Australia: Termination Of Employment

When an employer ends the employment relationship with their employee, there is potential for the employee to make a number of claims against the former employer. Defending such claims can prove costly. As a result, the risks of any proposed termination should be carefully weighed in light of the individual circumstances and any applicable legislation. This information sheet provides employers with some basic information about the most common claims that can arise when employment is terminated:

  • Breach of Contract
  • Unfair Dismissal
  • Unlawful Termination
  • Freedom of Association
  • Claims under the Trade Practices Act
  • Anti-Discrimination
  • Workers' Compensation.

Breach of Contract

What is Breach of Contract?

When termination occurs, an employer must comply with the terms agreed in the employment contract. Failure to comply with the terms of an employment contract may give rise to an action for breach of contract by the employee. Damages in this context can be open-ended.

Express Terms of the Contract

A contract of employment will generally include express and implied terms. Express terms are those terms that have been specifically agreed upon (in writing or verbally) between the parties. For example, the base salary specified in a contract would be an express term of the contract.

Implied Terms of the Contract

The common law implies a number of terms into the employment relationship that are necessary for its proper operation. For example, an implied duty of fidelity on the employee. Implied terms can also arise by custom and practice where an employer has a history or tradition of acting in a particular way. The law may also imply a term into a contract where it is necessary to give business efficacy to the contract.

Reasonable Notice

Where no notice provision is contained in an employment contract, the common law may impose an obligation on the employer to give the employee reasonable notice of termination (or payment in lieu). What is 'reasonable notice' is an open-ended question and depends, amongst other things, upon the nature of the individual employment, the length of service, the age of employee etc. Failure to provide reasonable notice may give rise to a wrongful dismissal claim, which can prove to be very costly. (For senior employees, awards of damages for reasonable notice have been up to and sometimes in excess of 12 months' remuneration.)

Employment Policies

Policies or handbooks used in the employer's business may also form part of the employment relationship and create binding obligations on the employer. For example, policies concerning disciplinary processes may create binding obligations on the employer to act in a particular way. Noncompliance with these policy obligations can expose the employer to a significant claim for breach of contract.

Industrial Agreements & Awards

Industrial agreements and awards will create specific statutory obligations on an employer with regard to the employment relationship and also in relation to termination (eg notice periods and severance payments upon redundancy). There are dedicated government bodies that monitor compliance with industrial agreements and awards, such as the Workplace Ombudsman.

Unfair Dismissal

What is Unfair Dismissal?

A claim for unfair dismissal is based on the concept that an employer must give an employee 'a fair go all round' when terminating their employment. If an employer fails to do so then the termination may be considered by an industrial commission to be 'harsh, unjust or unreasonable' and therefore compensable.

When does it apply?

Unfair dismissal legislation exists at both state and federal levels. It is important to note that state unfair dismissal remedies are not available to many employees whose unfair dismissal rights on termination, if any, fall under the Workplace Relations Act 1996. The Workplace Relations Act 1996 applies to trading corporations and some other incorporated entities. This information sheet focuses on the Federal jurisdiction under the Workplace Relations Act 1996.

When is termination 'harsh, unjust or unreasonable'?

Key factors in determining if a termination is 'harsh, unjust or unreasonable' include:

  • Whether the employer had a valid reason for terminating the employment; and
  • Whether the employer afforded the employee procedural fairness in connection with the decision to terminate.

Exemptions from Unfair Dismissal

Under the Workplace Relations Act 1996, an unfair dismissal claim will not succeed where one or more of the following exclusions apply:

(a) The employer has 100 employees or less: In determining the number of employees, the calculation will include the employee whose employment has been terminated and any casual employee engaged on a regular and systematic basis for at least 12 months. Where an employer belongs to a 'corporate group' ,the calculation includes any 'related bodies corporate' as defined in the Corporations Act 2001.

(b) Termination occurred within the qualifying period: The legislation sets a default qualifying period of 6 months during which termination will not give rise to a claim for unfair dismissal. The qualifying period can be reduced or extended (if extending it is reasonable) by agreement of the parties at the commencement of the employment relationship.

(c) The employee is dismissed for genuine operational reasons or reasons that include genuine operational reasons: 'Operational reasons' are defined as 'reasons of an economic, technological, structural or similar nature' relating to the employer's business. Therefore, where genuine redundancy is a reason for termination, the employee will be prevented from succeeding in an unfair dismissal claim. Operational reasons need not be the only reason for termination, to qualify for this exclusion.

(d) Other exclusions also exist for other categories of employees: Employees engaged under fixed-term contracts or on contracts for a specified task, certain casual employees, seasonal employees and employees under traineeship agreements are also precluded from making an unfair dismissal claim. Non-award and nonindustrial agreement employees earning in excess of the jurisdictional limit on unfair dismissal claims are also precluded from making an unfair dismissal claim.

What remedies are available?

If the Industrial Relations Commission determines that the termination is 'harsh, unjust or unreasonable', it may make various orders including:

  • Re-appointing the employee to their original position;
  • Appointing the employee to another position with the same employer;
  • Where the employee obtains their job back or another position with the employer, compensation for the period out of work; and
  • Damages of up to 6 months' pay (to a maximum $32,000 for non-award employees as indexed by regulation - $53,200 from 1 July 2008).

Unlawful Termination

What is Unlawful Termination?

Unlawful termination is regulated by the Workplace Relations Act 1996. Unlawful termination occurs where: Employment is terminated " for a proscribed reason under the Workplace Relations Act 1996; or

  • The employer terminates the employment without providing the correct notice or pay in lieu of notice; or
  • The employer fails to notify the Commonwealth Employment Service (CES) of the proposed termination in certain circumstances.

