Australia: Termination of Employment: Best Practice Guide

Last Updated: 23 February 2012
Article by Andrew Ball, Andrew Ball, Simon Billing, Rick Catanzariti and Nick Ruskin

The decision to dismiss an employee is an area of the employment relationship that requires an understanding of a wide range of legislative and other obligations of an employer. The decision is also a significant one in terms of the effect on the employee and the business. Not surprisingly, a significant amount of resources, time and effort needs to be devoted to the associated decisions and processes. Knowing the legal risks and obligations involved is essential.


Unfair dismissal laws, which are set out in the Fair Work Act 2009 (Cth) (FW Act), apply to a large number of Australian employees and generally give those employees the broadest protection from having their employment terminated. Therefore a good starting point is to consider whether or not an employee is covered by unfair dismissal laws.

Who is covered by unfair dismissal laws?

Employees who are earning up to $113,800 excluding superannuation and incentive bonuses or payments (indexed for CPI each year) are covered by unfair dismissal laws. In addition, employees who are covered by awards or enterprise agreements made under the FW Act or its predecessor, irrespective of their earnings, will be covered by the unfair dismissal laws.

This is the case except for:

  • certain casual employees
  • employees who were dismissed during their first six months of employment (or 12 months in the case of stipulated small employers)
  • employees engaged on a specified term contract if the ending of the employment is due to the contract not being renewed at its expiry
  • certain employees engaged under traineeships.


If considering dismissing an employee, ask what obligations will impact upon the decision.

Comply with any unfair dismissal laws that apply and any workplace policies, industrial agreements or contractual provisions that may impact upon dismissal or discipline of employees.

Identify any payments the employee is entitled to on ending of the employment.


Under unfair dismissal laws, an employer cannot dismiss an employee unless they have a valid reason connected with the employee's conduct, capacity or because of a genuine redundancy. In addition, if the dismissal is related to conduct or capacity, it may still be unfair if the employee is not notified of the reason for their dismissal, not given an adequate opportunity to respond to those reasons, not provided with a warning in certain circumstances, not allowed a support person to assist them in discussions about the hearing or if the dismissal was otherwise procedurally unfair.

A valid reason is one that is sound and defensible and related to the employment. Except for serious misconduct (eg theft), if dismissing an employee because of inadequate performance or misconduct, an employer may need to establish more than one incident of misconduct or poor performance to justify the dismissal. In addition, the existence of prior warnings about the employee's misconduct or poor performance will normally be necessary in the sense that the employee has been made aware that failure to improve their performance or conduct may jeopardise their ongoing employment.

In the case of the valid reason, employers need to establish the misconduct on the 'balance of probabilities'. A rigorous investigation of the circumstances is often a key element of satisfying that burden of proof. Employers need to ensure that they have sought and taken into account all relevant evidence and properly tested it and that, prior to any dismissal decision, they have given the employee an opportunity to respond to any allegations against them, including having given them sufficient detail of the matters that may form the basis for dismissal.

An employer should also take into account the employee's length of service, employment record and relevant personal circumstances before making the decision to dismiss.


A dismissal that is found to be unfair may lead to the employee being reinstated to the position that they were employed in prior to the dismissal or to another position on terms and conditions no less favourable than that position.

This may include an order that the employee be appointed to an associated entity of the employer that dismissed the employee. Where reinstatement is ordered, Fair Work Australia can also make an order that continuity of service of the employee is not broken by the dismissal and that they be compensated for any loss of pay suffered between the time of dismissal and reinstatement.

If Fair Work Australia considers that reinstatement is inappropriate, it may instead order payment of compensation to the employee up to a maximum of six months' pay.

In determining the amount of compensation, Fair Work Australia must take all relevant circumstances into account, including the employee's length of service, the remuneration that the person would have received had they not been dismissed, efforts by the employer to mitigate any loss suffered, any remuneration earned by the employee since the dismissal, the effect of the order on the viability of the employer's enterprise and income reasonably likely to be earned by the person since the dismissal.


