Alex is Sprintlaw's co-founder and principal lawyer. Alex previously worked at a top-tier firm as a lawyer specialising in technology and media contracts, and founded a digital agency which he sold in 2015.
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Ending someone’s employment is one of the hardest parts of running a team. You’re balancing people, performance and culture alongside strict legal rules. Get it wrong and you risk unfair dismissal claims, reputational damage and a lot of stress. Get it right and you protect your business while treating people fairly.
This guide breaks down the lawful grounds for dismissal under the Fair Work Act 2009 (Cth), what counts as “unfair” dismissal, and the practical steps to follow so your process is fair, compliant and defensible. We’ll also touch on small business rules, probation, notice and final pay.
If you need tailored help at any stage, we’re here to support you so you can manage your team with confidence.
What Does Dismissal Mean Under The Fair Work Act?
Dismissal (also called termination of employment) happens when you, as the employer, end the employment relationship.
Most employees in Australia are covered by the national workplace relations system under the Fair Work Act 2009 (Cth). The Fair Work Commission (FWC) is the tribunal that deals with unfair dismissal applications, and the Fair Work Ombudsman (FWO) is the regulator that provides guidance and enforces certain workplace laws.
In practice, this means you need a valid reason for dismissal, a fair process, and compliance with minimum notice and final pay requirements. The exact steps can vary depending on the reason for dismissal, any applicable Modern Award or Enterprise Agreement, and whether you’re a small business employer (fewer than 15 employees).
Lawful Grounds For Ending Employment In Australia
Under the Fair Work Act, dismissals usually fall into three broad categories. The key is to ensure your reason is sound and your process is fair.
1) Misconduct And Serious Misconduct
Misconduct is unacceptable behaviour that breaches workplace policies, your code of conduct, or the law. Examples include:
- Refusing to follow lawful and reasonable directions
- Bullying, harassment or discrimination
- Theft, fraud or dishonesty
- Violence, threats, or safety breaches
- Serious conflicts of interest or breaches of confidentiality
Serious misconduct is behaviour so serious that it justifies immediate dismissal without notice (for example, theft, assault, serious safety risks, or a wilful and serious breach of duty). Even where summary dismissal is appropriate, you should still put allegations to the employee, consider their response, and keep proper records. Where allegations are contested or sensitive, consider suspending an employee pending investigation while you gather facts.
2) Performance Or Capacity
Ongoing underperformance or a lack of capacity to do the inherent requirements of the role can justify dismissal if you have set clear expectations and provided a reasonable opportunity to improve. Typical signals include missed KPIs, poor quality work over time, or inability to meet essential job functions despite support and training.
There is no blanket legal rule that you “must” issue written warnings in every case. However, in most performance matters, issuing written warnings, allowing a response, and giving a reasonable improvement period will be highly relevant to whether a dismissal is considered fair. If the employee disputes your concerns, a formal process-often including a show cause letter-can help demonstrate procedural fairness.
Keep in mind that illness, injury or a protected attribute can raise discrimination and general protections risks, so get advice before moving to dismissal where capacity is affected by health or personal circumstances.
3) Genuine Redundancy
A redundancy is “genuine” when:
- the role is no longer required to be performed by anyone due to changes in operational requirements, and
- you complied with any obligation to consult under an Award or Enterprise Agreement, and
- redeployment within the business (or an associated entity) was not reasonable.
Common triggers include reorganisations, automation, business closure or relocation, or a strategic shift. Redundancy pay may be owed depending on service and business size-our guide to calculating redundancy payments explains how these entitlements work.
When Is A Dismissal “Unfair”?
The FWC can find a dismissal unfair if it was harsh, unjust or unreasonable. A dismissal can be unfair even when there was a reason if the process was poor, the outcome disproportionate, or the employee wasn’t given a chance to respond.
FWC Factors
When deciding unfair dismissal claims, the FWC weighs specific factors in section 387 of the Fair Work Act, including whether:
- there was a valid reason related to capacity or conduct
- the employee was notified of the reason and given an opportunity to respond
- the process was fair (including any warnings for performance issues)
- the employee could have a support person present
- the size and HR resources of the employer affected procedures followed.
Who Can Apply (Eligibility Limits)
Not every worker can bring an unfair dismissal claim. Key eligibility limits include:
- Minimum employment period: 6 months for non–small business employers, or 12 months for small business employers (fewer than 15 employees).
- Coverage: the employee must be covered by an Award or Enterprise Agreement, or earn less than the high income threshold (indexed annually) if not covered.
- Time limit: applications must usually be lodged within 21 days of dismissal taking effect.
Separate from unfair dismissal, “general protections” claims (for example, dismissal for exercising workplace rights, making a complaint, union activity, or discriminatory reasons) have different rules and can be costly. If you’re unsure about risk, pause and get advice.
How To Run A Fair, Compliant Dismissal Process
Every situation is different, but the following steps will help you manage risk and demonstrate procedural fairness.
1) Check Contracts, Awards And Policies
Start with the employment contract and any applicable Modern Award or Enterprise Agreement. These documents may set out processes for warnings, consultation or dismissal. Having a clear, tailored Employment Contract and up-to-date policies makes these processes simpler and more consistent.
2) Identify The Reason And Gather Evidence
Be clear about the ground (misconduct, performance/capacity, or redundancy). Gather relevant documents, witness accounts, KPI reports or policy references. If facts are disputed or sensitive, arrange a fair investigation-this may include interviews, a chance to respond, and temporary suspension on pay while you investigate.
3) Communicate Concerns And Allow A Response
For performance issues, outline concerns, expectations and a reasonable improvement period. For conduct issues, set out the allegations and invite a response. A written step-such as a show cause letter-helps clarify what’s at stake and records your process.
It’s not legally mandatory to provide multiple written warnings in every case, but it’s good practice (and often required by Awards or enterprise instruments). Always give the employee a reasonable chance to respond and, if requested, a support person at meetings.
4) Consider Outcomes And Proportionality
Ask whether dismissal is a proportionate response to the issue, taking into account length of service, prior performance, consistency with past decisions, and any mitigating circumstances. If problems are fixable, a performance improvement plan or final warning may be more appropriate.
5) Decide And Confirm In Writing
Once you decide to end employment, confirm the decision in writing. The letter should state the reason, termination date, notice arrangements (or summary dismissal, if applicable), and outline final pay and any post-employment obligations (like returning company property or confidentiality).
6) Notice And Final Pay
Unless you’re dismissing for serious misconduct, you must provide minimum notice based on service length, or make payment in lieu of notice. Senior employees may have longer notice under their contracts. If you’re unsure which period applies, our overview of calculating notice periods can help.
Final pay typically includes all hours worked up to termination, accrued but untaken annual leave, and (if applicable) redundancy pay. For serious misconduct, no notice is owed, but you still pay earned wages and accrued entitlements as required by law.
7) Keep Records
Document the entire process: meetings, warnings, investigation steps, the employee’s responses, and your decision-making. Good records are your best defence if the decision is later challenged.
Small Business Employers, Probation And Related Scenarios
Small businesses (fewer than 15 employees) have specific protections under the Small Business Fair Dismissal Code. If you follow the Code, you’ll have a stronger defence against unfair dismissal claims. The Code expects a valid reason related to conduct or capacity, a fair process (including giving warnings for performance issues), and appropriate notice (unless serious misconduct applies).
Probation And Minimum Employment Periods
Probation is a contractual tool to assess suitability. It doesn’t replace the Fair Work Act’s minimum employment periods for unfair dismissal eligibility (6 or 12 months, depending on business size), but it often aligns with them. If issues arise early, act promptly and fairly-our guide to terminating employment during probation outlines the main steps and risks.
Investigations And Stand Downs
In serious conduct matters, you might need to remove an employee from the workplace while you investigate. Depending on the circumstances and any industrial instrument, consider a paid suspension rather than a unilateral stand down. For more on process and options, see suspension pending investigation.
Redundancy For Small Business
Small business employers (under 15 employees) may be exempt from paying redundancy pay, but the dismissal still must be a genuine redundancy. You must consult where required and consider reasonable redeployment options before ending employment. If it’s not genuinely a redundancy, the dismissal risks being unfair.
What To Watch Out For (And Common Pitfalls)
Even with a valid reason, most legal risk arises from poor process. These are the common traps:
- Skipping procedural fairness: no opportunity to respond, no reasonable time to improve, or no support person when requested.
- Inconsistent treatment: similar cases handled differently without good reason.
- Retaliation or timing issues: dismissal soon after a complaint, leave request, or WHS report can look like adverse action.
- Inadequate records: no paper trail of meetings, warnings, or investigations.
- Wrong entitlements: incorrect notice, final pay or redundancy calculations.
If you’re unsure about your pathway-for example, whether conduct meets the threshold for summary dismissal, or how performance management should run-get advice before taking the final step. It’s often faster and cheaper than defending a claim later.
Key Takeaways
- Lawful grounds for dismissal include misconduct (including serious misconduct), performance/capacity issues, and genuine redundancy; each requires a fair, evidence-based process.
- The Fair Work Commission looks at factors in section 387 when deciding unfair dismissal, with procedural fairness and proportionality front and centre.
- Eligibility limits apply: employees generally need 6 or 12 months’ service (depending on business size), must be Award/Agreement covered or under the high-income threshold, and must lodge within 21 days.
- Written warnings are not mandated in every case, but clear communication, a chance to respond and reasonable improvement opportunities are key to a fair outcome.
- On termination, check contracts and industrial instruments, follow notice rules or make payment in lieu, and calculate any redundancy correctly using tools like our redundancy payment guide.
- Strong foundations-clear policies, an Employment Contract, and documented processes-reduce risk and help you act consistently.
If you’d like a consultation on grounds for dismissal under the Fair Work Act-or support drafting letters, managing investigations or finalising termination-reach us on 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.
