Unfair Dismissal Eligibility in Australia: What Employers Should Know

When you’re managing staff, there may come a time when you need to end someone’s employment. That’s hard enough on its own - but if you don’t handle it correctly, you could be defending an unfair dismissal application at the Fair Work Commission (FWC).

Understanding unfair dismissal eligibility isn’t just for employees. As a small business owner, knowing who can bring a claim (and why) helps you plan the right process, reduce risk, and make confident decisions if termination is on the table.

In this guide, we’ll break down who is eligible to apply for unfair dismissal, how the Commission decides what’s “harsh, unjust or unreasonable”, and the practical steps you can take to minimise disputes while staying compliant.

What Is Unfair Dismissal Eligibility In Australia?

Unfair dismissal is where an employee is dismissed in a way that the FWC considers harsh, unjust or unreasonable. Not everyone can apply. Eligibility depends on a mix of employment status, time served, income level and coverage by an award or enterprise agreement, plus timing and jurisdiction.

From an employer’s perspective, your key goal is to understand when an employee is likely eligible to apply. If they are, ensure your process follows the rules (and is well documented) before you act. If they’re not eligible, you still need to comply with other laws - but your unfair dismissal risk may be lower.

Who Can Apply For Unfair Dismissal?

Generally, an employee may be eligible to apply for unfair dismissal if they meet all of the following:

• They are a national system employee (most private sector employees are covered).
• They have completed the minimum employment period:
  • 6 months for businesses with 15 or more employees, or
  • 12 months for small businesses (fewer than 15 employees).
• They earn less than the high-income threshold, unless they’re covered by a modern award or enterprise agreement (in which case the threshold doesn’t matter).
• They were dismissed (not a resignation or a genuine fixed-term expiry) and apply to the FWC within 21 days of the dismissal taking effect.

Casual employees can be eligible too, if they’ve been employed on a regular and systematic basis and had a reasonable expectation of ongoing work across the minimum employment period.

Contractors, volunteers and some trainees won’t be eligible because they aren’t employees. And if an employee is genuinely made redundant (where their job is no longer required and consultation obligations were met), they’re usually not eligible to bring an unfair dismissal application.

As a quick sense check, when you’re planning a termination, consider the employee’s length of service, your headcount, whether an award applies, their earnings, and the 21-day timeframe. If they’re likely eligible, you should assume the FWC may scrutinise your process.

How Does The FWC Decide What’s “Harsh, Unjust Or Unreasonable”?

Even if an employee is eligible, the Commission still needs to decide whether the dismissal was unfair. The law sets out specific factors under section 387 of the Fair Work Act that guide this assessment. In practice, the Commission looks at both the reason for dismissal and the process you followed.

Valid Reason

You should have a sound and defensible reason related to the employee’s capacity or conduct (including performance), or due to operational needs (not redundancy unless it’s genuine). Vague or trivial issues can create risk. If performance is the reason, ensure you can show the performance expectations and where they weren’t met.

Notification And Opportunity To Respond

The employee should be told the reason(s) for possible dismissal in clear terms and given a chance to respond before a final decision. Surprising someone with a termination without warning or input is a common misstep.

Support Person

If a meetings process is underway, the employee should have a reasonable opportunity to bring a support person. You don’t have to offer one proactively, but you shouldn’t unreasonably refuse their request.

Prior Warnings (For Performance)

For underperformance (not serious misconduct), prior warnings are important. A fair process typically includes clear goals, support or training, and documented warnings before dismissal.

Size Of Business And HR Resources

The Commission will consider your business size and HR capacity. Smaller employers aren’t expected to run a complex HR process, but you still need to act fairly and keep reasonable records of what happened and why.

Ultimately, the question is whether your decision and process were reasonable in all the circumstances. A well-run process dramatically improves your position if things are challenged later.

Common Scenarios Employers Ask About

Can We Dismiss During Probation?

Probation doesn’t automatically make an employee ineligible for unfair dismissal - but the minimum employment period often lines up with probation length. If you’re within the minimum employment period, unfair dismissal risk is lower, but you still need to follow contracts and other laws (e.g. discrimination). If you’re outside the minimum period, unfair dismissal may apply even if the person is still labelled “on probation”. More detail is here: termination during probation.

What About Casuals?

Regular and systematic casuals with a reasonable expectation of ongoing work can be eligible if they meet the other criteria. If termination is due to performance or conduct, follow a fair process (including warnings where appropriate) and document your decisions.

High-Income Employees

If an employee earns above the high-income threshold and is not covered by an award or enterprise agreement, they generally can’t bring an unfair dismissal claim. However, other risks remain (e.g. general protections, discrimination). Make sure your decisions are still fair, well-reasoned and documented.