The common law imposes a number of obligations on employees, even when those obligations are not expressly stipulated in the employment contract or any industrial instruments. These obligations include the obligation of an employee to behave honestly, the requirement that the employee perform their work to the best of their ability, the obligation to act in the interests of the employer and the obligation to follow reasonable and lawful directions. Where those obligations are breached, an employer may, subject to applicable procedural issues, have the right to dismiss the employee, depending upon the nature and circumstances of the non-compliance. Dismissal of an employee is normally grounded on one of these types of implied duties.

Workplace policies about behaviour may also form a basis to dismiss an employee when there is a breach of the policies by the employee.

Conversely, an employer has obligations to its employees, including a duty to pay the employee an agreed or stipulated amount of remuneration and a duty to take care for the employee's safety. More recently, Australian courts have considered whether an employer is actually under an obligation to provide work to an employee rather than simply pay them the agreed or stipulated amount of remuneration. This is relevant when considering suspending an employee on full pay or if putting an employee on garden leave (that is, paying the employee but directing them not to perform any work).

Employers should also consider any obligations owed, either by the employer or the employee, in any written contract of employment.


When dismissing an employee, employers also need to ensure that a reason for the dismissal (even if not the only reason) did not include certain protected attributes of that employee, set out under state and federal discrimination laws or under the general protections available under the FW Act, including:

  • race, ethnicity, colour, natural extraction or social origin or religion
  • age
  • physical features or characteristics
  • disability or impairment
  • temporary absence due to illness or injury
  • sex or sexual preference
  • pregnancy, carer or family responsibilities, or parental or carer status
  • marital status
  • having a role as a union delegate or OH&S representative
  • political opinion
  • union membership or being involved in industrial activities
  • making a complaint about occupational health and safety matters or conditions of employment.

A temporary absence is where the absence is not more than three consecutive months or three months in a 12 month period and where the employee is not on paid sick leave for the duration of the absence.

An employer may have a defence to dismissing an employee for some of the above reasons if it was an integral requirement of the job or the employee could not perform the inherent requirements of the position due to the attribute (usually this will only apply to a dismissal due to a disability or impairment).

Some categories of employees have additional protections, such as employees who have been injured at work, as they have additional protections under workers' compensation legislation.

It is also unlawful to terminate an employee's employment because they have exercised, or wish to exercise, what is known as a workplace right. An employer is prevented from dismissing employees because the employee:

  • is able to or has participated in workplace processes or proceedings
  • has the benefit of, or a responsibility under a workplace instrument or law
  • is able to make, or has made, a complaint or inquiry to a body or person seeking compliance with a workplace law or instrument.

For more information about general protections and workplace rights, see our Best Practice Guide to General Protections.

If a court or tribunal finds that a reason for an employee's dismissal is related to one of the above reasons, the dismissal is unlawful. Reinstatement is a possibility, as well as compensation of up to six months' pay and a penalty of up to $32,000 imposed on the employer. Where a discrimination claim is made in a state or federal discrimination tribunal, compensation is not usually capped and while a penalty cannot be ordered, compensation can be ordered for pain and suffering or general damages as well as economic loss.

With discrimination or unlawful termination claims, an employee usually has to establish that they have been dismissed and that they have the protected attribute they allege was a reason to dismiss them. However, in practice, the burden of proof then falls on the employer to show that the dismissal was not motivated by any of the claimed discriminatory reasons. The best way for an employer to do this is to demonstrate the valid reason that it was motivated by. Failing to do so may lead the court or tribunal to infer that the discriminatory attribute alleged by the employee was a reason for the dismissal. So even if a valid reason and procedural fairness is not technically required, they will often be very important to demonstrate in order to defend a discrimination or breach of workplace rights claim.


Often when an employer is faced with information that suggests an employee may be guilty of serious misconduct, it is preferable that the employee in question is suspended while an investigation takes place. Taking this course is often advisable as if the employee has engaged in the alleged misconduct, it is prudent to remove the employee from the workplace.

An employer does not have a general right to suspend employees unless they are permitted to do so under a workplace agreement or where the employee is not covered by an industrial instrument or by an express written clause in the employment contract.

