Unfair Dismissal Claims in Australia: Eligibility, Process and Employer Risks

What Unfair Dismissal Means

Unfair dismissal is a statutory jurisdiction created by Part 3-2 of the Fair Work Act 2009 (Cth). It is not a general complaint that an employer behaved badly, and it is not a claim for breach of contract. It is a defined question answered by the Fair Work Commission against defined criteria, and an employer who understands those criteria can usually work out early whether a claim is arguable, whether a jurisdictional objection is available, and what exposure realistically looks like.

Section 385 provides that a person has been unfairly dismissed if the Commission is satisfied that:

• the person has been dismissed and was protected from unfair dismissal at the time;
• the dismissal was harsh, unjust or unreasonable, assessed against the criteria in section 387;
• the dismissal was not consistent with the Small Business Fair Dismissal Code, where the employer is a small business employer; and
• the dismissal was not a case of genuine redundancy within section 389.

Each element matters. A dismissal with an obvious valid reason can still be found unfair because of how it was carried out. Equally, a process with defects is not automatically unfair: the Commission weighs the criteria as a whole and, consistently with the object of the Part in section 381, aims to give a fair go all round to both the employer and the employee.

The rest of this guide follows the order in which an employer actually confronts these questions: coverage, whether there was a dismissal, whether the employee was protected, the exclusions, the merits criteria, the deadline, the forms, the Commission process, remedies, costs and the claims that sit alongside unfair dismissal. Where a topic has its own detailed guide — performance management, serious misconduct, investigations, redundancy, general protections, medical capacity and worker classification — this article summarises the point and links across rather than repeating it.

Is the Employer in the National System?

Part 3-2 applies to national system employees and national system employers. Section 14 defines a national system employer principally by reference to constitutional corporation status, together with the Commonwealth and Commonwealth authorities, Territory bodies, and certain maritime, waterside and flight crew employment connected with constitutional trade or commerce. Section 14(2) excludes bodies established for a public purpose by or under State or Territory law and bodies established for local government purposes.

Most, but not all, Australian employees are in the national system. The Commission's coverage guidance records that the system covers all employees in Victoria (with limited exceptions relating to State public sector employees), the Northern Territory and the Australian Capital Territory; employees on Norfolk Island, Christmas Island and the Cocos (Keeling) Islands; private enterprise employees in New South Wales, Queensland, South Australia and Tasmania; local government employees in Tasmania; employees of constitutional corporations in Western Australia; Commonwealth employees; and waterside, maritime and flight crew employees in interstate or overseas trade or commerce.

The practical exclusions an employer should identify before assuming the Commission has jurisdiction are:

• Western Australian employers that are not constitutional corporations — sole traders, partnerships and unincorporated associations, whose employees remain in the Western Australian state system;
• State public sector and local government employment outside the areas listed above, which generally remains within the relevant state system;
• certain Victorian State public sector employees, who fall within the limited exceptions the Commission records for Victoria;
• independent contractors, volunteers and people on vocational placements, who are not employees and are listed in the Commission's benchbook among those excluded from the national unfair dismissal laws; and
• labour hire workers, who are ordinarily employed by the agency rather than the host, so a claim is ordinarily brought against the agency as the employer.

This article does not attempt to set out the detail of each state industrial relations system. Where coverage is genuinely in doubt — particularly for Western Australian and state public sector employers — the question should be resolved before any response is filed, because it goes to jurisdiction rather than merits.

Was There a Dismissal at All?

Section 386 defines dismissal. A person has been dismissed if their employment was terminated on the employer's initiative, or if they resigned but were forced to do so because of conduct, or a course of conduct, engaged in by the employer. The second limb is the statutory form of constructive dismissal, and it is narrower than the colloquial use of that phrase: dissatisfaction, or a resignation in the heat of an argument, is not enough. The employer's conduct must have left the employee no real choice.

Section 386(2) excludes three situations:

• employment under a contract for a specified period of time, a specified task, or the duration of a specified season, which ends at the end of the period, on completion of the task, or at the end of the season;
• employment to which a training arrangement applied, where the employment was for a specified period or limited to the duration of the training arrangement and ended accordingly; and
• a demotion that does not involve a significant reduction in remuneration or duties, where the employee remains employed by the employer that effected the demotion.

