Unfair dismissal claims are one of the biggest employment law risks for Australian businesses. They can cost employers financially, harm workplace morale, and damage reputation.
For employers, knowing how to defend an unfair dismissal claim (and how to avoid one in the first place) is essential.
This article, written by our unfair dismissal lawyers explains the law, outlines valid reasons for dismissal, and provides practical steps for building a strong defence.
Key Takeaways
Employers must have both a valid reason and follow a fair process when dismissing an employee.
The Small Business Fair Dismissal Code provides protections to small employers if applied correctly.
Documenting employee performance, policies, and disciplinary actions strengthens a defence.
Acting consistently across staff reduces risk of claims.
Early legal advice can protect your business and improve your position if a claim arises.
What is Unfair Dismissal?
Under the Fair Work Act 2009 (Cth), an employee may bring a claim if they believe their termination was harsh, unjust or unreasonable.
A dismissal might be considered unfair if:
There was no valid reason (e.g. misconduct wasn’t proven, or performance wasn’t poor).
The employee was not given a chance to respond.
Company procedures weren’t followed.
Similar cases were handled differently for other staff.
Valid Reasons Employers Can Rely On
A key defence to an employee’s unfair dismissal claim is that the dismissal was not unfairly instigated by the business. To do this, employers must demonstrate that the dismissal was based on a legitimate, valid reason.
Set out below are some of the valid reasons that an employer can end their staff’s employment.
1. Serious Misconduct
Termination of employment may be justified if an employee has engaged in behaviour that is a serious breach of company policy. For this type of dismissal, documenting incidents of misconduct and following disciplinary procedures is fundamental for employers to prove the dismissal was fair.
Examples of serious misconduct can include:
- physical violence
- fraud or theft
- breach of health and safety laws
2. Genuine Redundancy
Another fair reason for dismissal is genuine redundancy. Employers may need to show that the dismissal was part of a legitimate business restructure or downsize of operations.
This involves following proper redundancy processes and ensuring that:
- the role is genuinely no longer required to be performed by any one person
- the role no longer exists
- any consultation requirements have been followed
You can learn more about genuine redundancy and restructuring by reading our article.
3. Incapacity to Perform the Role
Termination can also occur if an employee is unable to perform their job due to illness or injury. This must be handled sensitively and in compliance with applicable laws.
We recommend that employees are offered a suitable alternative role if one is available.
Employers need to be careful that they’re not showing discriminatory behaviour when dismissing employees for this reason. The dismissal must only arise because of the inability to perform the requirements of the role.
4. Small Business Fair Dismissal Code
Small employers can rely on the Small Business Fair Dismissal Code if dismissal procedures are followed. This provides extra legal protection.
Procedural Fairness
Even if there is a valid reason, dismissal can still be ruled unfair if the process wasn’t fair. Employers should:
Investigate thoroughly before deciding.
Allow the employee to respond to allegations.
Permit a support person at disciplinary meetings.
Apply policies consistently across the workforce.
Failure to do so often results in the dismissal being found unfair (even when a valid reason exists).
You can learn more about unfair workplace investigations in our article.
Preparing Your Defence
If an unfair dismissal claim is made, employers should take immediate steps:
1. Gather Evidence
Record keeping is important to help you defend your actions if you face an unfair dismissal claim. Collect all relevant documentation, including:
- employment contracts
- employee handbooks and policies
- records of performance reviews and disciplinary actions
- contemporaneous (written around the time of the conversation) file notes
- witness statements from other staff
- correspondence related to the dismissal, such as documents provided to the dismissed employee
2. Consult Legal Counsel Early
Engaging early with a lawyer can provide valuable guidance on the specific legal requirements and nuances of the case. They can help formulate a strong defence strategy tailored to the situation.
3. Review Policies and Procedures
Ensure that your businesses internal policies are up to date and in compliance with current employment laws. Again, regular training for HR and management staff on these policies or procedures to follow can help prevent unfair dismissal claims.
4. Consider Settlement Options
In some cases, it may be better to settle the claim rather than go through a lengthy legal process. Employers should weigh the potential costs and reputational risks.
