Unfair Dismissal Lawyers Perth: What Small Businesses Need To Know About Employee Terminations

Building a strong team is central to growing your Perth business. But there may come a time when you need to end someone’s employment. That can feel daunting - not just because it’s tough on people, but because the legal risks are real.

One of the big risks is unfair dismissal. If a termination isn’t handled lawfully and fairly, you could face a claim in the Fair Work Commission (FWC) or, for some employers outside the national system, the Western Australian Industrial Relations Commission (WAIRC).

This guide walks you through what unfair dismissal means in Australia, how the rules apply in Western Australia, the steps to follow before you dismiss, and what to do if a claim lands on your desk. We’ll also point you to the key documents that help small businesses stay compliant and protect their position.

What Is Unfair Dismissal In Australia?

Unfair dismissal generally occurs when an employee is dismissed in a way that is harsh, unjust or unreasonable under the Fair Work Act 2009 (Cth). The FWC looks at factors such as the reason for dismissal, the process you followed, whether the employee had a chance to respond, and whether a support person was allowed at discussions about dismissal.

In practice, a dismissal is more likely to be considered unfair if:

• It’s harsh - for example, the penalty doesn’t fit the conduct or the personal circumstances.
• It’s unjust - there wasn’t a valid reason supported by evidence.
• It’s unreasonable - no reasonable employer would have dismissed in the same circumstances.

The FWC uses a specific list of considerations to decide these cases, including the presence of a valid reason and procedural fairness. If you’re assessing risk, it helps to know how these Section 387 factors are applied in real life.

If the FWC finds a dismissal was unfair, the main remedies are reinstatement (with or without back pay) or compensation (capped at the lower of 26 weeks’ pay or half of the current high-income threshold).

Does Unfair Dismissal Law Apply To Perth Small Businesses?

Most private sector employers in WA are covered by the national Fair Work system. If you’re a company (for example, a Pty Ltd), your employees’ unfair dismissal rights will typically be under the Fair Work Act and FWC.

Some employers sit outside the national system and remain in the WA state system - this includes certain sole traders, partnerships and unincorporated entities, as well as WA public sector and local government employers. Those matters are dealt with by the WAIRC under state industrial laws, not the FWC.

Not sure which system you’re in? A quick status check now can save a painful jurisdictional misstep later. If you’re in the national system, the Small Business Fair Dismissal Code may apply if you have fewer than 15 employees (headcount at the time of dismissal). For serious misconduct, you can dismiss without notice if you reasonably believe the conduct is serious misconduct, but you should still document your reasons and the steps you took. For performance or conduct issues short of serious misconduct, the Code expects warnings, a chance to respond and clear records of the process.

When Can An Employee Bring An Unfair Dismissal Claim?

Eligibility matters. An employee can usually apply for unfair dismissal if they meet all of the following:

• They’ve completed the minimum employment period - 6 months for most employers, 12 months if you’re a small business (fewer than 15 employees).
• They’re covered by an award or enterprise agreement, or they earn less than the high-income threshold.
• They’ve been dismissed (not resigned, unless there was a forced resignation) and the dismissal wasn’t a case of genuine redundancy.

There are key exclusions. For example, casuals who haven’t been working on a regular and systematic basis usually won’t qualify, and independent contractors aren’t eligible for unfair dismissal (though they may have other rights).

Timing is critical. Applications must be lodged within 21 days after the dismissal takes effect (extensions are rare). If you receive a claim, you’ll also have strict deadlines to respond.

Thinking about redundancy? Make sure the role is genuinely no longer required and consider redeployment where reasonable - otherwise you risk an unfair dismissal claim framed as a “non-genuine redundancy.” If you’re weighing up redundancy versus performance termination, this explainer on the difference between redundancy and termination is a helpful starting point.

How To Dismiss An Employee Lawfully (Step-By-Step)

Every situation is different, but a fair process goes a long way to reducing risk. Here’s a practical framework for small businesses.

1) Identify A Valid Reason

• Performance: Underperformance or incapacity should be supported by evidence (KPIs, performance reviews, complaints or quality issues).
• Conduct: Misconduct should be investigated. For serious allegations, consider temporarily standing down an employee pending investigation if your contract or enterprise instrument allows it.
• Redundancy: Confirm the role is no longer required due to operational change, and assess reasonable redeployment options across your business (and associated entities, if any).