Two consequences follow for employers. First, a demotion that does involve a significant reduction in remuneration or duties may be a dismissal even though the employee remains on the payroll, so significant restructures of an individual role need to be assessed on that footing. Second, the specified-term exclusion is subject to an anti-avoidance qualifier: it does not apply where a substantial purpose of the arrangement was to avoid the employer's obligations under Part 3-2. A pattern of rolling short-term contracts covering ongoing work invites that argument.

Whether the person was an employee at all is a threshold question of its own. Since 26 August 2024 the characterisation of a working relationship is determined on a whole-of-relationship basis under section 15AA, and the label in the agreement does not decide it. Where the respondent has engaged the person as a contractor, the classification analysis needs to be done properly before an objection is put — our guide to employee or contractor status covers the current test and the wider tax, superannuation and sham contracting exposure. Identifying the correct employer entity matters just as much: claims are frequently filed against a trading name, a related company or a host business rather than the employing entity.

Protection, the Minimum Employment Period and Casual Service

Under section 382, a person is protected from unfair dismissal only if, at the time of dismissal, they had completed the minimum employment period and one of the following applies: a modern award covers them, an enterprise agreement applies to them, or their annual rate of earnings plus prescribed amounts is less than the high income threshold.

Section 383 sets the minimum employment period:

• six months where the employer is not a small business employer; and
• one year where the employer is a small business employer.

The period ends at the earlier of the time notice of dismissal was given and the time immediately before the dismissal. A contractual probation period of three or six months has no independent effect on this calculation; the statute governs, and an employer that dismisses at the end of a nominal probation period after the statutory period has already run does not gain any protection from the label.

Small business status is determined under section 23 — fewer than 15 employees — and section 388(2)(a) fixes the time of assessment as immediately before the dismissal or when notice was given, whichever happened first. The Commission's guidance explains the counting rules: a simple headcount rather than full-time equivalents; all employees employed at the relevant time, including the employee being dismissed and any others dismissed at the same time; employees of associated entities counted together as one employer; and casual employees excluded from the count unless employed on a regular and systematic basis. A business that has recently crossed 15 employees, or that has associated entities, should do the headcount carefully and record it, because the same fact decides both the minimum period and whether the Code applies.

Section 384 deals with the period of employment. It is the period of continuous service, and section 384(2)(a) provides that casual service does not count unless the employment was as a regular casual employee and, during that service, the employee had a reasonable expectation of continuing employment on a regular and systematic basis. Both limbs need to be satisfied. Where a casual has worked a consistent roster for a year or more, the test is often met notwithstanding the casual designation.

Absences require care. Continuity of service and the question of what counts towards the period of employment are not the same thing, and the treatment differs between paid leave, unpaid leave and unauthorised absence depending on the entitlement under which the absence was taken and the terms of the engagement. It is not accurate to say that all authorised leave counts towards the minimum employment period without qualification. Where an employee's service is close to the six or twelve month line and includes a substantial period of unpaid absence, the calculation should be worked through rather than assumed. Section 384(2)(b) also allows service with a former employer to be disregarded in a transfer of business where the old and new employers were not associated entities and the new employer gave the employee written notice before the new employment started that service would not be recognised.

Earnings, the High Income Threshold and Award Coverage

Where no modern award covers the employee and no enterprise agreement applies, protection depends on earnings being below the high income threshold. Section 333 provides that the threshold is the amount prescribed by, or worked out in the manner prescribed by, the regulations, and it cannot be reduced by regulation.

Section 332 defines earnings, and the detail matters because the calculation is frequently done wrongly in both directions. Earnings include:

• the employee's wages;
• amounts applied or dealt with in any way on the employee's behalf or as the employee directs — salary sacrifice arrangements are the common example; and
• the agreed money value of non-monetary benefits, which section 332(3) defines as benefits other than an entitlement to a payment of money, provided for work performed, for which a reasonable money value has been agreed between the employee and the employer.

