Wrongful Termination Laws in Australia: Employer’s Responsibilities

Letting a team member go is never an easy decision. Whether you’re running a small business or growing a larger team, employee termination can be complex - and stressful - for everyone involved. But did you know that if dismissal isn’t handled correctly, your business could face claims of wrongful termination? Australia’s legal landscape around dismissal is designed to protect both employers and employees, but the rules can be intricate and, sometimes, confusing.

Missteps around unfair or wrongful termination can quickly escalate into costly legal battles, reputational damage, and loss of trust with your team. Understanding your responsibilities as an employer is your best shield against unnecessary risk, and making sure you treat your people fairly means you’re building a resilient, compliant workplace from the start.

In this article, we’ll break down exactly what wrongful termination means in Australia, how it differs from unfair dismissal, and step you through your legal responsibilities. We’ll also highlight the key legal documents and best practices you should have in place - so you can confidently manage your team and stay focused on achieving your business goals.

What Is Wrongful Termination?

It’s common to hear terms like “unfair dismissal”, “wrongful dismissal”, and “wrongful termination” used interchangeably, but there are some important differences - and getting it wrong can lead to trouble for your business.

Wrongful termination (sometimes referred to as wrongful dismissal) occurs when an employer ends an employee’s contract in a way that breaches the employee’s contractual or statutory rights. Put simply, if you dismiss someone in a manner not allowed under their contract, or in breach of workplace laws, you’re potentially exposed to a wrongful termination claim.

Common examples include:

• Dismissing an employee without giving the notice period stated in their contract (unless serious misconduct applies).
• Terminating employment in breach of an award, enterprise agreement, or the National Employment Standards (NES).
• Failing to follow the correct procedure outlined in a contract or company policy for redundancy, performance management, or disciplinary action.

In contrast, unfair dismissal usually refers to a termination that is “harsh, unjust or unreasonable” under the Fair Work Act 2009. A wrongful termination may or may not be unfair in all circumstances, but both can leave your business vulnerable to legal action if not handled properly.

For more on unfair dismissal and the difference from wrongful termination, see our guide “Unfair Dismissal”.

How Do Wrongful Termination Claims Work in Australia?

Australia’s workplace laws are designed to provide clear safeguards for both employers and employees. The Fair Work Act 2009 (Cth), together with the National Employment Standards, sets out minimum employment entitlements and the grounds and process for ending employment.

If an employee believes they’ve been wrongfully terminated, they can bring a claim in one or more of the following ways:

• Through the Fair Work Commission (for unfair dismissal, or if the employer has breached the General Protections provisions).
• By lodging a breach of contract claim with a court if the dismissal breached their written employment agreement.
• By filing a claim for adverse action (if dismissed for a prohibited reason, such as discrimination or exercising a workplace right). For more insight, see “Adverse Action in the Workplace: A Guide for Australian Employers and Employees”.

Employees may be entitled to compensation, reinstatement, or other remedies. Importantly, the risk of a claim increases if proper process and documentation are not followed from the start.

What Are an Employer’s Responsibilities When Terminating Employment?

If you need to let an employee go, you have several key legal responsibilities. These don’t just protect your business against wrongful termination claims - they’re also good practice for building trust and transparency within your team.

1. Provide the Correct Notice

Under the National Employment Standards (NES), you must provide a minimum period of notice before ending an employee’s job, unless the person is being dismissed for serious misconduct. The required notice depends on the employee’s length of service and (sometimes) their age.

• Notice is typically specified in the employee's contract. If not, check the NES for the minimum required.
• You may choose to make a “payment in lieu of notice”, but this must be equivalent to what the employee would have earned if they’d worked out the notice period.

2. Follow Procedural Fairness

Termination must be handled in a procedurally fair way. This means:

• Informing the employee of the reasons for possible dismissal (and providing an opportunity to respond).
• Allowing a support person to be present in meetings (if requested).
• Considering alternative actions (such as redeployment or further training) before making a final decision, especially in redundancy or performance-based terminations.

