Unlawful Firing in Australia: What Employers Need to Know

Ending someone’s employment is one of the toughest parts of running a business. It’s also an area where small mistakes can create big legal and financial risks.

If a dismissal is handled the wrong way, it could be unlawful, trigger general protections or discrimination claims, or be judged “unfair” by the Fair Work Commission.

This guide breaks down what “unlawful firing” actually means in Australia, how it differs from unfair dismissal, when a termination can be lawful, and a step-by-step process to reduce risk and handle dismissals confidently.

What Does “Unlawful Firing” Mean For Employers?

“Unlawful firing” is an umbrella term business owners often use when a dismissal breaches Australian employment laws. Legally, the most common risks are:

• General protections (adverse action): You cannot dismiss an employee because they exercised a workplace right (e.g. made a complaint, requested leave, joined a union), due to their industrial activity, or for discriminatory reasons (e.g. sex, race, age, disability, pregnancy, family responsibilities, religion).
• Discrimination: Dismissing someone for a protected attribute can lead to claims under federal or state anti-discrimination laws.
• Prohibited reasons: For example, dismissing someone for taking a temporary absence due to illness or injury, or for taking parental leave.
• Whistleblowing: Dismissing an employee in retaliation for protected whistleblowing can also lead to serious penalties.

These risks sit alongside “unfair dismissal,” which is a separate concept focused on whether the firing was harsh, unjust or unreasonable. Both areas can apply at once.

Unlawful Vs Unfair Dismissal: What’s The Difference?

It’s easy to mix up these terms. In short:

• Unlawful (general protections or discrimination) looks at why you dismissed the employee. If the reason is prohibited, the dismissal may be unlawful even if your process was careful and respectful.
• Unfair dismissal looks at how you dismissed the employee and whether it was harsh, unjust or unreasonable. The Fair Work Commission assesses factors such as warning, opportunity to respond, and procedural fairness (see the section 387 factors under the Fair Work Act).

You can avoid many problems by ensuring both a lawful reason and a fair process.

When Is Termination Lawful In Australia?

There’s no single “magic reason” that makes every termination safe, but common lawful grounds include:

1) Performance Or Conduct

Where performance is below expectations or conduct breaches policy, dismissal can be lawful if you have clear evidence, reasonable expectations, and a fair process (warnings and a chance to respond). Avoid dismissing for reasons connected to a protected attribute or workplace right.

2) Serious Misconduct

Examples include theft, fraud, violence, serious safety breaches, or gross insubordination. Summary dismissal (without notice) can be lawful for serious misconduct - but investigate, document your findings, and keep procedural fairness in mind. If you need time to investigate, consider whether a short suspension on pay or standing down pending investigation is appropriate under your circumstances.

3) Genuine Redundancy

A role becomes genuinely redundant when it’s no longer required to be performed by anyone due to changes in operational requirements, and the employer has complied with consultation obligations under any applicable award or enterprise agreement. This is different from performance or conduct dismissals. Redundancies must be genuine - you can’t dress up a performance issue as a redundancy.

4) Probationary Periods

Dismissing during probation can still be risky if the reason is unlawful (e.g. discrimination) or if required notice is not provided. A short, clear paper trail helps. For a deeper look at this scenario, see termination during probation.

5) Capacity (Ill Health Or Injury)

Terminating due to capacity must be handled with care. Avoid dismissing someone for taking a temporary absence due to illness or injury, and seek medical information (with consent) before making any decision. Consider reasonable adjustments and your obligations under discrimination laws.

For all dismissal types, remember that awards, enterprise agreements and contracts can add extra requirements. The Small Business Fair Dismissal Code may also apply to eligible small businesses - but it’s not a free pass. You still need a valid reason and decent process.

A Fair And Lawful Termination Process: Step By Step

No two situations are identical, but the following framework will help you manage risk and act fairly.

Step 1: Identify The Real Reason (And Check It’s Lawful)

• Write down the main concern (e.g. repeated lateness, quality issues, a specific incident, business restructure).
• Check that the reason is not connected to a protected attribute or a workplace right (complaint, union role, leave entitlements, etc.).
• Confirm any award or enterprise agreement that applies and note relevant procedures.

Step 2: Gather Evidence

• Collect performance records, emails, customer complaints, or witness statements as relevant.
• If it’s a serious allegation, conduct a reasonable investigation. Keep the scope proportionate and maintain confidentiality.

Step 3: Put Concerns To The Employee

• Invite the employee to a meeting, explain the concerns, and allow a support person if requested.
• Give them a chance to respond. This can be in the meeting and/or in writing after the meeting.
• For formal allegations, a show cause letter outlines the issues, potential outcomes (including dismissal), and invites a written response by a set date.

Step 4: Consider Responses And Decide

• Assess the employee’s explanations and any new information objectively.
• Decide on an outcome: no action, training, a warning, a final warning, or termination.
• For performance issues, document a performance management process and consider whether the employee had enough time and support to improve.

Step 5: Communicate The Outcome

• Hold a final meeting. If dismissing, clearly explain the reason, the effective date, and next steps.
• Follow up in writing with a termination letter confirming notice arrangements, final pay, return of property, and any post-employment obligations.