Earnings exclude:

• payments the amount of which cannot be determined in advance — the statutory note gives commissions, incentive-based payments and bonuses, and overtime, as examples, with overtime excluded unless it is guaranteed;
• reimbursements; and
• superannuation contributions to the extent of the compulsory contribution.

So it is wrong to say simply that commissions, bonuses, incentives and superannuation are excluded. The exclusion turns on uncertainty. A guaranteed bonus, a contractually fixed commission floor, or an incentive amount that is ascertainable in advance may count. Superannuation contributions above the compulsory amount may count in some circumstances. A motor vehicle made available for private use, or an allowance paid in connection with one, requires the non-monetary benefit analysis: whether a reasonable money value has actually been agreed, and whether the real or notional value can properly be attributed to the employee. Where an employee is paid wholly or partly by piece rates, regulation 3.05 prescribes how the amount is worked out.

Award or agreement coverage is a separate and often decisive question, and it is not answered by the job title. Coverage depends on the substantive duties actually performed and whether they fall within the classification structure of the relevant modern award. A senior-sounding title, a salaried arrangement, or an annualised salary clause does not remove award coverage. Two propositions follow:

• an employee below the threshold is protected whether or not an award covers them; and
• an employee above the threshold remains protected if an award covers them or an enterprise agreement applies to them.

It is also worth distinguishing coverage from application. A modern award may cover an employee for section 382 purposes even where its terms are not operative because an enterprise agreement applies. The two questions are asked separately, and an employer that conflates them may abandon a good objection or press a bad one.

Current 2026–27 Figures

Figures verified for the 2026–27 financial year against Fair Work Commission publications. Both amounts change each 1 July, so they should be re-checked against the Commission's own pages for any dismissal in a later year.

• High income threshold: $190,100 for dismissals occurring on or after 1 July 2026 and before 1 July 2027. For a dismissal that took effect on or before 30 June 2026 the threshold was $183,100.
• General maximum compensation: $95,050 for dismissals taking effect on or after 1 July 2026 — half the high income threshold — subject in every case to the lower employee-specific cap described under remedies.

The compensation limit should not be described loosely as "six months' pay". Section 392(5) and (6) fix it as the lesser of the total amount of remuneration the employee received, or was entitled to receive, in the 26 weeks immediately before the dismissal, and half the high income threshold immediately before the dismissal. For most employees the 26-week figure is the operative cap and it is well below $95,050. Where the employee was on leave without pay, or on leave without full pay, for part of that period, regulation 3.06 treats them as having received the remuneration they would ordinarily have received had they not been on that leave.

The Small Business Fair Dismissal Code

Section 388 empowers the Minister to declare a Small Business Fair Dismissal Code, and provides that a dismissal was consistent with the Code if the employer was a small business employer immediately before the dismissal or when notice was given, whichever happened first, and the employer complied with the Code. Because compliance is a separate element under section 385(d), a small business employer that complied with the Code has not effected an unfair dismissal, and section 396(c) requires the Commission to decide the Code question before the merits.

For summary dismissal, the Code provides that it is fair for an employer to dismiss without notice or warning where the employer believes on reasonable grounds that the employee's conduct is sufficiently serious to justify immediate dismissal. The Code gives theft, fraud, violence and serious breaches of occupational health and safety procedures as examples of serious misconduct. It states that where an allegation of theft, fraud or violence is involved, reporting it to the police is sufficient though not essential, and that the employer must have reasonable grounds for making any such report. This is a reasonable belief test, and it is importantly different from proving the conduct occurred.

For other dismissals, the Code requires the employer to give the employee a reason why they are at risk of dismissal, based on the employee's conduct or capacity to do the job; to warn the employee verbally or preferably in writing that they risk dismissal if there is no improvement; to provide an opportunity to respond to the warning; and to give a reasonable chance to rectify the problem, having regard to the employee's response, which may involve additional training and ensuring the employee knows what is expected.

On procedural matters, the Code provides that in discussions where dismissal is possible the employee can have another person present to assist, but that person cannot be a lawyer acting in a professional capacity. Employers frequently overlook this limitation, which is specific to the Code and does not mirror section 387(d).