Typically, an employer will be able to suspend the employee pending an investigation into serious misconduct, provided that the employee is paid their normal remuneration during the suspension period. Suspension on full pay will normally be permitted, provided it is not for an unreasonable length of time.

Any investigation carried out by an employer, whether or not the employee is suspended, should always be undertaken without any unnecessary delay.


Once a decision has been made to dismiss the employee, termination of the employment and the meeting leading up to it should be documented in writing. Unfair dismissal laws require that the employee be notified of the reasons for the dismissal. In any event, it is good practice to expressly state in writing the reasons for the dismissal, as well as the effective date of termination.

It is generally not good practice to be evasive or too general about the reasons for the dismissal (even if unfair dismissal laws do not apply) as it may raise questions about the reasons for dismissal, allowing courts or tribunals to draw an inference that discriminatory reasons outlined above may have been part of it.

Where a dismissal is due to serious and wilful misconduct, an employee is not entitled to notice of termination or to a payment in lieu of notice in most circumstances. However, where a dismissal is not related to serious and wilful misconduct, an employer needs to ensure that the employee receives the appropriate notice period or pay in lieu of notice. The employee will also need to be provided with any accrued entitlements that are payable on the ending of the employment, such as annual leave and long service leave.

Employers also need to consider any obligations or processes set out in workplace agreements or workplace policies that may impact upon the dismissal of an employee. For example, it is common for workplace agreements to stipulate disciplinary processes that are to be followed prior to dismissing an employee. Failure to comply with these may expose the employer to an unfair dismissal claim or breach of the workplace agreement. Employers should also note that injunctions may be ordered for breaches of enterprise agreements made under the FW Act.


The employee will be entitled to at least the minimum period of notice or payment in lieu of notice stipulated in the FW Act. The notice period depends upon the employee's length of service. Employers should also check any applicable workplace instrument in the event that the notice period is higher than the minimum in the FW Act, in which case the notice provisions in that workplace agreement should be complied with.

Employers also need to check whether an employee may be entitled to a higher period of notice in accordance with their contract of employment. Where the employee has a written employment contract that expressly stipulates the period of notice to apply on termination, and it is higher than any legislative or workplace agreement minimums, then that express notice provision in the contract must be provided.

In some cases, employees may be entitled to reasonable notice (which again may be far higher than any minimums in legislation or workplace agreements). This might be the case when, for example, there is no written contract of employment, the written contract of employment does not provide for notice of termination or where, since the written contract was agreed to, there have been substantial changes to the employee's position, which may render the express notice in the initial contract irrelevant.

Employers need to be careful about these issues as reasonable notice in some cases, particularly for senior employees, may be significantly more than standard minimums.

Employers who pay an amount in lieu of notice should be careful. Unless the contract of employment expressly allows it, it is a breach of the contract.

Any payment in lieu of notice should also properly consider whether it is calculated on base salary or may need to include other benefits in the employment contract.


Where an employee's employment comes to an end because their position is redundant, the employee may be entitled to redundancy or severance pay in addition to any notice of termination or payment in lieu of notice. This entitlement may arise under the National Employment Standards in the FW Act, under an applicable award (including a modern award), workplace agreement, workplace policy or from the employee's contract. In the case of the employment contract, there may be an express provision entitling the employee to severance or redundancy pay or such a benefit may be implied or otherwise incorporated into the contract - for example, due to the existence of an applicable redundancy policy applying at the workplace.

An employer needs to provide the employee with the higher of any applicable redundancy pay entitlement in a written contract, workplace policy, under the FW Act or industrial instrument.

Employers should also keep in mind that in some cases, an employee is not entitled to redundancy or severance pay in the event that their position is made redundant - for example, if the employer has offered them or arranged suitable alternative employment. Employers need to carefully review the document that provides the redundancy pay entitlement to assess that issue.

Employers must also comply with any process or obligations set out in workplace agreements relating to consultation and exploring alternative positions in the case of genuine redundancies. Failure to do so may expose employers to a breach of those workplace agreements or to an unfair dismissal claim.


