Unfair dismissal 

Unfair dismissal is one of the most heavily litigated areas of Australian workplace law, and one of the most frequently misunderstood by students who arrive with common law contract concepts and try to force the statutory scheme into them. It is important to see it, from the outset, as its own creature.

A statutory remedy, not a common law claim

At common law, dismissing an employee in breach of contract — without proper notice, or during a fixed term, for example — gives rise to a claim for wrongful dismissal, a straightforward damages claim for breach of contract, generally limited to what the employee would have earned over the notice period or remaining term. Common law wrongful dismissal does not ask whether the dismissal was fair; it asks only whether the contract was performed according to its terms.

Unfair dismissal is different in kind. It is a creation of the Fair Work Act 2009 (Cth), administered by the Fair Work Commission, and it asks a different question entirely: not whether the employer complied with the contract, but whether the dismissal itself was harsh, unjust or unreasonable, judged against statutory criteria.³ An employee can succeed in an unfair dismissal application even where the employer gave full contractual notice and paid everything owed, and can fail even where notice was technically deficient, because the two claims protect different things and are assessed by different tribunals under different tests. A dismissed employee with an arguable claim may in principle pursue both, though practical and procedural constraints (including statutory bars on double recovery for the same loss) shape how that plays out.

Harsh, unjust or unreasonable

The statutory test asks whether the dismissal was harsh, unjust or unreasonable — separate though frequently overlapping grounds rather than one composite standard. In Byrne v Australian Airlines Ltd (1995) 185 CLR 410,² McHugh and Gummow JJ explained that a termination "may be harsh but not unjust or unreasonable, unjust but not harsh or unreasonable, or unreasonable but not harsh or unjust". A dismissal may be unjust because the employee was not guilty of the misconduct the employer acted on; unreasonable because it rested on inferences that could not reasonably have been drawn from the material before the employer; and harsh in its consequences for the employee's personal and economic situation, or because it is disproportionate to the gravity of the conduct.

The valid reason limb has its own settled gloss. In Selvachandran v Peteron Plastics Pty Ltd (1995) 62 IR 371,¹ Northrop J held that "valid" means sound, defensible or well founded, and that a reason which is capricious, fanciful, spiteful or prejudiced could never be valid.

In assessing this, decision-makers weigh a cluster of statutory considerations, including whether there was a valid reason for the dismissal related to the employee's capacity or conduct, whether the employee was notified of that reason and given an opportunity to respond, whether the employee was permitted a support person in any discussion, and any unreasonable refusal by the employer to warn an underperforming employee before dismissing them. Procedural fairness therefore matters not as a freestanding requirement but as part of the overall evaluation of harshness, injustice or unreasonableness.

Eligibility thresholds

Not every dismissed employee can bring an unfair dismissal claim. The scheme is built around threshold eligibility requirements, of which the most important conceptually are:

• a minimum employment period — an employee generally must have been employed for a continuous minimum period before the dismissal before they can apply, with a longer period applying to employees of a small business employer;
• an earnings threshold — employees earning above a prescribed high income threshold are generally excluded unless covered by an applicable award or enterprise agreement;
• the dismissal must be a genuine dismissal at the employer's initiative, rather than a resignation, and must not fall within specific statutory exclusions such as a genuine redundancy or dismissal in accordance with the Small Business Fair Dismissal Code.

These thresholds change periodically and their exact figures should always be checked against current Fair Work Commission guidance rather than assumed. Coverage also depends on whether the employer is within the national system, discussed in the orienting article of this module — an employee of a Western Australian employer outside that system may instead need to look to the state industrial relations scheme.

Remedies

Where the Commission is satisfied a dismissal was unfair, the primary remedy contemplated by the legislation is reinstatement — putting the employee back into their former position, or an equivalent one, generally with an order restoring lost pay and continuity of service. Where reinstatement is inappropriate — commonly because the employment relationship has broken down irretrievably — the Commission may instead order compensation, which is calculated by reference to the remuneration the employee would likely have received had they not been dismissed, subject to a statutory cap, and is not intended to compensate for distress, humiliation or other non-economic loss.

Applying this in a problem question

1. Confirm the applicant is within the national system and meets the eligibility thresholds — minimum employment period, earnings threshold, and any small business rules.
2. Confirm there has been a genuine dismissal at the employer's initiative, not a resignation or a genuine redundancy.
3. Work through harshness, injustice and unreasonableness separately, addressing valid reason and procedural fairness as part of that analysis rather than as a separate test.
4. Do not conflate this with a common law wrongful dismissal claim — identify which remedy is actually being sought.
5. If a remedy is available, explain why reinstatement is or is not appropriate before turning to compensation.