The Code checklist published with the Code is a useful contemporaneous record and is often persuasive evidence of the process actually followed. It is evidence, not a conclusive answer: a completed checklist does not establish Code compliance if the underlying steps were not taken, and the Commission will look at what happened rather than at the form.

Genuine Redundancy

Section 389 provides that a dismissal was a case of genuine redundancy if the employer no longer required the person's job to be performed by anyone because of changes in the operational requirements of the enterprise, and the employer complied with any obligation in an applicable modern award or enterprise agreement to consult about the redundancy. Section 389(2) provides that the dismissal was not a case of genuine redundancy if it would have been reasonable in all the circumstances for the person to be redeployed within the employer's enterprise or the enterprise of an associated entity.

Three qualifications are important for employers:

• the consultation limb is an award or agreement obligation, not a free-standing statutory duty — where no award or agreement applies, section 389(1)(b) imposes no consultation requirement, though consultation may still bear on overall fairness and on obligations arising elsewhere;
• if the genuine redundancy exclusion fails, that does not mean the dismissal was unfair — the exclusion simply falls away and the Commission assesses harshness under section 387; and
• redeployment is fact-specific. There is no rule that a lower-paid or lesser role must be offered in every case, nor a rule that offering one is unnecessary. What was reasonable in all the circumstances depends on the vacancies actually available, the employee's skills, and the structure of the enterprise and its associated entities.

Selection criteria, redundancy pay under the National Employment Standards, notice, and the interaction with general protections claims are dealt with in our guide to genuine redundancy, consultation and employer risk. One point from that guide is worth restating here: the section 385(d) exclusion removes the unfair dismissal jurisdiction only. It is not a defence to a general protections claim, a discrimination complaint, a contractual claim or a claim for breach of a consultation clause.

The Section 387 Criteria

Where the exclusions do not apply, the Commission considers whether the dismissal was harsh, unjust or unreasonable. Section 387 requires it to take into account:

1. whether there was a valid reason for the dismissal related to the person's capacity or conduct, including its effect on the safety and welfare of other employees;
2. whether the person was notified of that reason;
3. whether the person was given an opportunity to respond to any reason related to their capacity or conduct;
4. any unreasonable refusal by the employer to allow the person to have a support person present to assist at any discussions relating to dismissal;
5. if the dismissal related to unsatisfactory performance, whether the person had been warned about that performance before the dismissal;
6. the degree to which the size of the employer's enterprise would be likely to impact on the procedures followed;
7. the degree to which the absence of dedicated human resource management specialists or expertise would be likely to impact on the procedures followed; and
8. any other matters the Commission considers relevant.

Paragraph (d) is regularly misstated. It is directed at whether the employer unreasonably refused a request for a support person to be present to assist at discussions relating to dismissal. It does not impose an unconditional duty to offer a support person proactively, and a failure to offer one is not of itself a breach of section 387(d). Offering the opportunity is nonetheless sensible practice, it removes an argument, and where the Small Business Fair Dismissal Code applies the Code separately contemplates another person being present to assist — a person who cannot be a lawyer acting in a professional capacity.

Paragraph (e) is confined to dismissals related to unsatisfactory performance. There is no universal three-warning rule, and no statutory requirement for a fixed number of warnings, a show cause letter, written particulars of allegations in every case, or an investigation conducted in a prescribed form. What fairness requires varies with the reason for dismissal and the circumstances, and paragraphs (f) and (g) expressly moderate the expectation for smaller businesses without HR expertise.

Two further points shape outcomes. First, a valid reason and overall fairness are different questions: the Commission may accept there was a valid reason and still find the dismissal harsh, or find no valid reason and decline a remedy on discretionary grounds. Second, procedural defects are not automatically decisive. They are weighed with everything else, including proportionality between the conduct and the consequence and the employee's personal circumstances — length of service, prior record, age, and the economic effect of dismissal can all bear on harshness even where the reason itself is sound.

Misconduct, Performance and Capacity

Serious misconduct arises in several distinct legal settings, and conflating them causes most of the analytical errors employers make.