An employee is also entitled to accrued statutory entitlements such as annual leave and long service leave (if the employee reaches the relevant length of service threshold). Employers should carefully consider the rate of pay that employees ought to receive for leave accruals on termination, particularly when there are non-cash components of remuneration. Also, superannuation payable on final entitlements, including leave and payments in lieu of notice, is likely to be different, as will the tax payable (which will also depend on whether the dismissal relates to redundancy or not).

Australian Consumer Law

When dismissing an employee, employers also need to consider any potential for an employee to raise claims about breaches of the Australian Consumer Law (ACL) or misleading and deceptive conduct or misrepresentation. Typically these issues arise when an employee claims that they were promised certain benefits, which may not have been set out in any written agreements. For example, an employee may claim that they were promised certain bonuses, or that they were promised long-term or secure employment and that non-payment of these bonuses or dismissing them is in breach of those promises and constitutes misleading and deceptive conduct, misrepresentation or breach of the ACL by the employer.

Employers need to be careful to investigate whether any such promises may have been made, including at the time the employee was being recruited by the employer to commence employment.



Certain obligations on employees during their employment survive the ending of the employment, eg non-disclosure or use of confidential information and restraint of trade clauses (provided, in the case of restraint clauses, that they are express terms of a written employment contract). After dismissing an employee, employers should consider how to best minimise the risks of employees breaching those obligations. Employers may need to consider taking specific steps to protect confidential information that the dismissed employee had access to or may have retained. Similarly, where an employee is the subject of a restraint, employers should give consideration to the best way to ensure that the employee maintains that obligation.

Employers should also be aware that if they dismiss an employee contrary to the express provisions of the contract of employment, including failing to give the required notice of termination or other termination benefits, a court may regard this as a repudiation of the employment contract by the employer. If that occurs, a court may also conclude that other clauses in the employment contract such as restraint of trade clauses are no longer enforceable by the employer as the employer's breach of the contract shows an intention that the employer no longer wishes to be bound by the terms of the contract. This highlights the need to ensure that the dismissal of any employee is carefully implemented.


Our national workplace relations, employment and safety team has many expert lawyers who can help you update your policies and procedures, conduct training to assist compliance and advise you when dealing with complaints.

We have extensive expertise dealing with union rights of entry and can also help your organisation respond to claims made in Fair Work Australia, Federal Court or Federal Magistrates Court.


Can you establish that you have a sound, defensible reason related to the employee's conduct or capacity or due to redundancy to dismiss the employee, unrelated to any discriminatory attribute?

Do you need to suspend the employee if the possible reason may amount to serious misconduct?

Have you conducted a thorough investigation (where appropriate and necessary) into the grounds for the dismissal, by considering and adequately weighing up all relevant evidence?

Have you given the employee an opportunity to respond to the grounds for the possible dismissal, including giving the employee sufficient detail of the grounds?

If the grounds for dismissal are not serious misconduct, have there been previous recorded instances of the same or similar behaviour or performance by the employee and has the employee received warnings for these?

Were you required to enable the employee to have a support person at the meeting to consider dismissal and did you do so?

Have you identified and followed all policies and procedures relating to dismissal that apply to your workplace?

Have you considered any matters relevant to the decision, including the employee's length of service, employment record and relevant personal circumstances, before making any decision to dismiss?

Have you notified the employee of the reason for dismissal and that the employment has been terminated, identifying the effective date, in writing?

Have you paid the employee all appropriate entitlements on termination, including entitlements in industrial instruments, policies and any written contract of employment?

Do you need to take steps to protect the organisation's confidential information or property and enforce any restraint of trade?

© DLA Piper

This publication is intended as a general overview and discussion of the subjects dealt with. It is not intended to be, and should not used as, a substitute for taking legal advice in any specific situation. DLA Piper Australia will accept no responsibility for any actions taken or not taken on the basis of this publication.

DLA Piper Australia is part of DLA Piper, a global law firm, operating through various separate and distinct legal entities. For further information, please refer to

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions