Unlawful termination in Australia: an employer’s guide

Unlawful termination is when you dismiss an employee for a reason the Fair Work Act 2009 specifically prohibits, and it’s a different risk from unfair dismissal. Section 772 of the Act bans ending someone’s employment for reasons such as race, sex, age, disability, pregnancy, religion, family or carer’s responsibilities, trade union membership, temporary absence through illness or injury, or because they made a complaint against you. Get the reason wrong and a dismissal can be unlawful even when your process looked clean.

This guide explains what counts as unlawful termination, how it differs from unfair dismissal and the general protections, and the steps that keep your decisions defensible.

Unlawful termination sits in Part 6-4 of the Fair Work Act 2009. It applies when an employer ends employment for one or more prohibited reasons. The provisions exist mainly to protect employees who can’t access the general protections, for example people who aren’t national system employees, but the principle drives every dismissal decision: the reason has to be lawful.

The timeframe is tight. Under the Fair Work Act, an employee has 21 days from the date the dismissal takes effect to lodge an unlawful termination application, and the clock starts the day employment ends.

These three terms get used interchangeably, and that’s where employers slip up. They test different things.

• Unfair dismissal asks whether the dismissal was harsh, unjust or unreasonable, and whether you followed a fair process. It turns on procedure as much as reason. We cover this in detail in our unfair dismissal guide.
• Unlawful termination under section 772 asks one question: was the reason prohibited. It can apply even when your process looked sound, if a prohibited reason influenced the decision.
• General protections (adverse action) under Part 3-1 prohibit dismissing someone because they exercised a workplace right or have a protected attribute. Compensation here is uncapped.

The practical takeaway is the same across all three: decide for a lawful, defensible reason and document it clearly.

Section 772 lists the reasons that make a termination unlawful. You must not dismiss someone because of:

• temporary absence from work due to illness or injury
• trade union membership, or non-membership, or participating in union activities
• seeking office as, or acting as, an employee representative
• filing a complaint or taking part in proceedings against you
• race, colour, sex, sexual orientation, age, physical or mental disability, marital status, family or carer’s responsibilities, pregnancy, religion, political opinion, national extraction or social origin
• absence during maternity or other parental leave

The high-risk situations are the ones where a lawful reason and a prohibited reason sit close together, for example when you’re managing someone’s performance and they’ve just taken parental leave or lodged a complaint. If a protected reason formed any part of the decision, the dismissal can be unlawful.

You can dismiss for plenty of valid reasons that aren’t prohibited. The common ones are:

• persistent underperformance after a fair performance-management process
• serious misconduct backed by credible evidence
• genuine redundancy, where the role is no longer required and redeployment isn’t reasonable (see our redundancy guide for the entitlements and the genuine redundancy test)
• the end of a compliant fixed-term contract

What protects these reasons is process. The Fair Work Ombudsman’s guidance on ending employment makes the point that you need a valid reason, a fair procedure, and proper notice and final pay. For performance and conduct matters that means a clear reason, a chance for the employee to respond, a support person if they ask, and written records at every step.

Smaller employers get a defined pathway. The Small Business Fair Dismissal Code applies to businesses with fewer than 15 employees, and completing its checklist at the time helps show the dismissal was fair.

Notice of termination is part of the National Employment Standards. Under section 117 of the Fair Work Act, the minimum notice runs on a sliding scale: 1 week for under a year of service, 2 weeks for 1 to 3 years, 3 weeks for 3 to 5 years, and 4 weeks for more than 5 years. Employees over 45 with at least 2 years’ continuous service get an extra week, so the maximum statutory notice is 5 weeks. You can pay in lieu instead of having someone work the notice.

Final pay generally falls due quickly and includes outstanding wages, accrued annual leave and any other entitlements owing. Superannuation now sits at 12% of ordinary time earnings.

Summary dismissal, meaning termination without notice, is only available for serious misconduct as defined in regulation 1.07 of the Fair Work Regulations 2009. That covers wilful or deliberate behaviour inconsistent with continuing employment, or conduct causing serious and imminent risk, and includes theft, fraud, assault and refusing a lawful and reasonable instruction. Even then you still owe procedural fairness: a rushed summary dismissal routinely loses at the Commission.

The exposure is real and rising. According to the Fair Work Commission’s 2024–25 Annual Report, set out in President Justice Adam Hatcher’s statement of 12 November 2025, the Commission received 44,075 lodgements in 2024–25, an increase of 24% above the five-year average, including 6,209 general protections dismissal applications and roughly 16,500 unfair dismissal applications.

The financial risk runs on several tracks:

• Unfair dismissal compensation is capped at the lesser of 26 weeks’ pay or half the high income threshold. The Fair Work Commission confirms the cap is $91,550 for a dismissal that occurred on or after 1 July 2025 (half of the $183,100 high income threshold set under the Fair Work Regulations 2009). In practice payouts are modest: the Commission states that the median is between 5 and 7 weeks’ pay and less than 0.4% of applicants receive the maximum.
• Unlawful termination and general protections breaches are civil remedy provisions. With the Commonwealth penalty unit at $330 since 7 November 2024, the standard maximum of 60 penalty units works out to $19,800 per contravention for an individual and $99,000 for a corporation, and general protections compensation is uncapped. Even so, settlements are usually small — in the FWC’s 2024–25 general protections data the median monetary settlement was in the range of $4,000 to $5,999, with 33% under $4,000.

The figures show the headline penalties are rarely reached, but the legal cost, management time and reputational damage land regardless of outcome — which is why the cheapest claim is the one you prevent.

A short, disciplined checklist keeps most matters out of dispute:

1. Name the real reason — performance, conduct, redundancy or capacity — and confirm it isn’t a prohibited reason.
2. Gather the evidence: reviews, warnings, investigation notes.
3. Separate any protected factor from your genuine reason and be able to show that separation.
4. Run a fair process: notify the reason, allow a response, permit a support person.
5. Confirm the decision, notice and final pay in writing.
6. Keep every record. Your documentation is your defence.

Doing termination lawfully protects your business. Doing it humanely protects your brand and the team that stays. Outplacement support helps exiting employees move into their next role faster, and it signals to remaining staff that you handle hard decisions with care.

This is where Careerminds comes in. Unlike slow-moving models, we pair participants with dedicated coaches at a 30:1 coaching ratio, and our outcomes show it: a 95% placement rate and an average of 11.5 weeks to land a new role. We’ve supported more than 20 million people across 100+ countries.

If you’re planning a termination or a restructure and want to do right by the people leaving, connect with a career expert today.