the Rules
   Make sure you understand your obligations under the Fair Work Act and, if you’re a small business, the Small Business Fair Dismissal Code. These frameworks outline what’s considered fair and lawful when ending employment. 
2. Follow a Fair Process
   A fair and documented process is just as important as having a valid reason. Always: 
   • Communicate clearly and respectfully.
   • Give the employee a genuine opportunity to respond to concerns.
   • Offer support, feedback and time to improve where appropriate.
   • Keep detailed records of all conversations, warnings and actions taken.
3. Seek Advice Early
   If you’re unsure about how to proceed, don’t leave it to chance. Speak with an HR professional or legal advisor before taking action, early guidance can help you avoid costly mistake and ensure the process is handled correctly from the start.  

Final Thoughts 

Navigating dismissal isn’t just about ticking legal boxes –  it’s about treating people fairly while protecting your business. The stakes are high, and the rules can be complex, especially when emotions and urgency are involved. 

As an employer, you want to do the right thing. You care about your team, your reputation, and staying compliant. But you don’t have to figure it all out alone.  

At Polyglot Group, we help businesses across Australia make confident, informed decisions when it comes to employment matters. Whether you need a second opinion, a process review, or require hands-on support, we’re here to guide you through it. If you’re facing a tricky termination or just want peace of mind, reach out. We’re ready to help.