Who can access Unlawful Termination?

Generally speaking, all employees in Australia irrespective of whether or not they are employed by constitutional corporations, can make a claim for unlawful termination on the grounds that they were terminated for a proscribed reason (see below). The various exclusions that apply to unfair dismissal (above) will also apply to preclude an employee from making an unlawful termination claim where the employer fails to give notice or notify the CES.

What are proscribed reasons for Unlawful Termination?

An employer must not terminate employment for a proscribed reason under the Workplace Relations Act 1996. Proscribed reasons in relation to unlawful termination include:

  • The employee has had a temporary absence from work because of illness or injury;
  • The employee is filing a complaint against an employer alleging violation of laws or regulations;
  • The employee's race, colour, sex, sexual preference, age, physical or mental disability, marital status, family responsibilities, pregnancy, religion, political opinion, national extraction or social origin;
  • The employee's refusal to negotiate in connection with, make, sign or extend, vary or terminate an AWA; or
  • The employee's absence from work during maternity leave or other parental leave.

What remedies are available?

If the court finds that an employer has dismissed an employee for a proscribed reason, it may make one or more of the following orders:

  • Impose a penalty on the employer of up to $10,000;
  • Order the employer to reinstate the employee; or
  • Award damages of up to 6 months' pay (to a maximum $32,000 for non-award employees as indexed by regulation).

If a court finds that an employer has failed to provide the correct notice to the employee, then it may award an amount equivalent to the amount that should have been paid in lieu of notice.

Freedom of Association

What is Freedom of Association?

Freedom of association under the Workplace Relations Act 1996 covers aspects of workplace law that protect against undue pressure, discrimination, victimisation and other forms of unlawful conduct, and operate to guarantee the rights of employees, independent contractors (and where relevant, employers). Such provisions apply, amongst other things, to termination of employment.

What type of behaviour is unlawful under Freedom of Association?

Under the freedom of association provisions, an employer must not terminate or threaten to terminate an employee for reasons that include what is known as a 'prohibited reason'. A prohibited reason includes such things as:

  • The employee participating in industrial action;
  • The employee giving evidence in industrial proceedings;
  • The employee participating in a secret ballot; or
  • The employee's entitlement to the benefit of an industrial instrument.

What remedies are available?

Where an employer has terminated an employee for a prohibited reason, the employee may obtain an order from the court for reinstatement. They may also be entitled to an award of damages. The court may also impose a fine on the employer.

Claims under the Trade Practices Act

The Trade Practices Act 1974 provides potential remedies for terminated employees of corporations in some situations including:

  • Deceptive and misleading conduct by the employer - Section 52; or
  • Representations in relation to employment by the employer - Section 53B.

Claims under Sections 52 and 53B are directed at conduct that is 'misleading or deceptive'. Employers who do not deliver on representations made to employees (eg about the duration of employment, future remuneration or safety) may face claims under Section 52 or Section 53B of the Act.

Anti-Discrimination Legislation

Grounds for Discrimination claims in employment

Legislation exists at both state and federal level to prohibit discrimination in relation to employment on a number of grounds. Discrimination occurs where a person is treated less favourably than another on the basis of a proscribed ground which can include: race, colour, sex, sexual preference, age, disability, medical record, impairment, marital status, pregnancy, potential pregnancy, family responsibilities, criminal record, trade union activity, political opinion, religion, national extraction or social origin. Where an employer dismisses an employee by reason of any of these grounds, the employer may be liable under anti-discrimination legislation.

Disability Discrimination and the 'Inherent Requirements' exemption

Generally speaking, it is not unlawful to terminate the employment of a person with a disability if after taking into consideration the person's training, qualifications and experience relevant to the position, the employee is unable to perform the inherent requirements of their position. The inherent requirements are the essential or core components of the employee's position, however each situation must be carefully assessed on its own merits, and it is recommended that professional advice be sought.

What remedies are available?

The following remedies are available when a Federal court finds unlawful discrimination:

  • An order requiring a employer to perform any reasonable act or course of conduct to redress any loss or damage suffered by an employee;
  • An order requiring an employer to re-employ the employee;
  • An order requiring an employer to pay damages to an employee to compensate for any loss or damage suffered because of the conduct of the employer. (Note that whereas the federal jurisdiction has no ceiling for damages where an employer is liable, the NSW jurisdiction has set a $40, 000 limit for awards of damages); and
  • An order requiring an employer to vary the termination of a contract or agreement to redress any loss or damage suffered by an applicant.

Workers' Compensation Legislation

Requirement of 6 months to pass before terminating an employee under Workers' Compensation Legislation

In addition to observance of other legislative requirements, NSW employers may be guilty of an offence under the Workers' Compensation Act 1987 (NSW) if the employer dismisses an employee who is on workers' compensation within 6 months of the date the employee became unfit for work.

Employee can apply to their former employer for reinstatement

The Workers' Compensation Act 1987 provides that an employee who is dismissed due to a workplace injury may in certain circumstances apply to their former employer for reinstatement to a position of the kind that the employee held at the time that they became unfit because of the workplace injury. If an employer does not immediately reinstate the employee to an equivalent position, the employee may apply to the Industrial Relations Commission for reinstatement.

Workers' Compensation and claims by employees for unlawful termination

Recent case law suggests that receipt by an employee of workers' compensation payments may operate to deem absence from work as temporary absence or illness, thereby exposing employers who terminate such employees to claims for unlawful termination.

Swaab was recently named winner 'Best Law Firm in Australia (Revenue < $20m)' and 'Attribute Award for Exceptional Service (Australia Wide)' and at the 2008 BRW- Client Choice Awards.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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”

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