Unlawful Dismissal In Australia: Employer’s Essential Legal Guide

If you employ staff in Australia, getting termination decisions right matters. Ending someone’s employment is never easy, and if it’s handled for the wrong reason (or handled the wrong way), you could face costly claims, disruption to your team, and damage to your brand.

“Unlawful dismissal” is a term that gets confused with “unfair dismissal” and “wrongful termination.” They’re related concepts, but they’re not the same. Each has its own legal test, process and remedies.

In this guide, we’ll clearly explain what unlawful dismissal means under Australian law, how it differs from unfair dismissal and general protections (adverse action) claims, give practical examples, and walk you through sensible steps to reduce risk before you let someone go. Our aim is to help you manage your team confidently and compliantly.

What Does “Unlawful Dismissal” Mean In Australia?

Unlawful dismissal refers to situations where you end an employee’s employment for a reason that the law specifically prohibits. The key protections come from the Fair Work Act 2009 (Cth) and anti‑discrimination laws, and in some contexts, whistleblower protections.

There are two main pathways that often get grouped under “unlawful” termination:

• Unlawful termination (s 772 Fair Work Act): This prohibits terminating an employee for certain prohibited reasons (for example, discriminatory grounds, union membership/industrial activity, temporary absence due to illness or injury within prescribed limits). This pathway is commonly used by employees who are not eligible to bring general protections claims.
• General protections (adverse action) dismissal: It’s unlawful to take adverse action (including dismissal) against someone because they exercised a workplace right, engaged in industrial activity, or because of protected attributes. These provisions carry strong remedies and a reverse onus of proof.

Separate to those, anti‑discrimination laws (federal and state/territory) make it unlawful to dismiss someone due to protected attributes such as sex, race, disability, age, pregnancy, marital or relationship status, sexual orientation, religion, and more.

There are also specific whistleblowing protections. For example, in certain corporations there are protections under the Corporations Act for eligible whistleblowers. In the public sector, the Public Interest Disclosure framework can also apply. Terminating someone for protected disclosures can lead to serious penalties.

How Is Unlawful Dismissal Different From Unfair Dismissal And General Protections?

These concepts are often mixed up, so it’s worth drawing a clean line between them.

• Unfair dismissal: Focuses on whether the dismissal was “harsh, unjust or unreasonable.” It looks at things like whether there was a valid reason related to conduct or capacity, whether the employee was notified of that reason, and whether you provided a fair opportunity to respond. Unfair dismissal is largely about procedural fairness and reasonableness. Eligibility thresholds (e.g. service periods and high‑income thresholds) apply.
• Unlawful termination (s 772): Prohibits dismissals for certain specific reasons (such as discrimination, industrial activity, or protected temporary absence). It is reason‑based-if the real reason is prohibited, it’s unlawful.
• General protections (adverse action) dismissal: Makes it unlawful to dismiss someone because they exercised a workplace right (for example, making a complaint about their employment, taking protected leave, or seeking flexible work), engaged in industrial activity, or due to protected attributes. Critically, the employer bears the burden of proving the prohibited reason was not a reason for the dismissal.

In short: unfair dismissal looks at fairness of the process and decision, while unlawful dismissal and general protections focus on why you ended employment. A termination can be lawful but unfair, lawful and fair, or unlawful regardless of process.

Prohibited Reasons And Practical Examples

Below are common scenarios where dismissal can be unlawful. Keep in mind that context matters-the real reasons must be carefully separated from any protected reasons.

Discrimination

It’s unlawful to dismiss someone because of protected attributes such as sex, pregnancy, age, race, disability, marital or relationship status, sexual orientation, or religion (among others). For instance, ending employment because an employee becomes pregnant or because they have a disability is prohibited.

Workplace Rights And Complaints

Dismissing someone because they exercised a workplace right-like making a complaint or inquiry about their pay or conditions, requesting flexible work, taking annual leave, or raising a safety issue-can constitute adverse action. If a complaint about underpayments prompts a termination soon after, that timing will likely be scrutinised.

Industrial Activity And Union Membership

It’s unlawful to terminate employment because the employee joined a union, participated in lawful industrial activity, or chose not to join.

Temporary Absence Due To Illness Or Injury

There are specific protections for temporary absence due to illness or injury within limits set by regulations. Generally, an absence is protected if it’s supported by evidence and does not exceed the prescribed duration (for example, more than 3 months in a single stretch or an aggregate of 3 months over 12 months may fall outside protection, depending on the circumstances). Where illness or injury is involved, careful handling and clear evidence requirements-such as appropriate medical certificates-are important. If you need clarity on verifying absences, review your approach to medical certificates.

Whistleblowing And Protected Disclosures

Terminating an employee because they made a protected disclosure under applicable whistleblower laws can be a serious breach. If allegations involve fraud, bribery or other wrongdoing, take advice early before taking any action against the disclosing employee.

Other Red Flags

• Dismissing someone because they asked about their entitlements or queried rostering or pay.
• Ending employment immediately after an employee raises a bullying or safety complaint without investigating those concerns.
• Masking a prohibited reason behind a pretextual “performance” explanation where performance wasn’t previously raised or documented.

If any protected attribute or protected workplace right forms part of the reason (even one of several reasons), you could face a general protections claim. This is where detailed records and a defensible, well‑documented process really matter.

What Process Should Employers Follow Before Dismissal?