Fixed-Term Contracts

When a genuine fixed term ends on its stated date, that expiry isn’t usually a dismissal for unfair dismissal purposes. The risk increases if you terminate before the end date, or if the arrangement looks continuous beyond the term (e.g. rolling fixed terms). Keep your contracts clear and align your conduct with those terms.

Misconduct Vs Poor Performance

Serious misconduct may justify immediate dismissal, but you still need a fair process: a proper investigation, an opportunity to respond, and reasons that stack up. For underperformance, fair warning and a chance to improve are crucial.

Redundancy

Genuine redundancies are generally excluded from unfair dismissal, but you must follow consultation obligations and explore redeployment where reasonable. If you’re unsure whether it’s redundancy or termination for other reasons, check the difference between redundancy and termination so you apply the right process.

An Employer’s Checklist Before You Dismiss

Here’s a practical, legally-informed checklist to help you manage risk if you’re considering termination. Adjust the level of formality to your business size and the situation at hand.

1) Confirm Eligibility And Risks

• Check length of service vs your headcount (minimum employment period).
• Confirm award or enterprise agreement coverage and consider the high-income threshold.
• Note the 21-day application window for unfair dismissal - if they’re eligible, expect scrutiny.

2) Identify The Reason And Gather Evidence

• Is your reason related to conduct, capacity (performance), or operational change?
• Collect documents: performance plans, warnings, emails, complaints, or investigation notes.
• Ensure the reason is consistent with the employee’s contract and your policies.

3) Follow A Fair Process

• Invite the employee to a meeting, outline the issues, and let them bring a support person.
• Explain the potential consequences (including dismissal) and allow them to respond.
• For performance issues, consider a performance improvement plan and written warnings.
• Use clear, professional show cause letters to document your process and expectations.

4) Investigate Misconduct Properly

• If misconduct is alleged, run a timely and fair investigation and keep thorough notes.
• Consider precautionary measures (like suspension on pay) where appropriate and proportionate.

5) Decide And Communicate

• Make a reasoned decision and record how you weighed up the facts and responses.
• Confirm the outcome in writing, including key dates, notice, and any entitlements.
• If you do not want the employee to work out their notice, calculate lawful payment in lieu of notice.

6) Complete Final Pay And Offboarding

• Prepare final pay correctly, including wages, accrued leave and any other entitlements - see this detailed guide to calculating final pay.
• Issue documents like statements of service and, where relevant, separation certificates.
• Collect company property, confirm ongoing confidentiality and any restraint obligations.

If you’re within the minimum employment period, you still need to follow contracts and apply a reasonable process. If you’re outside it (and the employee is otherwise eligible), expect the FWC to look closely at these steps.

Legal Documents And Policies That Reduce Unfair Dismissal Risk

Strong, clear documents make performance management and termination more straightforward - and easier to defend if challenged. Consider the following foundation documents for your business:

• Employment Contract: Sets role expectations, probation, notice, conduct standards and confidentiality. Clear terms support a fair process and help avoid disputes. For core roles, use a comprehensive Employment Contract tailored to the position (casual, part-time or full-time).
• Workplace Policies: Document standards for performance, conduct, bullying/harassment, IT use and investigations. Policies guide staff and underpin a consistent process when issues arise.
• Performance Management Templates: Scripts and letters help you set goals, record warnings and outline support offered - making your process transparent and fair.
• Show Cause and Outcome Letters: Clear wording minimises misunderstandings and proves procedural fairness. Our overview of show cause letters covers the essentials.
• Termination Pack: A consistent suite of notices, acknowledgements and checklists streamlines offboarding and reduces admin errors. If you need a structured set, consider an Employee Termination Documents pack.

If restructuring is on the table rather than performance or conduct dismissal, map your process to redundancy obligations (consultation, genuine operational change and potential redeployment). If you’re weighing up those pathways, revisit the difference between redundancy and termination before you proceed.

Key Takeaways

• Unfair dismissal eligibility depends on factors like minimum employment period, earnings and award coverage, and the 21-day application window.
• Even where an employee is eligible, the FWC assesses whether your decision was harsh, unjust or unreasonable using set factors in section 387 of the Fair Work Act.
• Casuals may be eligible if they worked regularly and systematically with a reasonable expectation of ongoing work.
• Follow a fair process: clear reasons, notice of issues, an opportunity to respond, and documented warnings for performance concerns.
• Use precise documentation (contracts, policies, show cause letters and termination packs) to reduce risk and keep your process consistent.
• Finalise entitlements correctly, including payment in lieu of notice where appropriate and accurate final pay, and issue necessary separation certificates.
• If you’re unsure whether the situation is redundancy or dismissal, confirm the difference between redundancy and termination and align your process accordingly.

If you’d like a consultation on unfair dismissal eligibility and setting up a fair, compliant termination process for your business, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.