• Regulation 1.07 of the Fair Work Regulations 2009 defines serious misconduct for the purposes of section 12 as having its ordinary meaning, and gives examples: wilful or deliberate behaviour inconsistent with continuation of the contract; conduct causing serious and imminent risk to health or safety, or to the reputation, viability or profitability of the employer's business; theft, fraud, assault or sexual harassment in the course of employment; intoxication at work; and refusing to carry out a lawful and reasonable instruction consistent with the contract. Sub-regulation (3) qualifies several of those examples where the employee shows the conduct was not such as to make employment during the notice period unreasonable.
• Notice is a separate question. Whether dismissal without notice was lawful under the contract and the National Employment Standards does not decide whether the dismissal was unfair, and vice versa.
• Section 387(a) asks whether there was a valid reason. Outside a Code case, the Commission generally determines for itself whether the conduct occurred, on the balance of probabilities, with the cogency of the evidence required increasing with the seriousness of the allegation. It is not enough to point to a suspicion, and it is not necessary to reach criminal-standard certainty.
• Overall fairness remains a separate assessment: conduct may be established and still not justify dismissal in the circumstances.
• The Code test differs again. For a small business summary dismissal, the question is whether the employer believed on reasonable grounds that the conduct was sufficiently serious to justify immediate dismissal.

Performance-based dismissals turn largely on section 387(e) and on whether the employee understood what was expected, was told they were falling short, and was given a genuine chance to improve. Capacity cases raise a different set of overlapping obligations again, including the temporary absence protections and discrimination and workers compensation regimes. Those subjects have their own guides:

• Can an employer terminate employment for serious misconduct?
• Managing underperformance and performance improvement plans
• Procedural fairness in workplace investigations and common investigation mistakes
• Managing ill and injured employees
• Suspension pending investigation

The 21-Day Deadline and Extensions

Section 394(2) requires an application to be made within 21 days after the dismissal took effect, or within such further period as the Commission allows. The period runs from when the dismissal took effect, not from the date of a termination letter or the date the final pay was processed, which can matter where notice was worked out or payment in lieu was made.

Section 394(3) permits a further period only where the Commission is satisfied there are exceptional circumstances, taking into account:

• the reason for the delay;
• whether the person first became aware of the dismissal after it had taken effect;
• any action taken by the person to dispute the dismissal;
• prejudice to the employer, including prejudice caused by the delay;
• the merits of the application; and
• fairness as between the person and other persons in a similar position.

Serious illness and misrepresentation by the employer are examples of matters that may support an extension; they are not the whole test, and the Commission weighs all six considerations. Nor is the section confined to a short additional period — there is no statutory limit on the further period the Commission may allow, so an employer should not assume a late application will simply fail. If an extension is opposed, the objection should be raised in the Form F3 and supported by evidence of the date the dismissal took effect and of any prejudice from the delay.

Form F2, Service and the Form F3 Response

An employee applies for an unfair dismissal remedy on Form F2. The Commission serves the application on the employer, and the employer responds on Form F3, which the Commission ordinarily requires within seven days of service. That is a short window, and the practical work an employer should do inside it is largely evidentiary rather than argumentative.

Immediately on receipt:

1. Record the date and manner of service and diarise the response date, together with any listed conciliation date.
2. Notify insurers and brokers.Employment practices liability and management liability policies commonly contain notification conditions with their own time limits.
3. Preserve records. Suspend any routine deletion or document destruction affecting emails, messaging platforms, HR files, rosters, CCTV, access logs and payroll data, and preserve metadata rather than producing reformatted copies.
4. Assemble the primary documents: the contract of employment and any variations, the applicable award or enterprise agreement, relevant policies and any acknowledgement of them, position descriptions, warnings and performance records, investigation material, the termination letter, and payroll records covering at least the 26 weeks before dismissal.
5. Identify the decision-maker, the reasons actually relied on at the time, and the witnesses who can speak to them. Reasons constructed after the event are usually apparent and rarely help.
6. Calculate the jurisdictional facts: length of continuous service, the section 23 headcount at the relevant time, and earnings under section 332.
7. Confirm the correct respondent entity and correct it in the response if the application names the wrong one.
8. Preserve any objection by raising it in the Form F3 rather than leaving it to be developed later.
9. Assess remedies and overlap — the realistic compensation range, whether reinstatement is sought and whether it is workable, and whether any other claim about the same dismissal is on foot.
10. Ensure the person attending conciliation has authority to settle within a defined range, or can obtain instructions quickly.

The response itself should be accurate and complete rather than combative. It is a procedural document that identifies the respondent, the facts of the employment and dismissal, the reasons relied on, and any objection. Overstating the case, adding allegations that cannot be supported by evidence, or omitting material facts creates problems later, because the Form F3 is the document the Commission and the applicant work from and inconsistencies between it and the evidence are readily exposed.

Jurisdictional Objections

Section 396 requires the Commission to decide four initial matters before considering the merits:

• whether the application was made within the period required by section 394(2);
• whether the person was protected from unfair dismissal;
• whether the dismissal was consistent with the Small Business Fair Dismissal Code; and
• whether the dismissal was a case of genuine redundancy.

An objection may be dealt with at a separate jurisdictional hearing before the merits, or together with the merits, depending on the nature of the objection and the Commission's directions. Where the objection depends on a small number of documents — a headcount, a payroll summary, a contract — it is often efficient to have it determined first.

A working checklist for an employer assessing objections:

• Respondent — is the named respondent the employing entity?
• National system — is the employer a national system employer under section 14?
• Employment — was the person an employee rather than a contractor, and was the employer the agency rather than the host?
• Dismissal — was there a dismissal within section 386, or an excluded ending?
• Minimum period — six or twelve months, and does casual service count under section 384(2)(a)?
• Award or agreement — does a modern award cover the employee, or does an enterprise agreement apply?
• Threshold — are earnings under section 332 below the high income threshold?
• Small business and the Code — fewer than 15 employees at the relevant time, and was the Code complied with?
• Redundancy — does section 389 apply on both limbs, including redeployment?
• Time — was the application lodged within 21 days, and if not, are exceptional circumstances made out?
• Multiple proceedings — is another application or court proceeding on foot about the same dismissal, and do the statutory restrictions on multiple actions apply?

None of these should be treated as an automatic knockout. Each depends on evidence, several depend on contested facts, and a jurisdictional objection that fails can consume time and goodwill without narrowing the dispute. Objections are worth taking where they are supportable, and worth abandoning early where they are not.

Conciliation and Settlement

The Commission's first step in most unfair dismissal matters is conciliation. Its current guidance describes conciliation as a voluntary process to help the parties resolve the dispute, arranged as soon as possible after the application and usually taking place between 2 and 5 weeks later. It is an informal process that ordinarily takes place in an online meeting, so parties do not need to attend a Commission office, although the Commission may make other arrangements where that is appropriate. The Commission states expressly that parties are under no obligation to reach a settlement. It is conducted by a conciliator who facilitates discussion rather than deciding anything, and it is conducted on a without prejudice basis within the Commission's framework.

The Commission reports that around three quarters of cases settle at or before conciliation. That is a reason to prepare for it properly rather than treat it as a formality. Preparation means knowing the jurisdictional facts, the realistic compensation range, whether reinstatement is genuinely workable, and the limits of the authority held by whoever attends.

Terms of settlement commonly deal with:

• a payment, and its characterisation;
• a statement of service, and any agreed separation record;
• confidentiality and non-disparagement;
• a release and, where appropriate, withdrawal or discontinuance of the application; and
• any agreed return of property or transition arrangements.

Settlement terms should be documented properly rather than recorded as a bare figure. The characterisation of a payment can have taxation and superannuation consequences, and may affect Centrelink treatment for the former employee; those are matters on which each party should obtain its own advice. Enforceability, the scope of the release, and whether the person signing has authority to bind the entity all warrant attention before the document is executed.

Conferences, Hearings, Representation and Appeals

Where a matter does not resolve at conciliation, it is allocated to a Commission Member. The Member may deal with it by way of a conference or a formal hearing. Evidence is generally given by witness statement with witnesses available for cross-examination, and the Member will ordinarily issue directions for material and submissions. The Commission is not bound by the rules of evidence in the way a court is and may inform itself as it considers appropriate, so proceedings are less formal than litigation — but they are still proceedings in which evidence is tested, and the outcome turns on the quality of the contemporaneous documents and the credibility of the decision-maker.

How long a matter takes to be heard and determined depends on the issues, the number of witnesses, whether a jurisdictional objection is dealt with separately, and listing availability. Employers should not plan on a fixed duration.

Representation. Under section 596, a lawyer or paid agent must seek the Commission's permission to represent a party in a matter, including to make submissions on the party's behalf. Permission is a matter for a Commission Member. Practically, that does not prevent a party obtaining legal advice, having correspondence and material prepared, or being assisted in preparation at any stage; it governs appearing in the proceeding.

Appeals. An appeal from a decision under Part 3-2 requires permission. Section 400(1) provides that the Commission must not grant permission to appeal unless it considers it is in the public interest to do so, and section 400(2) provides that an appeal on a question of fact can only be made on the ground that the decision involved a significant error of fact. Appeals are ordinarily lodged within 21 days of the decision, and the practical effect of section 400 is that disagreement with the outcome is rarely enough: an appellant needs an identifiable error and a public interest reason for the Full Bench to intervene.

Remedies and Compensation

Section 390 provides that the Commission may order reinstatement or compensation only where it is satisfied the person was protected from unfair dismissal and was unfairly dismissed, and only on an application under section 394. It must not order compensation unless it is satisfied that reinstatement is inappropriate and that compensation is appropriate in all the circumstances. Reinstatement is therefore the primary remedy in the statutory scheme, and a finding of unfair dismissal does not guarantee that any remedy will follow.

Reinstatement under section 391 means reappointment to the position held immediately before dismissal, or to another position on terms and conditions no less favourable, and it may extend to a position with an associated entity where the original position now sits there. The Commission may also order that continuity of employment and service be maintained, and order the employer to pay an amount for remuneration lost because of the dismissal.

Compensation under section 392 is compensation in lieu of reinstatement, ordered against the employer. It is economic in nature and not punitive, and section 392(4) prevents any amount being included for shock, distress, humiliation or other hurt caused by the manner of dismissal. In fixing an amount the Commission must take into account:

• the effect of the order on the viability of the employer's enterprise;
• the employee's length of service;
• the remuneration the employee would have received, or would have been likely to receive, had they not been dismissed;
• the employee's efforts to mitigate the loss;
• remuneration earned since the dismissal;
• income reasonably likely to be earned between the making of the order and the date it takes effect; and
• any other matter the Commission considers relevant.

Section 392(3) requires the amount to be reduced on account of misconduct where the misconduct contributed to the employer's decision to dismiss. Section 393 allows a monetary order to be paid by instalments where the order so permits.

The cap under section 392(5) and (6) is the lesser of the remuneration received, or to which the employee was entitled, in the 26 weeks immediately before the dismissal, and half the high income threshold immediately before the dismissal — $95,050 for dismissals on or after 1 July 2026. Regulation 3.06 adjusts the 26-week figure where the employee was on leave without pay or without full pay.

On outcomes, the Commission's own published guidance states that median compensation is between 5 and 7 weeks' pay, and that fewer than 0.4% of applicants receive the maximum limit. Those figures are a useful reality check for both sides at conciliation: the tail risk of a maximum award is small, and the amounts typically awarded are modest, but the cost and disruption of running a matter to hearing is real and is not recoverable. Compensation remains discretionary, reinstatement is the primary remedy, an award compensates lost remuneration rather than distress or humiliation, and the applicable limit is the lesser statutory amount described above.

Costs

Section 611(1) provides that a person must bear their own costs in relation to a matter before the Commission. Costs orders are exceptional. Section 611(2) permits an order where the Commission is satisfied that a party made an application, or responded to one, vexatiously or without reasonable cause, or that it should have been reasonably apparent to that party that the application or response had no reasonable prospect of success.

Section 400A permits an order for costs against a party where the Commission is satisfied that the party caused the other party to incur costs because of an unreasonable act or omission in connection with the conduct or continuation of the matter. An order under section 400A can only be made on application by the other party, and the section does not limit the power to order costs under section 611. The Commission's guidance records that section 400A applies to dismissals taking effect from 1 January 2013.

Winning does not ordinarily produce a costs order. An employer that succeeds on the merits, or on a jurisdictional objection, will usually still bear its own costs, and that expectation should be built into any commercial assessment of whether to settle.

Overlapping and Alternative Claims

Unfair dismissal is one of several avenues a dismissed employee may have, and an employer assessing exposure should identify the alternatives rather than looking only at the section 392 cap.

• General protections. Where the allegation is that adverse action was taken for a prohibited reason — the exercise of a workplace right, industrial activity, or a protected attribute — a dismissal application is made on Form F8. Where the matter is not resolved, the Commission issues a certificate, after which the applicant may commence proceedings in the Federal Court or the Federal Circuit and Family Court, or the parties may agree to arbitration. Compensation in those court proceedings is not subject to the section 392 cap, but it must be proved, and civil penalties may also be sought. Our general protections and adverse action guide sets out the response process and the reverse onus.
• Discrimination complaints under federal, state or territory anti-discrimination legislation, with their own processes, time limits and remedies.
• Unlawful termination applications, available in limited circumstances to employees who are not covered by the general protections dismissal provisions.
• Workers compensation claims, and state-based return to work and injured worker protections, which operate independently of the unfair dismissal jurisdiction.
• Contractual claims, most commonly for notice or for entitlements under an incentive scheme, which are pursued in the ordinary courts and are not capped by section 392.

There is no automatic entitlement to run multiple claims on the same facts. The Fair Work Act contains restrictions on multiple applications and multiple actions about the same dismissal, and an applicant may in practice be required to elect. An employer should ask early which jurisdiction the applicant has chosen, because the choice affects the deadline, the process, the exposure and the value of settling.

Employer Response Checklist

Related Reading

This guide covers eligibility, section 386 dismissal, the Form F2 and Form F3 stage, the Commission process, jurisdictional objections, remedies, costs and representation. The following guides cover the underlying decisions that produce most claims:

• Managing underperformance and performance improvement plans — performance gaps, PIP design, warnings and documentation.
• Terminating for serious misconduct — what qualifies, and lawful summary dismissal.
• Procedural fairness in workplace investigations and common investigation mistakes.
• Genuine redundancy, consultation and employer risk.
• General protections and adverse action claims.
• Managing ill and injured employees and suspension pending investigation.
• Employee or contractor — classification and the risks of getting it wrong.

Official Sources

• Fair Work Act 2009 (Cth) — current compilation — including sections 14, 23, 332–333, 380–394, 396, 400, 400A, 596 and 611.
• Fair Work Regulations 2009 — current compilation — including regulation 1.07 (serious misconduct), regulation 2.13 (small business employer), regulation 3.05 (high income threshold) and regulation 3.06 (compensation).
• Fair Work Commission Rules 2024 — the Commission's procedural rules, including lodgment and service requirements.
• Small Business Fair Dismissal Code and the Commission's explanation of what the Code is and how the headcount works.
• Fair Work Commission — unfair dismissal and the process for unfair dismissal claims.
• Fair Work Commission — unfair dismissal application (Form F2) and respond to a claim for unfair dismissal (Form F3).
• Fair Work Commission — objecting to an unfair dismissal claim.
• Fair Work Commission — who is protected from unfair dismissal, coverage for unfair dismissal, who the national system covers and modern award coverage.
• Fair Work Commission — high income threshold and compensation cap — the current 2026–27 amounts.
• Fair Work Commission — conciliation and conciliation for unfair dismissal.
• Fair Work Commission — practice note on unfair dismissal proceedings and representation by lawyers and paid agents.
• Fair Work Commission — compensation for unfair dismissal — the published median and the proportion of applicants receiving the maximum.
• Fair Work Commission — costs and fees and costs.
• Fair Work Commission — Unfair Dismissals Benchbook — the Commission's consolidated statement of the authorities on each element.

Frequently Asked Questions