If you have any questions about unfair dismissal claims or need assistance with an ongoing case, please do not hesitate to contact us. Our experienced legal team is here to help you navigate employment law issues effectively.
Case Law Examples
Emery v City of Stirling - Procedurally Unfair
Mr Emery was dismissed by the City of Stirling for allegedly modifying vehicle air-conditioning units without permission. He argued he had approval and that the investigation was flawed.
The Fair Work Commission initially found the dismissal unfair due to lack of procedural fairness and ordered reinstatement.
On appeal in City of Stirling v Kevin Emery [2018] FWCFB 2279, the Full Bench overturned this decision. It held that the deputy president had denied the employer procedural fairness by making findings (such as suggesting a supervisor “had something to hide”) without giving the City of Stirling the chance to respond.
Lesson: Procedural fairness must be upheld not only by employers during investigations, but also by decision-makers. Even valid reasons for dismissal can be undermined if the process is unfair.
Julie Budgen v Verifact Traffic Pty Ltd – Afforded Fair Procedures
Ms Budgen claimed she was unfairly dismissed from Verifact Traffic.
Ms Budgen worked for Verifact Traffic as a Traffic Controller. Verifact Traffic terminated her employment following an investigation which identified discrepancies in the recording of her shift data. She was terminated following a show cause process for serious misconduct.
Ms Budgen claimed that:
- the dismissal was harsh
- there were flaws in the investigation
- she was not afforded procedural fairness
- she did not have an opportunity to address the allegations
Outcome: The Commission found that she was afforded procedural fairness, that she did not deny the incorrect time recording and was not remorseful. No remedy was awarded to Ms Budgen.
David Sharp v Patrick Stevedores Holdings Pty Ltd – Not a Genuine Redundancy and Unfair
Mr Sharp’s position was made ‘redundant’ by his employer.
The employer asserted that Mr Sharp’s dismissal was a case of genuine redundancy. They claimed that it would not have been reasonable for Mr Sharp to have been redeployed into another position as suitable positions had been filled.
The Commission established that this was false. In fact, the employer did have suitable positions for Mr Sharp to be reasonably deployed. His dismissal was made in contravention of the employer’s policies and procedures and made the dismissal unreasonable. The dismissal of Mr Sharp was not a case of genuine redundancy, and was found to be unfair.
Outcome: The employer was ordered to reinstate Mr Sharp and restore lost pay.
Employer’s Checklist for Defending an Unfair Dismissal Claim
Before defending a claim in the Fair Work Commission, make sure your business has:
A valid reason for dismissal (misconduct, redundancy, incapacity, or Code compliance).
Evidence of procedural fairness (investigation, warnings, chance to respond, support person allowed).
Consistent application of workplace policies across all staff.
Employment contracts, policies, and performance records on file.
Contemporaneous notes, emails, and correspondence related to the dismissal.
Evidence that redeployment or alternatives were considered (where relevant).
Legal advice obtained early to guide your defence strategy.
A review of whether settlement options may be more cost-effective than litigation.
Frequently Asked Questions
How can an employer defend an unfair dismissal claim?
By showing there was a valid reason for dismissal, that fair procedures were followed, and that records support the employer’s decision.
What is the Small Business Fair Dismissal Code?
It’s a code under the Fair Work Act that sets out simplified dismissal rules for small businesses. Compliance with the Code can be a complete defence.
What happens if an employer loses an unfair dismissal claim?
The Fair Work Commission may order compensation (capped at six months’ pay), reinstatement of the employee, or both.
How long does an employee have to make an unfair dismissal claim?
Employees must lodge an application within 21 days of dismissal.
See our article on the 21-day time limit for unfair dismissal claims to learn more.
Should employers settle unfair dismissal claims?
Settlement may save costs, time, and reputational damage. Whether to settle depends on the merits of the case, strength of the defence and risks of continuing.
Do small businesses face the same unfair dismissal rules as large employers?
Small businesses must still meet minimum standards but can rely on the Small Business Fair Dismissal Code for additional protection.
Defending an unfair dismissal claim requires preparation, consistency, and compliance with workplace laws. Employers who understand their obligations (and act early with legal guidance) are far better placed to protect their business.
