Reading time: 6 minutes

Surprisingly, almost half of the Fair Work Commission applications in the reporting year of 2019-2022 were for unfair dismissal claims. Unfair dismissal occurs when you dismiss an employee in a harsh, unjustifiable or unreasonable manner. If your employee believes that their dismissal was unfair, they can lodge a claim with the Fair Work Commission. Although, they must do so within 21 days following their dismissal. This article outlines some key considerations that small business owners should make and provides advice for employers on preventing unfair dismissals.

Employment Essentials Factsheet

As an employer, understand your essential employment obligations with this free LegalVision factsheet.

Download Now

Unfair Dismissal Basics

The Fair Work Commission (FWC) is likely to find that an employee’s dismissal was unfair where:

  • you terminate their employment in a way that is harsh, unjust or unreasonable;
  • the dismissal was not a case of genuine redundancy; or
  • in the instance where you are a small business, you did not terminate your employee according to the Small Business Fair Dismissal Code.

There is no clear cut definition of what constitutes ‘harsh, unjust or unreasonable’. Although, under the Fair Work Act, the Commission will look at all of the following indicators:

  • whether there was a valid reason for dismissing your employee concerning their workplace conduct;
  • if you made this reason clear to your employee;
  • if you allowed your employee to respond;
  • whether you unreasonably refuse your employee’s request for a support person; and
  • whether you first warn your employee about their unsatisfactory performance, if you are dismissing them due to their performance.

Your employee can make an unfair dismissal claim if they:

  • complete the minimum employment period, meaning they work in your business for at least 6 months, or 12 months (if you are a small business employer);
  • fall under a modern award or an enterprise agreement; and
  • earn less than the maximum high-income threshold, which is $158,500 from 1 July 2021 onwards.

A small business is any business with less than 15 employees at dismissal. A headcount of all the full-time and part-time employees can determine your business’s total number of employees. Casual employees are not generally part of this headcount unless they are regular and systematic casual employees.

Small Businesses and Unfair Dismissal Claims

If you are a small business owner, you should know the Small Business Fair Dismissal Code (the Code). If a small business employer follows the Code during the process of dismissal, the dismissal is likely to have been fair. Moreover, under the Code, it is fair for a small business employer to dismiss an employee without notice or warning. Although, this is only justifiable when you believe on reasonable grounds that the employee’s conduct is sufficiently serious.

Serious misconduct includes:

For the dismissal to be fair, it is good (although not essential) to report an allegation of theft, fraud or violence to the police. However, you should base this report on reasonable grounds. This means that you must conduct a thorough investigation into the instance of serious misconduct.

Have a Valid Reason for the Dismissal

In cases other than serious misconduct, the small business employer must give the employee a reason why they are at risk of facing dismissal. This reason must be valid regarding the employee’s conduct or capacity to fulfil the responsibilities and obligations that align with their job.  

Warn Your Employee

When it comes to dismissing your employee, you should give them a fair warning. Moreover, you can do this verbally. However, it is ideal to record this in writing. Doing so will ensure that you have clear records of any procedurally fair steps you may take during dismissal. It is essential that the warning is in writing and clearly outlines that your employee is not doing their job correctly. Additionally, you must make it clear that you will dismiss them if there is no improvement in their conduct.

Opportunity to Improve

Furthermore, once you warn your employee, you should provide them with ample opportunity to improve their performance or conduct. This means that you give them a reasonable chance to rectify the problem. When it comes to improving their workplace performance, this might mean that you need to provide your employee with additional training and support.

Opportunity to Respond

If your employee does not improve their performance or conduct, you may now be in a position to terminate their employment. However, before you do so, you should ensure that you inform your employee of the reasons why they are facing dismissal. Furthermore, it is crucial to allow them to respond before you confirm the outcome.

Seek Legal Advice

There can be a lot of ambiguity when it comes to unfair dismissals. If you wish to dismiss an employee, it will help to seek legal advice early on. An experienced employment lawyer can take the guesswork out of dismissal by advising you on handling your employee’s specific circumstances.

Key Takeaways 

Unfair dismissal is when you dismiss an employee in a harsh, unjustifiable or unreasonable manner. If you own a small business (have 15 or fewer employees), you can dismiss an employee without warning if they commit serious misconduct. Serious misconduct includes:

  • theft; 
  • violence; 
  • fraud; or 
  • a serious breach of workplace health and safety procedures. 

If you dismiss an employee for reasons other than serious misconduct, you should:

  • provide a valid reason regarding your employee’s capacity and conduct in the workplace; 
  • warn your employee that they risk facing dismissal if they dont improve;
  • allow them to improve; 
  • allow them to respond before the final decision to terminate their employment; and
  • seek legal advice. 

If you need help with an unfair dismissal claim, our experienced employment lawyers can assist as part of our LegalVision membership. You will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. Call us today on 1300 544 755 or visit our membership page.

Frequently Asked Questions

What is genuine redundancy? 

A genuine redundancy is where you no longer need your employee’s job to be performed by anyone.

What is the Small Business Fair Dismissal Code?

The Small Business Fair Dismissal Code is a set of rules to help small businesses ensure their employee dismissals are fair. The Code states that you can dismiss an employee without warning. However, you must have reasonable grounds to believe that your employee has committed serious misconduct such as theft, violence, fraud and serious breaches of occupational health and safety procedures. 


New Kid on the Blockchain: Understanding the Proposed Laws for Crypto, NFT and Blockchain Projects

Wednesday 25 May | 10:00 - 10:45am

If you operate in the crypto space, ensure you understand the Federal Government’s proposed licensing and regulation changes. Register today for our free webinar.
Register Now

How to Expand Your Business Into a Franchise

Thursday 26 May | 11:00 - 11:45am

Drive rapid growth in your business by turning it into a franchise. To learn how, join our free webinar. Register today.
Register Now

Day in Court: What Happens When Your Business Goes to Court

Thursday 2 June | 11:00 - 11:45am

If your business is going to court, then you need to understand the process. Our free webinar will explain.
Register Now

How to Manage a Construction Dispute

Thursday 9 June | 11:00 - 11:45am

Protect your construction firm from disputes. To understand how, join our free webinar.
Register Now

Startup Financing: Venture Debt 101

Thursday 23 June | 11:00 - 11:45am

Learn how venture debt can help take your startup to the next level. Register for our free webinar today.
Register Now

About LegalVision: LegalVision is a commercial law firm that provides businesses with affordable and ongoing legal assistance through our industry-first membership.

By becoming a member, you'll have an experienced legal team ready to answer your questions, draft and review your contracts, and resolve your disputes. All the legal assistance your business needs, for a low monthly fee.

Learn more about our membership

Need Legal Help? Submit an Enquiry

If you would like to get in touch with our team and learn more about how our membership can help your business, fill out the form below.

Our Awards

  • 2020 Innovation Award 2020 Excellence in Technology & Innovation Finalist – Australasian Law Awards
  • 2020 Employer of Choice Award 2020 Employer of Choice Winner – Australasian Lawyer
  • 2020 Financial Times Award 2021 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review
  • 2021 Law Firm of the Year Award 2021 Law Firm of the Year - Australasian Law Awards
  • 2022 Law Firm of the Year Winner 2022 Law Firm of the Year - Australasian Law Awards