Unfair Dismissal In Queensland: What Small Business Employers Need To Know

Running a small business in Queensland can be incredibly rewarding, but managing staff also brings real legal responsibilities. One area that often causes stress for employers is unfair dismissal. If it’s handled poorly, an employee’s claim can lead to time-consuming disputes, legal costs and disruption to your operations.

The good news? With a clear understanding of the rules and a fair, well-documented process, you can make confident decisions and reduce your risk. In this guide, we break down how unfair dismissal works in Queensland (noting that most private sector employers are covered by the national Fair Work system), what the Fair Work Commission looks for, and the practical steps you can take to stay compliant.

Keep reading to learn what counts as unfair dismissal, how the Small Business Fair Dismissal Code applies, the steps to follow if you’re considering termination, what happens if a claim is made, and the key documents and policies that protect your business.

What Is Unfair Dismissal In Queensland?

Unfair dismissal is when an employee is dismissed and the dismissal is considered “harsh, unjust or unreasonable” under the Fair Work Act 2009 (Cth). For most Queensland small businesses, unfair dismissal matters are handled by the Fair Work Commission (FWC), which is the national workplace relations tribunal.

Here are the big picture principles to keep in mind:

• Unfair dismissal vs unlawful termination: Unfair dismissal focuses on whether the dismissal was fair in reason and process. Unlawful termination is about prohibited reasons (for example, terminating someone because of their sex, pregnancy or union membership). These are separate legal routes.
• Harsh, unjust or unreasonable: The FWC assesses whether there was a sound, defensible reason for dismissal and whether a fair process was followed (for example, warning, a chance to respond, and procedural fairness).
• Small Business Fair Dismissal Code: Employers with fewer than 15 employees are expected to follow this simplified Code. If you comply with it, you’re less likely to face an adverse outcome in an unfair dismissal case.

The aim of these laws isn’t to prevent you from dismissing underperforming or misbehaving staff. It’s to make sure decisions are made fairly and transparently. If a former employee believes their dismissal was unfair, they can lodge a claim with the FWC seeking a remedy such as compensation or reinstatement.

Does Unfair Dismissal Law Apply To My Small Business?

Most Queensland private sector businesses are covered by the national “Fair Work” system, not state-based unfair dismissal laws. If you’re a typical small business employing staff in Queensland, there’s a good chance your employees have access to unfair dismissal protections (if they meet the eligibility criteria below).

Are You A Small Business Employer?

Under the Fair Work Act, a small business employer has fewer than 15 employees. Headcount includes regular and systematic casuals and is calculated on a simple headcount (not full-time equivalents) at the time of dismissal. If you have 15 or more employees, the standard unfair dismissal framework applies; if fewer than 15, the Small Business Fair Dismissal Code applies.

Minimum Employment Period

• Small business employers: the employee must have completed at least 12 months of continuous service before they can access unfair dismissal.
• Non-small business employers: the minimum period is 6 months.

Other Thresholds

• High income threshold: Employees who are not covered by an award or enterprise agreement and earn above the high income threshold cannot make an unfair dismissal claim. The threshold is indexed annually; the compensation cap is the lesser of 26 weeks’ pay or half of the current high income threshold.
• Casuals: Only regular and systematic casuals with a reasonable expectation of ongoing employment can access unfair dismissal after the relevant minimum period.

If you’re close to the 15-employee threshold or unsure whether your staff are covered (for example, because of high earnings or award coverage), it’s practical to confirm your position before taking steps toward dismissal.

When Is A Dismissal Unfair?

In deciding whether a dismissal was harsh, unjust or unreasonable, the Fair Work Commission considers both the reason for dismissal and the process you followed.

Key Factors The FWC Considers

• Valid reason: Was there a valid reason related to the employee’s capacity or conduct? This can include poor performance, misconduct or serious misconduct where supported by reasonable evidence.
• Notification and opportunity to respond: Was the employee told about the reasons and given a chance to respond before the decision was made?
• Procedural fairness: Did you conduct a fair and reasonable process? This typically includes investigating allegations, allowing a support person in meetings if requested, and giving the employee a chance to improve where appropriate.
• Consistency with workplace rules: Was the dismissal consistent with any applicable award or enterprise agreement, the National Employment Standards, and your policies?
• Small Business Fair Dismissal Code: If you are a small business employer, did you comply with the Code’s requirements?

What About Redundancy?

While business restructuring may be a genuine reason to end employment, the Fair Work Act specifically excludes unfair dismissal claims where a dismissal is a genuine redundancy. For this to apply, the employer must no longer require the role to be performed by anyone due to operational changes, must consult as required under any applicable award or enterprise agreement, and must consider reasonable redeployment options. If the “redundancy” was not genuine-for example, the role still exists or consultation obligations were missed-the dismissal may still be assessed as unfair.

Serious Misconduct

Serious misconduct (such as theft, fraud or violence) can justify immediate dismissal, provided you had reasonable grounds for believing the conduct occurred and you act promptly and fairly. Even in serious cases, make records of your evidence and decision-making, and ensure procedural fairness where possible.

How To Dismiss An Employee Fairly (Step By Step)

A structured, documented process is your best protection. Here’s a practical sequence to follow.

1) Identify The Reason And Gather Evidence

Be clear whether you’re dealing with performance concerns, misconduct or a redundancy. Collect the documents you’ll rely on-performance reports, emails, witness statements, timesheets, or financial/operational data for restructures. Clarity at this stage will guide everything that follows.

2) Communicate Concerns And Set Expectations

• For performance or conduct issues (non-serious): give clear feedback and warning(s), ideally in writing, setting out what needs to improve, by when, and the consequences if it doesn’t.
• Offer reasonable support (training, mentoring, setting KPIs) and timeframes for improvement.
• Keep notes and copies of all conversations and letters.

Having clear, tailored documents helps here. An Employment Contract that sets expectations from day one and a well-written Workplace Policy suite make it easier to manage performance and behaviour consistently.

3) Conduct A Fair Investigation (Misconduct)

Before making findings about misconduct, run a reasonable investigation. Put the allegation to the employee, allow them to respond, and consider any evidence they provide. If you need to separate the employee from the workplace during an investigation, ensure you understand your obligations around standing down an employee pending investigation and whether suspension on pay is appropriate.

4) Consider The Small Business Fair Dismissal Code

If you employ fewer than 15 employees, follow the Code closely. In general, this means giving warnings and an opportunity to improve for performance issues, documenting each step, and ensuring you had reasonable grounds before summarily dismissing for serious misconduct.

5) Make The Decision And Notify The Employee

• Confirm the final reason for dismissal and the effective date.
• Where notice is required, provide the correct notice (or lawful payment in lieu of notice) based on the contract, any applicable award or agreement, and the National Employment Standards. If in doubt about timing, it helps to check how notice periods are calculated.
• Confirm the decision in writing (letter or email) and keep a copy.

6) Final Pay, Entitlements And Exit Documents

• Calculate and pay accrued entitlements (for example, wages to date, accrued but untaken annual leave, and any redundancy pay if applicable). For planning, you can estimate entitlements using the redundancy calculator.
• Provide required paperwork, which may include an employment separation certificate if requested.
• Collect company property and revoke system access sensitively and securely.

Documenting every step-notes of meetings, warnings, reasons for the decision-will be critical evidence if a dispute arises later.

What Happens If An Unfair Dismissal Claim Is Made?

A dismissed employee generally has 21 days from the date of dismissal to lodge an unfair dismissal application with the FWC. Here’s what to expect if a claim is made against your business.

Conciliation

The Commission will ask you to respond in writing and will usually convene a phone conciliation conference. This is a confidential, without-prejudice process aimed at settling the dispute quickly. Many matters resolve at this stage via agreed outcomes (for example, a deed of settlement and modest ex gratia payment, or amendments to the termination record).

Hearing And Outcome

If the matter doesn’t settle, it may proceed to a formal conference or hearing where the FWC decides whether the dismissal was unfair and, if so, what remedy applies. Remedies can include reinstatement or compensation.

Compensation is capped at the lesser of 26 weeks’ remuneration or half of the current high income threshold (the threshold is indexed annually). The Commission will only award compensation for loss caused by the unfair dismissal; it’s not a penalty.

If a claim lands on your desk, respond promptly, stick to the timelines, and gather your documents. The earlier you get organised, the easier it is to resolve the matter cost-effectively.

How To Reduce Your Risk (And The Documents That Help)

Prevention is better than cure. Putting the right foundations in place will significantly reduce the likelihood of unfair dismissal issues-and help you defend a claim if one arises.

Practical Risk-Reduction Tips

• Use clear contracts: Make sure each employee has a well-drafted Employment Contract that sets out duties, performance expectations, notice and termination provisions.
• Implement workplace policies: A practical Workplace Policy suite (performance management, misconduct, bullying and harassment, use of devices, etc.) supports consistent decision-making and fair treatment.
• Train your managers: Provide basic training on giving feedback, conducting warnings, procedural fairness and the Small Business Fair Dismissal Code.
• Keep good records: File notes of conversations, warnings, performance improvement plans, investigation steps and reasons for decisions.
• Check entitlements and timing: Before finalising dismissal, confirm notice or payment in lieu, accrued leave, and any redundancy pay. Use tools like the redundancy calculator to estimate figures.

Core Documents That Support A Fair Process

• Employment Contract: Sets role, responsibilities, notice, and termination terms in clear, plain English.
• Performance Management Policy: Explains how performance concerns are raised, documented and reviewed-including timeframes and support.
• Disciplinary Procedure: Outlines steps for warnings and investigations, and when summary dismissal may apply (for serious misconduct).
• Meeting Records And Warning Letters: Evidence that you communicated concerns, allowed a response and set expectations.
• Termination Checklist: Ensures you cover notice (or lawful substitute), final pay, return of property, and exit documentation such as an employment separation certificate when needed.

Not every business needs an extensive policy library, but most will benefit from the essentials. Well-drafted documentation keeps your process consistent, fair and defensible.

Common Edge Cases To Watch

• Constructive dismissal: If an employee resigns but says they had no real choice (for example, because of unreasonable pressure), they may still seek remedies. Handle resignations carefully and record the circumstances.
• Probation: A fair process still matters during probation. If concerns arise, provide feedback and a reasonable chance to improve before ending employment.
• General protections: Separate from unfair dismissal, employees can bring claims alleging adverse action for prohibited reasons (for example, exercising a workplace right or discrimination). Even if unfair dismissal isn’t available, general protections may be-so take care with all termination decisions.

Key Takeaways

• Most Queensland small businesses are covered by the national Fair Work system, and unfair dismissal focuses on whether your reason and process were fair.
• Small business employers (fewer than 15 employees) should follow the Small Business Fair Dismissal Code closely-good records and clear warnings are essential.
• Genuine redundancy is excluded from unfair dismissal, but only if consultation and redeployment obligations are met and the role is genuinely no longer required.
• A fair process includes notifying the employee of the issue, giving them a chance to respond, and following procedural fairness before deciding to dismiss.
• If a claim is made, act quickly, prepare your evidence, and remember compensation is capped at 26 weeks’ pay or half of the current high income threshold.
• Strong foundations-clear contracts, practical policies, and careful documentation-lower your risk and make terminations smoother and more defensible.

If you would like a consultation about unfair dismissal in Queensland or support preparing contracts, policies and termination documents for your team, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.