Step 6: Finalise Notice, Pay And Records

• Pay the correct notice period or provide payment in lieu of notice if applicable.
• Calculate leave and other entitlements accurately and pay them on time.
• Update payroll, revoke system access, and store your records securely.

Tip: Having clear, current termination documents (e.g. letter templates, checklists) reduces errors and helps you keep to a consistent, fair process.

Notice, Final Pay And Documentation

Even when the reason for dismissal is lawful, many claims arise from procedural slip-ups. These are the key admin areas to get right.

Minimum Notice

Most employees are entitled to minimum notice or payment in lieu based on their length of service, unless they’re dismissed for serious misconduct. Double‑check any contractual terms and applicable award or enterprise agreement. For a quick refresher on timeframes, see employment notice periods.

Payment In Lieu Of Notice

Sometimes it’s cleaner to make a lump sum payment instead of having the employee work out their notice. If you go down this route, ensure you calculate it properly and document it in the termination letter. This guide to payment in lieu of notice outlines common pitfalls for employers.

Final Pay

Final pay usually includes outstanding wages, accrued annual leave, and other entitlements. Some awards or agreements also require payment of unused rostered days off or allowances. Keep a clear audit trail of how you calculated the amounts and when they were paid.

The Termination Letter

A well-drafted termination letter should confirm the dismissal date, the reason (briefly and factually), notice arrangements, payments, return of property, and any ongoing obligations (e.g. confidentiality). Using a consistent template across the business helps keep things accurate and fair.

Record‑Keeping

Keep your notes, evidence, letters, and calculations securely. If a claim is made, these records will be critical in showing you had a valid reason and a fair process.

Common Scenarios

Below are a few high‑risk scenarios and practical tips.

Probation

Probation can simplify termination, but it is not a shield against unlawful reasons (e.g. discrimination). Provide correct notice, keep your documentation tight, and refer to your letter of offer and contract. For more, see termination during probation.

Misconduct Allegations

A quick but fair investigation is essential. Where appropriate, consider a short paid suspension or lawful stand down while you gather facts. The guidance on standing down pending investigation sets out key considerations for employers.

Underperformance

Set clear expectations, provide feedback, offer support (training, coaching), and give reasonable time to improve. A documented performance management process and measured warnings go a long way in demonstrating fairness.

Redundancy

Ensure the role is genuinely no longer required, consult as required by any applicable award or agreement, consider redeployment, and pay any redundancy entitlements where applicable. Don’t confuse redundancy with performance termination - mixing the two is a common source of claims.

Prevention: Set Yourself Up For Success

Many dismissal problems start long before termination day. Preventative steps include:

• Clear contracts and policies: Use current, plain-English agreements and policies that reflect how your business actually operates. That includes a well‑drafted Employment Contract and any key workplace policies (e.g. performance, conduct, leave, privacy, social media).
• Induction and training: Make sure new starters understand expectations. Provide and explain policies early.
• Consistent documentation: Keep notes of performance discussions, feedback, and any warnings. Consistency helps you avoid “surprise” terminations.
• Early intervention: Address issues when they arise. Early, constructive feedback often prevents termination altogether.
• Use the right templates: Keep a tidy toolkit - invite letters, warning letters, a show cause letter, termination letter, and a handover checklist. Sprintlaw’s termination documents can help you put this in place quickly.

Small Business: Extra Notes

If you’re a small business employer, the Small Business Fair Dismissal Code may be relevant. It recognises that smaller operators might not have the same HR resources, but you should still have a valid reason and follow a sensible process.

In practice, that means documenting your concerns, giving warnings for performance issues (unless it’s serious misconduct), and keeping straightforward, factual records of what you did and why you did it.

Common Pitfalls To Avoid

• Firing “on the spot” without facts: Even for serious allegations, make reasonable inquiries first.
• Confusing redundancy with performance: If the real issue is performance, don’t label it a redundancy.
• Retaliation after a complaint: Adverse action after a worker complains about safety, pay, or bullying is high‑risk.
• Missing notice rules: Always check the correct notice (or calculate a lawful payment in lieu). The guide to employment notice periods is a handy reference.
• Poor paperwork: Incomplete letters, missing payslips, or no file notes make defending a claim much harder.

Key Takeaways

• Unlawful firing generally refers to dismissals for prohibited reasons (e.g. discrimination or adverse action) and sits alongside unfair dismissal risk based on process and fairness.
• Lawful terminations usually fall into performance/conduct, serious misconduct, genuine redundancy, or capacity - but you must ensure the reason isn’t connected to protected attributes or rights.
• A fair, step‑by‑step process (clear concerns, evidence, chance to respond, reasoned decision, accurate notice and final pay) significantly reduces risk.
• Get the admin right: notice or payment in lieu of notice, correct entitlements, a clear termination letter, and good records.
• Invest in prevention: solid contracts and policies, consistent documentation, and a practical performance management process make difficult decisions easier and safer.
• If you’re unsure, it’s best to get tailored advice before you terminate - a short call now can prevent an expensive claim later.

If you’d like a consultation on handling unlawful firing risks and setting up a fair termination process, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no‑obligations chat.