Australia’s unfair dismissal regime is set out in Part 3-2 of the Fair Work Act 2009. An employee who is dismissed in a manner that is harsh, unjust, or unreasonable can apply to the Fair Work Commission for a remedy — including reinstatement or compensation. The application must be lodged within 21 days of the dismissal taking effect. Not all employees are eligible — there are minimum employment periods (6 months for businesses with 10+ employees, 12 months for small businesses) and income thresholds (as of 1 July 2025, the high-income threshold is $175,000 per year). Small businesses (fewer than 15 employees) are subject to the Small Business Fair Dismissal Code, which provides a simplified framework.
This guide covers eligibility, the lodgement deadline, the fairness assessment, remedies, and the small business code.
Key takeaways
- Unfair dismissal claims are governed by Part 3-2 of the Fair Work Act 2009.
- An employee must have completed a minimum employment period — 6 months (10+ employees) or 12 months (fewer than 15 employees).
- The employee must lodge the application within 21 days of the dismissal — this is a strict deadline.
- The dismissal must be harsh, unjust, or unreasonable — the Fair Work Commission considers a range of factors.
- The high-income threshold (as of 1 July 2025: $175,000) excludes high-earning employees from unfair dismissal claims — unless covered by an award or enterprise agreement.
- Remedies include reinstatement (the primary remedy) and compensation (capped at 26 weeks’ pay).
Eligibility
Not every dismissed employee can bring an unfair dismissal claim. The employee must meet three eligibility requirements:
1. Minimum employment period
Under s.383, the employee must have completed a minimum employment period:
| Employer size | Minimum employment period |
|---|---|
| Fewer than 15 employees (small business) | 12 months |
| 15 or more employees | 6 months |
The period is calculated from the start of employment and includes periods of casual employment where the employee had a reasonable expectation of continuing employment on a regular and systematic basis.
2. Income threshold
The employee’s annual income must not exceed the high-income threshold — as of 1 July 2025, this is $175,000 per year (excluding superannuation). An employee who earns above this threshold cannot bring an unfair dismissal claim unless they are covered by a modern award or enterprise agreement.
The threshold is adjusted annually by the Fair Work Commission.
3. Not a casual employee (with exceptions)
A casual employee is generally not eligible for unfair dismissal unless:
- They were employed on a regular and systematic basis.
- They had a reasonable expectation of continuing employment.
- They have completed the minimum employment period.
This exception was introduced to protect long-term casuals who, despite their classification, have the characteristics of ongoing employment.
The 21-day lodgement deadline
The application must be lodged within 21 calendar days of the dismissal taking effect — s.394(2). This is a strict limitation period. If the employee misses the deadline, the Fair Work Commission can only extend it in exceptional circumstances.
The 21-day period runs from the day after the dismissal takes effect. If the dismissal takes effect on a Friday, the 21 days run from the following Monday (excluding public holidays and weekends for the purposes of the lodgement).
The fairness assessment
Under s.387, the Fair Work Commission must consider the following factors in determining whether the dismissal was harsh, unjust, or unreasonable:
| Factor | What the Commission considers |
|---|---|
| Valid reason | Was there a valid reason for the dismissal related to the employee’s capacity or conduct? |
| Notification | Was the employee notified of the reason for the dismissal? |
| Opportunity to respond | Was the employee given an opportunity to respond to the reason? |
| Support person | Did the employee have a support person during the discussion? |
| Unsatisfactory performance | If the dismissal was for unsatisfactory performance, was the employee warned? |
| Size of the employer | Did the size of the employer affect the procedures followed? |
| Absence of dedicated HR | Did the absence of dedicated HR staff affect the procedures? |
| Any other matters | Any other matters the Commission considers relevant |
The Commission looks at the substance of the process — not just the form. A technically correct process that was substantively unfair can still be found to be a harsh, unjust, or unreasonable dismissal.
Remedies
Reinstatement
Under s.391, the primary remedy is reinstatement — the employee is restored to their position or a comparable position. Reinstatement includes:
- Continuity of employment
- Continuity of entitlements (pay, leave, superannuation)
Reinstatement is the default remedy unless the Commission considers it inappropriate.
Compensation
If reinstatement is not appropriate, the Commission can order compensation — s.392. Compensation is:
- Capped at 26 weeks’ pay (based on the amount earned in the 26 weeks before dismissal).
- Reduced to account for the employee’s misconduct (if any).
- Reduced to account for the employee’s failure to mitigate loss.
- Adjusted for the employee’s earnings since the dismissal.
Compensation is not a punishment — it is designed to compensate the employee for the loss caused by the unfair dismissal.
The Small Business Fair Dismissal Code
Under s.388, the Small Business Fair Dismissal Code applies to employers with fewer than 15 employees. The Code provides a simplified process:
| Step | Requirement |
|---|---|
| First warning | The employer warns the employee that dismissal is possible if the conduct continues. |
| Second warning | The employer gives a second warning. |
| Dismissal | The employer dismisses the employee. |
If the employer follows the Code, the dismissal is not unfair. The Code is designed to reduce the procedural burden on small businesses.
Common pitfalls
1. Missing the 21-day deadline
The 21-day lodgement deadline is strict. An employee who misses it can only extend it in exceptional circumstances — which are rare.
2. Not following the Small Business Code
Small businesses that do not follow the Code — for example, by dismissing without warning — lose the protection of the simplified process.
3. Dismissing without a valid reason
A dismissal without a valid reason — or where the reason is not related to capacity or conduct — will be found to be harsh, unjust, or unreasonable.
4. Not allowing the employee to respond
Failing to give the employee an opportunity to respond to the reason for the dismissal is a procedural flaw that the Commission will weigh heavily.
Putting it into practice
Five steps to manage unfair dismissal risk:
- Check eligibility — before dismissing, verify the employee has completed the minimum employment period and is below the income threshold.
- Follow the process — for small businesses, follow the Small Business Fair Dismissal Code; for larger businesses, follow a fair process with warnings and the opportunity to respond.
- Document everything — keep records of warnings, discussions, and the reasons for dismissal.
- Meet the deadline — if the employee lodges a claim, engage with the Fair Work Commission within the timeframes.
- Consider reinstatement — if the Commission finds the dismissal unfair, the primary remedy is reinstatement — be prepared for this outcome.
A leave management system that tracks warnings, documents the dismissal process, and manages the 21-day lodgement deadline keeps the employer compliant with the unfair dismissal framework.
Sources
- Fair Work Act 2009, Part 3-2 (unfair dismissal)
- Fair Work Commission — Unfair Dismissal (guidance and forms)
- Fair Work Ombudsman — Unfair Dismissal (eligibility and process)
- High Income Threshold (current threshold)
This article is general information, not legal advice. Unfair dismissal law is complex and depends on the specific circumstances of the dismissal — consult the Fair Work Commission or an employment lawyer for specific situations.