2) Follow A Fair Performance Or Misconduct Process

• Put concerns in writing and give the employee reasonable detail and time to respond.
• Invite them to a meeting and allow a support person if they request one.
• For performance issues, issue clear written warnings and set improvement expectations. A formal show cause letter can be useful before making a final decision.
• Consider the employee’s response in good faith before deciding.

3) Make And Communicate The Decision

• Confirm the outcome in writing. State whether the dismissal is for conduct, capacity or redundancy and the effective date.
• Provide the correct notice period under the National Employment Standards, any applicable award/enterprise agreement and the contract - or make payment in lieu of notice if appropriate.
• If the person is a long-serving or senior employee, consider whether a period of garden leave (if your contract allows) is preferable to working out notice.

4) Finalise Pay And Documentation

• Calculate all final entitlements - wages to the final day, accrued annual leave, and any redundancy or long service leave where applicable. This guide to calculating final pay outlines the typical components.
• If requested, prepare a Separation of Employment Certificate (used by Services Australia).
• Ensure company property is returned and access to systems is removed in a timely, respectful way.

5) Keep Robust Records

• Retain copies of warnings, notes of meetings, investigation materials, correspondence and signed contracts/policies. Good documentation often decides outcomes in disputes.

6) Consider Alternatives (Where Appropriate)

• Performance improvement plans, changes to duties by agreement, or a mutually agreed exit supported by a Deed of Release and Settlement can sometimes resolve matters without the risk of a contested dismissal.

What Legal Documents And Policies Should You Have?

Clear, up-to-date documents make performance management and termination processes more consistent and defensible. As a minimum, small businesses should consider the following:

• Employment Contract: Sets expectations, duties, notice, serious misconduct, confidentiality, post-employment restraints and rights to stand down or place on garden leave where lawful.
• Workplace Policies: Performance management, disciplinary procedures, conduct, bullying/harassment, grievance handling and IT/security use help ensure procedural fairness.
• Termination Letter: Confirms the grounds for dismissal, notice arrangements, last day and practical steps (property return, access removal).
• Employee Separation Agreement: Useful for a negotiated exit to finalise terms and reduce the risk of later claims.
• Redundancy Materials: If undertaking redundancies, align communications and selection criteria with genuine operational reasons and keep detailed records.

If health capacity is a concern, be mindful of discrimination and adverse action risks. Managing these processes carefully is essential - see our overview of termination on medical grounds for typical risk points.

Responding To An Unfair Dismissal Claim In WA

If a claim is lodged with the FWC (or WAIRC for state-system employers), acting promptly and methodically gives you the best chance of resolving it early.

1. Check the deadline and eligibility: Confirm the application date (the 21‑day limit), your coverage (national vs state system) and whether the employee met the minimum employment period. Jurisdiction or eligibility issues can sometimes dispose of a claim at the outset.
2. Prepare your response: Assemble the facts, timeline, witness notes, policies, contract, warnings and any investigation materials. A clear, evidence-backed narrative is essential when addressing the Section 387 considerations.
3. Conciliation: Most matters resolve at telephone conciliation. Be ready to discuss risks and practical solutions - for example, a deeded settlement and a neutral reference in appropriate cases.
4. Hearing (if required): If unresolved, the Commission may list the matter for conference or hearing. Procedural timelines can be tight, so keep your documents organised and witnesses available.

Throughout, keep your tone professional and your documentation consistent. Even if you believe the dismissal was fair, a pragmatic approach at conciliation often saves time, cost and stress for everyone involved.

Key Takeaways

• Unfair dismissal risk turns on both the reason for dismissal and the process you follow - plan the steps, communicate clearly and document everything.
• Most Perth small businesses fall under the national Fair Work system; some unincorporated employers and the public sector are in the WA state system.
• Eligibility depends on minimum employment periods, award/enterprise agreement coverage or earnings below the high‑income threshold, and applications must be lodged within 21 days.
• For small businesses, the Small Business Fair Dismissal Code matters - use warnings, allow a response, and keep records; summary dismissal is limited to genuine serious misconduct with a reasonable basis.
• Use strong foundations: an Employment Contract, clear policies and the right letters help you apply fair, consistent processes and defend decisions.
• If a claim is filed, respond on time, provide evidence and take conciliation seriously - a practical settlement can be a smart commercial outcome.

If you’d like a no‑obligations chat with our team about unfair dismissal processes or employee terminations in Perth, reach us on 1800 730 617 or team@sprintlaw.com.au - we’re here to help you protect your business and move forward with confidence.