Avoiding the Pitfalls of Unfair Dismissal

The June 2025 edition of BAL Lawyer’s HR Breakfast Club, led by Special Counsel Ash Borg, delved into strategies for employers to manage the risks associated with unfair dismissal claims. The session provided a refresher of the legislative provisions and recent case law relating to unfair dismissal, along with practical guidance on addressing legal and procedural considerations in workplace decision-making. Here are the key takeaways.

Current Provisions on Unfair Dismissal

Ash discussed the legislative provisions on unfair dismissal in the Fair Work Act 2009 (FW Act), noting how section 381 sets out the objectives of the unfair dismissal legislative framework. These include balancing the needs of businesses and employees, establishing quick and flexible procedures, and emphasising reinstatement as the primary remedy. He also outlined the criteria for unfair dismissal under section 385 of the FW Act as a dismissal that the Fair Work Commission (FWC) is satisfied  is harsh, unjust, or unreasonable, and not a case of genuine redundancy, or not consistent with the Small Business Fair Dismissal Code.

Who is protected?

• Ash outlined the eligibility criteria for unfair dismissal protection under section 382 of the FW Act. To be eligible, an employee must: Be employed by a national system employer;
• Have completed the minimum employment period (six months for most employers, or 12 months for small business employers);
• Earn less than the high-income threshold, unless covered by an award or enterprise agreement, and
• For casual employees, have worked on a regular and systematic basis before dismissal with a reasonable expectation of ongoing employment.

What is the High-Income Threshold?

Ash noted that the high-income threshold, currently set at $175,000 (and increasing to $183,100 from 1 July 2025), limits eligibility for unfair dismissal protections. Employees earning above this threshold are only covered if they are subject to a modern award or enterprise agreement. He referred to the case of Clements-Kupsch v Saxon Energy Services Australia Pty Ltd [2015] FWC 4081 as an example where an employee earning above the threshold remained covered due to award coverage. Ash also explained that under section 323 of the FW Act, the threshold calculation includes an employee’s wage or salary, salary sacrifice amounts, and the agreed money value of non-monetary benefits. It excludes bonuses, overtime (with some exceptions), reimbursements, commissions, and superannuation.

What Makes a Dismissal Unfair?

Ash explained that section 387 of the FW Act provides specific criteria for determining whether a dismissal is harsh, unjust, or unreasonable. Relevant considerations include:

• Whether there was a valid reason related to the employee’s conduct or capacity;
• Whether the employee was notified of that reason and afforded an opportunity to respond to any allegations and proposed termination;
• Whether procedural fairness was observed, including warnings and a support person present during dismissal discussions.

Ash noted that valid reasons for dismissal commonly include serious misconduct (such as theft, fraud, or safety breaches), genuine redundancy, or the exercise of a contractual right to terminate employment. Under Fair Work Regulation 1.07, serious misconduct is defined as wilful or deliberate behaviour that is inconsistent with the continuation of the employment contract.

How Do Unfair Dismissal Claims Work?

Ash walked through the steps that should be taken when dealing with unfair dismissal claims:

• Step 1: The employee must lodge an application within 21 days of their dismissal using the FWC Form F2, accompanied by a filing fee (presently $87.20 but subject to change in July 2025).
• Step 2: The employer must submit a response FWC Form F3 within 7 days.
• Step 3: The matter proceeds to conciliation before a member of the FWC Unfair Dismissals Team, where the parties are encouraged to resolve the dispute informally, often through settlement agreements such as a Deed of Release.
• Step 4: If unresolved, the matter proceeds to arbitration, where the Commission will make a binding decision (subject to any appeal rights), with potential remedies including reinstatement or compensation.

Ash discussed common jurisdictional objections that employers may raise before the conciliation stage, including where:

• The applicant is not an employee;
• The applicant has not completed the minimum employment period;
• The applicant exceeds the high-income threshold without coverage by an award or enterprise agreement; or
• The dismissal was conducted in accordance with the Small Business Fair Dismissal Code.

“No dismissal” objections may also arise in cases involving voluntary resignation or genuine redundancy. Ash highlighted that the primary remedies available are reinstatement and compensation. Compensation in lieu of reinstatement is capped at the lower of 26 weeks’ pay or half the high-income threshold. In practice, awards of compensation alone are typically modest, with a median outcome of 5–7 weeks’ pay. Fewer than 0.4% of applicants receive the maximum compensation limit.

While reinstatement is technically the primary remedy, compensation is more commonly awarded. Only a small percentage of successful unfair dismissal claims result in reinstatement.

Employer Pitfalls

Typical missteps include:

• No prior warnings;
• Poor or no investigation;
• Lack of valid reason (e.g. personality clashes);
• Failure to follow procedural fairness, including affording opportunities to respond; and
• Inadequate consultation during redundancy.

Ash stressed the importance of:

• Documenting performance issues;
• Conducting fair investigations;
• Consulting employees about redundancy and proper consideration of redeployment; and
• Training managers in compliance.

BAL Lawyers provides advice and legal representation in investigations, disciplinary and unfair dismissal matters for both employers and employees.

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If you are an HR professional and would like to attend our future HR Breakfast Club forums, please visit our monthly forum page and register to attend.

If you have any questions or queries about the information in this summary, or if you are experiencing any issues and need advice, please contact the BAL Lawyers Employment & Investigations team on 02 6274 0999.