If you skip or rush these steps, your process could be called into question - even if you had a valid reason for terminating employment.

3. Check Awards and Enterprise Agreements

Many employees are covered by a Modern Award or Enterprise Agreement that sets out extra obligations for dismissal, redundancy, and notice. Always check the relevant Award or Agreement and follow any extra steps required.

If you’re unsure, our award compliance experts can help you review your obligations.

4. Avoid Prohibited Grounds for Termination

Certain reasons for dismissal are explicitly unlawful. It is illegal to terminate someone on the basis of:

• Discrimination (race, sex, age, disability, religion, etc.).
• Temporary absence due to illness or injury.
• Parental leave or other protected activities.
• Exercising workplace rights (like making a complaint or joining a union).

Even if you think you have another valid reason, if the employee believes their dismissal was connected to a prohibited ground, they can make a claim for unlawful or adverse action.

Read more about workplace discrimination in our article “A Guide to Anti-Discrimination Laws for Business.”

5. Final Pay and Entitlements

When employment ends, you must pay out all outstanding entitlements. This generally includes:

• All wages up to the final day of employment.
• Unused annual leave (and, in some cases, long service leave).
• Any redundancy pay, if applicable.
• Other benefits (commissions, bonuses, allowances) as per the contract or company policy.

Failure to pay what’s owed can result in legal claims for underpayment or breach of contract.

If you’re unsure exactly what you owe, or whether redundancy applies, our guide “Redundancy Entitlements in Australia” is a good place to start.

What Are the Most Common Triggers for Wrongful Termination Claims?

Getting dismissal right requires more than good intentions. Here are some situations where many Australian businesses get caught out:

• Failure to provide minimum notice: Even with a valid reason, not giving proper written notice or pay in lieu puts you at risk.
• Not following your own procedures: If your contract or employee handbook sets out a required process for performance management, disciplinary steps, or redundancy, you need to follow it every time.
• Incorrectly classifying redundancy: Genuine redundancy is very specific under Australian law - you can’t use it as a “quick fix” for a performance issue.
• Discriminatory basis for dismissal: Even subtle or unintentional discrimination (such as letting a pregnant employee go) is unlawful, regardless of how you frame it.
• Withholding final pay or entitlements: Delayed or incomplete payment can open the door to a separate breach of contract claim.

What Legal Documents and Processes Should Employers Have in Place?

Being proactive is always better than scrambling after a dispute arises. Here are the critical legal documents and workplace policies that help employers in Australia avoid wrongful termination traps:

• Employment Agreement: A clear, well-drafted employment contract sets out notice periods, grounds for termination, and disciplinary procedures. Tailoring contracts to each role is best practice - avoid “one size fits all” templates that might miss key terms.
• Workplace Policies: These should include procedures for performance management, disciplinary actions, redundancy, anti-discrimination, and workplace bullying. A detailed workplace handbook will help your team know what’s expected.
• Termination Letter or Deed: Provide a formal notice of termination (or a deed of release in some cases). This confirms the date, reason, and any entitlements owed, helping prevent disputes over “what was said”.
• Redundancy or Restructuring Documents: If making roles redundant, have proper redundancy documentation and processes mapped out - including consultation and alternatives considered.
• Performance Management Records: Keep thorough notes of meetings, performance reviews, and opportunities given to improve. Having a good process in place makes it hard for a claim of procedural unfairness to stick.

Having these documents professionally prepared not only protects your business but provides comfort and clarity for your employees at every stage of their journey with you.

Are There Laws I Need to Follow When Terminating Employment?

