Section 772 Of The Fair Work Act: Unlawful Termination Explained

If you’re making decisions about ending someone’s employment, it’s important to understand more than just “unfair dismissal.” Section 772 of the Fair Work Act 2009 (Cth) creates a separate set of rules about unlawful termination. Get this wrong, and you could face penalties even if the dismissal might otherwise seem reasonable.

In this guide, we unpack what section 772 covers, how it differs from unfair dismissal, and the practical steps you can take to reduce risk before you dismiss an employee. We’ll keep it simple, employer-focused and actionable, so you can make confident decisions and keep your business compliant.

What Is Section 772 Of The Fair Work Act (And Why It Matters To Employers)?

Section 772 prohibits an employer from dismissing an employee for certain prohibited reasons. It’s sometimes called “unlawful termination.” Unlike other parts of the Fair Work Act that deal with “adverse action” or “unfair dismissal,” section 772 is a specific rule that targets dismissals for clearly unlawful reasons.

In simple terms, section 772 says you can’t terminate someone because of protected attributes or activities. Common examples include:

• Temporary absence from work due to illness or injury (where the absence is covered by the regulations).
• Union membership or participation in lawful union activities.
• Filing a complaint or participating in legal proceedings against you.
• Discrimination based on protected attributes, such as race, sex, age, disability, marital status, pregnancy or religion (not an exhaustive list).
• Absence from work during parental leave or for engaging in a workplace right.

Why should small businesses care? Because even if you have genuine performance or conduct concerns, a termination can be unlawful if a protected reason is part of the decision. Careful planning, clear documentation and a fair process are essential.

How Is Section 772 Different From Unfair Dismissal Or General Protections?

Unfair dismissal and unlawful termination are not the same thing. Unfair dismissal generally looks at whether the dismissal was harsh, unjust or unreasonable (and whether a fair process was followed). By contrast, unlawful termination under section 772 focuses on the reason for dismissal - specifically, whether it was for a prohibited reason.

For context, when employers think about process and reasonableness, they’re often thinking of the factors in section 387 (unfair dismissal) - things like whether the employee was notified of the reason and given a chance to respond. That’s still important, but section 772 can apply even where process looks fine, if a prohibited reason influenced the decision.

Section 772 also sits alongside the “general protections” regime (adverse action), which prohibits taking adverse action (including dismissal) because someone exercised a workplace right or engaged in industrial activity. The overlap can be confusing, but the bottom line for employers is the same: make decisions for lawful, defensible reasons and record them clearly.

When Can You Lawfully Terminate Without Risking A Section 772 Claim?

You can dismiss for valid reasons that are not prohibited under section 772. Common lawful reasons include:

• Persistent underperformance after a fair performance management process.
• Serious misconduct (for example, theft, fraud, violence) where you have credible evidence.
• Genuine redundancy (where the role is no longer required, you’ve consulted as required, and redeployment isn’t reasonable).
• End of a fixed-term or maximum-term contract, provided the arrangement is compliant and not used to sidestep obligations.
• During a probation period - still with a fair and lawful process and without any prohibited reasons influencing the decision. You can read more about the nuances in termination during probation.

The key is to be clear on your real reason, ensure it’s not a prohibited ground, and be able to back it up with evidence and a fair process.

Practical Steps To Reduce Risk Before You Dismiss An Employee

Before you move to termination, take a beat to run through a simple risk checklist. A measured approach often keeps matters out of litigation and protects your culture, too.

1) Identify and Document a Valid Reason

Be specific about the reason for dismissal. Is it performance, conduct, redundancy, or something else? Gather the evidence (performance reviews, written warnings, investigation notes). Precision helps prove your decision wasn’t for a prohibited reason and supports you if the employee challenges it later.

Clear documents start with a robust Employment Contract that sets out performance expectations, duties and policies you can refer back to. Consistency between your contract, policies and day-to-day operations is important.

2) Check for Any Prohibited Reasons

Ask yourself: could this employee argue that pregnancy, temporary illness, union membership, or a complaint they made played a part in your decision? If there’s any chance, you need to separate the protected factor from your genuine reason and be able to demonstrate that separation with evidence.

For example, if an employee recently raised a safety complaint and you also have serious performance concerns, make sure your files show the performance issues were discussed and recorded well before the complaint, and that you’ve treated similar cases consistently.

3) Provide Procedural Fairness

Even where you have a strong non-prohibited reason, process matters. Notify the employee of the concerns, give them a reasonable opportunity to respond, and genuinely consider their explanation. For conduct matters, a formal letter is best - a structured approach like using a show cause letter can help you frame the issues and invite a response.

If allegations of serious misconduct are involved, consider whether a temporary stand down is appropriate while you investigate. The decision should be measured and consistent with your contracts and policies - see our guidance on standing down an employee pending investigation.

4) Follow the Correct Notice and Final Pay Rules

If you proceed to dismissal (other than summary dismissal for serious misconduct), ensure you give the right notice or pay it in lieu. Getting this wrong can escalate a dispute. For a refresher on the mechanics and common pitfalls, see payment in lieu of notice.

Double-check any award or enterprise agreement requirements about notice, consultation, and redundancy pay. These obligations sit alongside the Fair Work Act.

5) Watch the “Hot Zones” (High-Risk Scenarios)

• Temporary Illness or Injury: Dismissing someone because they’re temporarily away from work due to illness or injury can be unlawful. A careful approach to capability assessments and reasonable adjustments is essential. If you’re unsure whether someone is fit to return, consider when you can request a medical clearance.
• Pregnancy and Parental Leave: Terminations connected with pregnancy or related leave are a high-risk area under section 772.
• Union Activity or Workplace Rights: Take extra care if the employee has recently exercised a workplace right, raised a complaint, or engaged in industrial activity.

6) Keep Your Policies Current (And Follow Them)

Up-to-date, accessible policies are your playbook and evidence. If you say you’ll conduct a certain process, do it. If you don’t have a baseline set yet, consider implementing a core Workplace Policy suite (e.g. performance management, disciplinary procedures, leave, bullying and harassment). This helps ensure consistency and defend decisions later.

Responding To An Unlawful Termination Claim: What To Do If A Complaint Lands On Your Desk

Even with a careful approach, claims happen. Here’s a calm, step-by-step response plan if you receive an application alleging unlawful termination:

1. Acknowledge and diarise deadlines: Timeframes are tight. In many cases, employees must apply within 21 days of dismissal - the Commission will set response deadlines. Don’t miss them.
2. Gather your evidence: Pull together contracts, policies, warnings, investigation notes, meeting minutes and emails showing your decision-making process and the reasons for dismissal. Clear, contemporaneous records are your best friend.
3. Map the alleged reason vs your actual reason: Be ready to show the termination was for a lawful reason unrelated to any prohibited ground (e.g., performance, genuine redundancy). Your notes should back this up.
4. Prepare for conciliation: Many matters resolve at an early conciliation. Think in advance about workable outcomes (e.g., deed of release, references, settlement). Having the right templates to hand - for example, from an Employee Termination Documents Suite - can speed things up and reduce stress.
5. Stay professional: Avoid reactive communications. Be respectful and stick to the facts; your conduct during a dispute can influence outcomes.

If the dispute touches both unfair dismissal and unlawful termination, keep the streams separate when you prepare your materials. For unfair dismissal, the process and reasonableness factors (see section 387) will dominate. For section 772, you’re focusing on proving the absence of any prohibited reason.

Alternatives To Dismissal: Are There Lower-Risk Options?

Sometimes, termination is necessary. Other times, a structured alternative resolves the issue without the legal risk and cost of a dismissal. Consider:

• Performance improvement plans with clear goals and timelines.
• Training, mentoring or role redesign where appropriate.
• Agreed changes to duties or hours, where the contract allows and after consultation.
• Mutual separation arrangements documented in a deed, especially if the working relationship has run its course.
• Suspension or stand down (limited scenarios) while you investigate serious allegations, aligned with contracts and policies - see standing down pending investigation.

The right choice depends on the facts, but exploring these options can reduce risk and demonstrate reasonableness if a dispute later arises.

Key Employment Documents That Help You Stay Compliant

Good documents don’t just “tick a box” - they actively lower your risk under section 772 by clarifying expectations, guiding your process and creating evidence of fair treatment. Core documents to consider include:

• Employment Contract: Sets out duties, standards, policies, disciplinary processes, notice arrangements and any probation. It’s your foundation when addressing underperformance or misconduct.
• Workplace Policies: Clear policies on performance management, leave, bullying and harassment, grievance handling, discrimination and social media. They help you act consistently and lawfully.
• Show Cause Letter: Frames allegations, invites a response and demonstrates procedural fairness before any decision is made.
• Notice and Final Pay templates: Ensure you calculate and communicate termination payments correctly, reducing disputes about entitlements.
• Termination and Settlement Documents: Letters, deeds of release and checklists support clean exits and finalise obligations.

Don’t forget to keep your documents aligned. For example, if your contract refers to specific policies, make sure those policies exist, are up-to-date, and are accessible to staff.

Common Mistakes Employers Make (And How To Avoid Them)

We regularly see avoidable missteps in dismissal decisions. Here are the big ones to watch out for:

• Rushing to dismiss: Acting fast can feel decisive, but it can also mean missing key facts or process steps. Slow down, investigate properly and document each step.
• Vague or shifting reasons: If your reason changes over time, it’s easier for an employee to argue a prohibited reason actually drove the decision. Nail your reason early and stick to it.
• Mixing protected factors with performance: If someone has recently used a workplace right (e.g., requested flexible work, took parental leave) and you’re also considering dismissal, separate those issues and make your performance evidence watertight.
• Skipping procedural fairness: Even for strong conduct cases, invite a response and consider it genuinely. A show cause process is rarely wasted effort.
• Overlooking contractual or award obligations: Notice, consultation and redundancy rules still apply. Confirm what your contract, award or enterprise agreement requires before you act.

Frequently Asked Questions For Employers

Is Section 772 Only About Discrimination?

No. While discrimination is a key category, section 772 is broader. It also covers union membership and activities, temporary absence due to illness or injury (within the rules), making complaints, and other protected situations. Always consider whether any protected factor could be alleged in your circumstances.

Do Probation Periods Protect Me From Section 772 Claims?

No. Probation can affect unfair dismissal eligibility and process, but you can’t terminate for a prohibited reason under section 772 at any time. If you’re ending employment during probation, ensure your reasons are lawful and your process is fair - our guide to termination during probation explains the practicalities.

What If I Need Someone Away From The Business During An Investigation?

Depending on your contracts and the situation, a suspension or stand down may be appropriate while you investigate serious allegations. Treat it as a short-term, carefully documented step - see our article on standing down pending investigation for key considerations.

Key Takeaways

• Section 772 of the Fair Work Act prohibits terminating employment for certain reasons, including discrimination, temporary illness/injury absences, union activity and making complaints.
• It’s different from unfair dismissal - even a well-run process can be unlawful if a prohibited reason influences the decision.
• Reduce risk by identifying a clear, lawful reason, checking for any protected factors, following a fair process, and keeping strong records.
• High-risk “hot zones” include pregnancy, parental leave, union activity and temporary illness/injury - be extra careful and document decisions.
• Core documents like an Employment Contract, Workplace Policies, a show cause letter and the right termination templates give you structure and evidence.
• If a claim arises, act quickly on deadlines, assemble your evidence and be prepared for conciliation - tools like an Employee Termination Documents Suite can streamline resolution.

If you’d like a consultation on managing dismissals and section 772 risk in your small business, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.