Understanding Unfair Dismissal (2025 Updated)

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Whether you’re an employee or an employer, unfair dismissals remain one of the most difficult and sensitive processes to navigate in 2025. So, what do you need to know?

As an employee, if you’ve been dismissed from your job in a ‘harsh, unjust or unreasonable manner’, you may be able to make a claim of unfair dismissal against your employer. It’s important to remember that, even in today’s evolving workplace landscape, your rights are firmly protected under law – and our updated guide on unfair dismissal explains how these rights work in 2025.

If you’re successful in making this claim, you may be entitled to compensation or the reinstatement of your job – but be wary! This is a time‐sensitive process. You only have 21 days from the effective date of dismissal to lodge your claim, so it’s crucial you take prompt action.

On the other hand, as an employer, you have several obligations and responsibilities under the law – one of which is to be fair and transparent in the dismissal process. If an employee claims to have been unfairly dismissed by your company, you’ll want to defend your position and protect your reputation, even if you believe you’ve acted appropriately. In today’s 2025 environment, with increasing regulatory updates and higher public expectations, ensuring that your practices meet current standards is more vital than ever.

Below, we’ll outline how to approach unfair dismissal as either an employee or an employer – with updated guidance reflecting the current legal framework in 2025.

What Is An Unfair Dismissal?

To put it simply, unfair dismissal occurs when an employee’s employment is terminated in a manner that is not just, reasonable or carried out with proper due process. This termination can occur either through the direct actions of an employer or by forcing an employee to resign because of the employer’s conduct.

Some factors that may be considered when deciding an unfair dismissal case include:

Whether the dismissal was harsh, unjust or unreasonable;
Whether the termination might actually be a case of a genuine redundancy; and
Whether the dismissal occurred in a small business, and if so, whether it aligned with the Small Business Fair Dismissal Code.

The sad reality is that many unfair dismissal cases and terminations are further complicated by instances of workplace harassment and discrimination – issues you can read about in more detail here.

If an employee has been forced to resign due to the conduct of their employer, this is referred to as a “constructive dismissal”. Importantly, a constructive dismissal can still be considered an unfair dismissal under the law.

Why Are Small Businesses Different When It Comes To Unfair Dismissal?

Small businesses operate under a different set of guidelines when it comes to unfair dismissal – and this is by design to account for their more limited resources compared to larger organisations. In 2025, the Small Business Fair Dismissal Code continues to provide a framework that helps small businesses conduct terminations fairly while also offering some protection when claims are made against them.

Under the Code, a business is considered “small” if it has fewer than 15 employees – this count includes the employee(s) being dismissed, regular casuals, and any overseas employees, measured at the earliest time of dismissal. This remains a key factor in determining the fairness of a dismissal in smaller businesses.

The Code allows a small business to fairly dismiss an employee if it is reasonably believed that the employee’s conduct is so serious that immediate dismissal is justified. As always, it is vital for small businesses to document their decision-making and follow proper procedures.

What Do Employers Need To Know About Unfair Dismissals?

As an employer, you will typically be notified of an unfair dismissal claim when you receive a copy of the former employee’s application from the Fair Work Commission. This application indicates that the employee has requested an investigation into their dismissal and is seeking a formal determination on their case.

Receiving such an application can be a shock, and amidst the stress of the situation, it may be confusing to know what steps to take next. However, it is crucial to respond to the unfair dismissal claim appropriately – regardless of whether you believe your business is at fault. Neglecting to participate in the process can have serious ramifications for your company.

Employers have the right to respond to the application by submitting the correct forms, outlining any objections and providing the Commission with detailed reasons for why the dismissal was fair. This input is essential for the Commission to decide whether to progress or dismiss the application.

It is advisable to review your employee termination procedures frequently and update them in line with current best practices. For further guidance on best practices for handling terminations and ensuring compliance, you might find our insights in the Employment Contract and Building a Team guides extremely useful.

After you submit your response, a conciliation conference by telephone will be arranged by the Commission – a voluntary process where staff work with both parties to resolve the dispute without needing a formal hearing. If conciliation fails, the matter will proceed to a formal hearing before a Commission member, who will then render a decision.

Additionally, if you believe the dismissed employee does not fall within the Commission’s jurisdiction – for example, if they have not met the minimum employment period (which remains 12 months for small businesses and 6 months for other businesses) – you have the option to lodge a jurisdictional objection. If upheld, the unfair dismissal claim will be dismissed.

A well-prepared Staff Handbook can be invaluable if you need to defend against an unfair dismissal claim. By clearly outlining the expectations and standards of the role, you increase your chances of demonstrating that the dismissal was justified.

What Do Employees Need To Know About Unfair Dismissals?

If you’re an employee, you must have been employed by the business for a minimum period before you can apply for an unfair dismissal claim. Currently, you need to have been employed for at least 6 months (or 12 months if you were employed by a small business) – and this period still includes any change of business ownership.

Most importantly, your claim must be lodged within 21 days of the dismissal becoming effective. In 2025, this time frame remains critical; delaying even by a few days may jeopardise your opportunity to have your case heard.

The national workplace relations system, which covers the majority of employers and employees in Australia, continues to be underpinned by the Fair Work Act, the National Employment Standards, registered agreements, and Awards.

Once you lodge your claim, the Commission will provide a copy of your application to your former employer, who will then have the opportunity to respond. Following this, a conciliation conference will be set up to try and resolve the dispute without resorting to a formal hearing. If unresolved, the matter will proceed to a formal hearing where a decision will ultimately be made – potentially awarding reinstatement, compensation of up to six months’ wages (excluding compensation for shock, hurt or humiliation), or other non-financial remedies.

Given the ongoing evolution of employment law in 2025, both employees and employers are encouraged to seek expert advice early. For employees, understanding your rights and gathering relevant evidence is crucial, while employers should ensure that all disciplinary procedures and dismissal processes are clearly documented and in line with current legal standards.

Key Takeaway

As you can see, the unfair dismissal claim process is a multifaceted and time-sensitive matter. Whether you’re an employee or an employer, it is essential to act quickly, follow proper procedures and ensure that all actions are fair and in compliance with current regulations.

In 2025, with the changing dynamics of the modern workplace and ongoing updates to legislation, maintaining up-to-date internal policies and seeking expert legal advice is more critical than ever. If you need assistance navigating or defending an unfair dismissal claim, give us a call on 1800 730 617 or email us at team@sprintlaw.com.au. We’re here to help you through every step of the process!

Abinaja Yogarajah

Abinaja is a the legal operations lead at Sprintlaw. After completing a law degree and gaining experience in the technology industry, she has developed an interest in working in the intersection of law and tech.

Embeth Sadie

Embeth is a senior lawyer at Sprintlaw. Having previously practised at a commercial litigation firm, Embeth has a deep understanding of commercial law and how to identify the legal needs of businesses.