Absolutely. If you employ staff in Australia, you’re required to comply with a range of federal, state, and territory workplace laws. Here’s a quick breakdown:

• Fair Work Act 2009 (Cth): Covers unfair dismissal, minimum conditions, and the procedural rights of employees. The Fair Work Act is the foundation of most employment law in Australia.
• Modern Awards & Enterprise Agreements: May set extra notice periods, disciplinary processes, and severance entitlements.
• National Employment Standards (NES): Includes minimum notice, redundancy, and other essential rights for employees.
• Anti-Discrimination Laws: Both federal and state/territory legislation protect employees from being terminated for discriminatory reasons (race, sex, age, disability, religion, etc.).
• Other Relevant Workplace Laws: These might touch on work health and safety obligations, General Protections in the Fair Work Act, and protections for whistleblowers.

Laws can change quickly, and new legal updates (such as the recent Fair Work “Closing Loopholes” legislation) may affect your business. Staying up to date and seeking regular advice is highly recommended.

What Steps Can I Take to Prevent Wrongful Termination Claims?

While termination can never be risk-free, these proactive steps can drastically reduce the likelihood of facing a wrongful or unfair termination claim:

• Document all performance and disciplinary conversations - use clear written records (meeting notes, warning letters) to build a factual timeline.
• Consult all relevant awards, agreements, and handbooks before acting - don’t assume you remember the details correctly.
• Be consistent in your process - treat all employees equally and apply company policies each time.
• Give employees an opportunity to respond to reasons for dismissal, and consider their explanations in good faith.
• Communicate clearly and respectfully before, during, and after termination. Ambiguity or surprises increase risk.
• Seek legal advice before dismissing employees in tricky situations - such as managing long-term sickness, pregnancy, or union involvement. Our employment law team can help you navigate tough scenarios.

Can I Terminate Employees During Probation Without Risk?

It’s a common myth that the probation period is a “risk-free” zone for termination. While employees on probation generally cannot claim unfair dismissal under the Fair Work Act until they have completed the minimum employment period (usually 6 months, or 12 months for small businesses), you must still comply with anti-discrimination laws, provide contractual notice, and avoid prohibited grounds for dismissal.

For more on managing probation periods, see our article “Navigating Probation Periods in Australia”.

What About Contractors and Casuals - Do Wrongful Termination Laws Apply?

Contractors and casual employees don’t automatically enjoy the same dismissal protections as permanent staff. However, you still need to honour the terms of their agreement, and if the courts consider a contractor was actually an employee in substance (not just on paper), you could still face claims for breach of contract or even unfair dismissal.

Getting the casual or contractor relationship right is essential - if you’re unsure, check out our guide “Difference Between Employee and Contractor”.

What Should I Do If Faced With a Wrongful Termination Claim?

If an employee makes a formal claim or suggests legal action, don’t panic - but don’t delay, either. Here’s how you should respond:

• Seek legal advice as early as possible to understand your risks and options. Our employment law specialists have experience in dispute management and negotiation.
• Review all documentation (contracts, pay records, correspondence, policies).
• Attempt to resolve matters at the earliest possible stage - sometimes a mediated conversation or written explanation is all it takes to defuse a claim.
• Take part in Fair Work Commission processes if called upon and follow all required timelines. Missing a deadline can mean automatic loss.
• Take steps to prevent future occurrences by reviewing and updating internal processes after the matter is closed.

Key Takeaways

• Wrongful termination happens when you dismiss an employee in breach of their contract or Australian workplace law.
• Your main legal responsibilities include providing correct notice, following fair procedures, and paying all entitlements.
• Prohibition on discriminatory dismissals and procedural fairness are critical - always check relevant Awards or Agreements.
• Clear employment contracts, workplace policies, and performance management records are your best defence.
• Probation and contractor periods don’t exempt you from all risks - get advice before acting in uncertain situations.
• If faced with a claim, act quickly, review your processes, and seek professional help to minimise fallout.
• Regular reviews of your employment practices and documentation help future-proof your business against disputes.

If you’d like a consultation about wrongful termination laws, or to review your employment agreements and policies for compliance, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.