While the law doesn’t put a single “one‑size‑fits‑all” procedure on every employer, following a fair and consistent process is one of the best protections you have. A thoughtful process supports your decision and helps show that prohibited reasons played no part.

1) Clarify The Legitimate Reason

Identify the real, lawful reason for termination (e.g. genuine redundancy, sustained underperformance, serious misconduct). Separate it clearly from any protected attribute or workplace right. If the reason is capability or conduct, ensure you have evidence-not just impressions.

2) Investigate Concerns Properly

Where allegations are raised (e.g. misconduct), conduct a fair investigation, collect statements, and keep notes. In some cases, you may need to temporarily remove the employee from the workplace while you investigate; consider whether standing down pending investigation is appropriate and lawful in your circumstances.

3) Put Allegations To The Employee And Consider Their Response

Provide the employee with the allegations or performance concerns and the key evidence, and give them a genuine opportunity to respond. A practical way to do this is through a structured process using show cause letters and meetings.

4) Make A Decision Based On Evidence

Consider the response and all the material objectively. If termination remains appropriate, ensure your decision is supported by documented facts (not by any prohibited reason). If a warning or performance improvement plan is more suitable, document that and follow through consistently.

5) Provide Notice, Pay Correct Entitlements And Communicate Clearly

Observe contractual or statutory notice requirements. In some cases, you may choose payment in lieu of notice. Make sure final pays are accurate and on time, including outstanding wages, accrued annual leave, and any other applicable amounts; this is where a checklist for calculating final pay helps avoid mistakes.

Note: Some awards or enterprise agreements include specific process obligations, but many do not mandate “warning steps” in a strict sense. Even where no fixed steps apply, a fair process and good records can be decisive evidence if your decision is challenged.

If you’re unsure at any stage, having an employment lawyer sanity‑check your approach can save time and cost later.

Consequences, Time Limits And Where Claims Go

Getting this wrong can be expensive. Potential outcomes and risks include:

• Reinstatement: The employee may be ordered back into their role (less common, but possible).
• Compensation: Orders to compensate lost income; in general protections matters, additional damages may be available.
• Civil penalties: Courts can impose penalties for contraventions of general protections or other provisions, including against individuals who were involved in the decision.
• Reverse onus (general protections): You may need to prove that a prohibited reason was not a reason for the dismissal, which is a significant evidentiary burden if your documentation is weak.
• Reputational and team impacts: Disputes are time‑consuming and can harm culture and trust.

Time limits: For dismissals, applications must usually be lodged within 21 days of the dismissal taking effect. This short window applies to unfair dismissal and general protections dismissal applications, and there are strict rules about extensions. Don’t assume an issue has “gone away” just because a couple of weeks have passed.

Depending on the pathway, matters may be dealt with by the Fair Work Commission, federal courts or anti‑discrimination bodies. The best defence remains the same: a lawful reason, a fair process, and thorough records.

Documents And Policies That Reduce Your Risk

Strong contracts and clear policies set expectations and make it easier to act fairly and consistently. They also show that your decisions are grounded in documented standards, not prohibited reasons.

• Employment Contract: Sets out role, duties, performance expectations, notice, serious misconduct, and termination terms. A clear, tailored Employment Contract reduces ambiguity and helps you manage risk from day one.
• Workplace Policies/Staff Handbook: Explains conduct, performance, complaints, leave, discrimination and bullying standards, and investigation procedures. A practical Staff Handbook supports consistent, defensible decision‑making.
• Performance Management Records: Document meetings, feedback, targets, training, and outcomes. This evidence often makes or breaks a contested termination decision.
• Show Cause And Outcome Letters: Clearly communicate allegations, invite a response, and record final decisions. Using structured show cause letters helps ensure procedural fairness.
• Medical Evidence And RTW Processes: When illness or injury is relevant, ensure you request appropriate medical evidence and consider reasonable adjustments. Where needed, get assistance on medical clearance to return to work.
• Termination Letters And Final Pay: Confirm the lawful reason, last day, notice or payment in lieu, and entitlements owing. Cross‑check against your final pay calculations before issuing.

If you’re restructuring roles or making changes to terms, make sure your approach to changing employment contracts is lawful and consultative to lower the risk of disputes down the line. And if you’re ending employment during probation, the principles above still matter-review your obligations around terminating during probation before you act.

No template will fit every situation. If you’re dealing with complex facts (health issues, complaints, alleged misconduct, or overlapping protected attributes and performance issues), it’s prudent to speak with an employment lawyer before making a final decision.

Key Takeaways

• Unlawful dismissal is about prohibited reasons-such as discrimination, industrial activity, protected temporary illness absence within limits, and adverse action because of workplace rights-rather than the fairness of your process.
• Unfair dismissal looks at whether the decision was harsh, unjust or unreasonable; general protections claims focus on whether a prohibited reason played any role, and they involve a reverse onus on the employer.
• A careful process-investigation, show cause, a chance to respond, and clear reasoning-helps prove your decision was lawful and defensible.
• Time limits are short (usually 21 days from dismissal), and remedies can include compensation, penalties and reinstatement, so documentation is crucial.
• Get your foundations right with a tailored Employment Contract, robust workplace policies, and accurate termination and final pay steps to reduce risk.
• If protected attributes, medical issues or complaints are in the mix, it’s wise to get advice before you act to avoid unlawful dismissal risk.

If you’d like a consultation on managing terminations and avoiding unlawful dismissal risks in your business, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no‑obligations chat.