If you’re managing staff in Australia, it’s essential to know how unfair dismissal is assessed. That’s where Section 387 of the Fair Work Act 2009 (Cth) comes in. It sets out the factors the Fair Work Commission must consider when deciding whether a dismissal was “harsh, unjust or unreasonable.”
In this guide, we’ll explain what Section 387 covers, how the Commission applies it in real cases, and the practical steps you can take to reduce your risk. We’ll also clarify common pain points for employers, including what counts as a valid reason, how “genuine redundancy” works, and what procedural fairness really looks like.
By the end, you’ll have a clear, confidence-boosting checklist for managing terminations the right way.
What Is Section 387 Of The Fair Work Act?
Section 387 lists the criteria the Fair Work Commission considers when deciding whether a dismissal was unfair. The Commission looks at all the circumstances of the case. The factors include:
- Valid reason: Whether there was a sound, defensible and well-founded reason related to the employee’s capacity or conduct.
- Notification: Whether the employee was notified of that reason.
- Opportunity to respond: Whether the employee had a genuine chance to respond before the decision to dismiss was made.
- Support person: Whether you unreasonably refused a request for a support person to be present at any discussion relating to dismissal. There’s no general duty to offer one proactively; the question is whether a reasonable request was refused.
- Performance warnings: If the dismissal related to unsatisfactory performance, whether the employee had been warned about that performance before dismissal.
- Size of the business: The size of the employer’s enterprise and how that affected procedures.
- HR resources: The presence (or absence) of dedicated HR expertise and how that affected the process followed.
- Other relevant matters: Any other facts the Commission considers relevant.
Two pillars matter throughout: having a substantive reason (capacity or conduct), and following a fair process. Even with a solid reason, a poor process can still result in an unfair dismissal finding.
Why Section 387 Matters For Employers
If you’re contemplating a termination, Section 387 is the lens through which your decision will be judged. A dismissal that falls short on these factors can lead to orders for compensation or reinstatement, along with time, stress and reputational damage.
Embedding these criteria into your HR practices will make your decision-making clearer, your documentation stronger and your workplace more respectful.
Who Can Make An Unfair Dismissal Claim?
Not every separation is covered by the unfair dismissal regime. An employee generally must:
- Have completed the minimum employment period (usually 6 months, or 12 months for a small business with fewer than 15 employees).
- Be covered by a modern award or enterprise agreement, or earn less than the high income threshold.
- Not be excluded because the dismissal was a genuine redundancy (more on this below).
Casual employees can be eligible if they worked on a regular and systematic basis and had a reasonable expectation of continuing employment. If you’re unsure about coverage or timing, it’s sensible to get specific advice before you proceed.
How The Commission Assesses Unfair Dismissal Under Section 387
In practice, the Commission steps through the Section 387 factors and weighs them in context. Here’s what that looks like on the ground.
1) Valid Reason (Capacity or Conduct)
A valid reason is one that is sound and related to the employee’s capacity (e.g. inability to perform the inherent requirements) or conduct (e.g. misconduct). Common examples include performance issues that are documented, repeated and not trivial; or misconduct such as serious breaches of policy.
Personal dislike, discriminatory grounds, or reasons unrelated to capacity or conduct are not valid reasons and will cut against you.
2) Notification And Opportunity To Respond
Before you make the decision to dismiss, the employee should clearly understand the concerns and have a real chance to respond. This typically means explaining the allegations or performance concerns, sharing the key evidence where appropriate, and genuinely considering what they have to say.
For alleged misconduct, you may need to investigate first and, in some cases, consider standing the employee down pending investigation if that’s permitted, necessary and reasonable in the circumstances.
3) Support Person Requests
The question is whether you unreasonably refused a support person when requested at a discussion relating to dismissal. You don’t have to offer one proactively, but if the employee asks, unreasonably refusing may weigh against you. Being flexible here is usually the safer path.
If the dismissal is for unsatisfactory performance (not serious misconduct), the Commission will consider whether the employee was previously warned. Well-drafted warnings, clear expectations and reasonable time to improve will support a fair process. A structured approach using clear communication and, where appropriate, a show cause process can help. Many employers use show cause letters to put concerns, evidence and potential outcomes on the table in writing.
5) Size And HR Capability
Smaller businesses may not have sophisticated HR systems. The Commission takes that into account, but still expects a fair and reasonable process. Keeping notes, being transparent and allowing a support person if requested go a long way.
Valid Reason vs Genuine Redundancy: What’s The Difference?
It’s important to separate “valid reason” under Section 387 from “genuine redundancy” under Section 389.
- Valid reason: This is about capacity or conduct. It’s assessed under Section 387 and goes to whether the dismissal was fair.
- Genuine redundancy (Section 389): This is a threshold question. If a dismissal is a genuine redundancy, an unfair dismissal claim is generally excluded. To be a genuine redundancy, the role must no longer be required due to operational changes, you must comply with any consultation obligations in an award or enterprise agreement, and redeployment within your business (or associated entities) must not be reasonable.
If a role is not genuinely redundant (for example, the job still exists or consultation didn’t happen where required), the dismissal isn’t excluded and the Commission may then assess it under Section 387. If you’re planning workplace change, tailored redundancy advice can help you manage consultation, redeployment and documentation correctly.
What Does Procedural Fairness Look Like In Practice?
Procedural fairness is about how you handled the situation, not just why. A fair process should be calm, transparent and well-documented.
- Clarity: Tell the employee what the issue is, why it matters and what information you’re relying on.
- Time to respond: Give a fair opportunity to consider the concerns and respond, including at a meeting. If they request it, don’t unreasonably refuse a support person.
- Genuine consideration: Keep an open mind. Consider their response and any mitigating factors (e.g. training gaps, health issues, workload, clarity of instructions) before deciding.
- Proportionate outcome: For performance matters, consider whether a warning or improvement plan is appropriate before you jump to dismissal. For alleged serious misconduct, ensure you have clear evidence and follow a careful investigation.
For investigations, set out the issue, gather facts, and give the employee a proper chance to be heard. For some situations, it will be appropriate to maintain pay and allow representation while you investigate, and in serious cases you may consider a temporary stand down if lawful and reasonable.
A Step-By-Step Dismissal Process For Employers
Every workplace and case is different, but this general roadmap aligns with Section 387 and will help you stay on track.
- Identify the issue: Is it capacity, conduct or a proposed restructure? Gather documents (e.g. performance reviews, emails, policy breaches).
- Plan the process: Decide the next step: a performance meeting, a warning, a show cause letter, an investigation interview or (for restructures) a consultation process. Where appropriate, prepare clear written correspondence.
- Communicate the concern: Explain the issue and the potential outcomes. If a meeting relates to dismissal, don’t unreasonably refuse a support person if requested.
- Hear the response: Let the employee address the concerns. Consider whether training, adjustments, further time or a different outcome is appropriate.
- Decide and inform: Make the decision with reasons. Communicate it respectfully, confirm in writing, and keep records.
- Give notice correctly: Provide the required notice (or, if appropriate, make a lawful payment in lieu of notice). For serious misconduct and summary dismissal, ensure the circumstances meet the threshold and the process was fair.
- Finalise entitlements: Process outstanding wages, accrued annual leave and any other lawful entitlements promptly. This is where a clear process for calculating final pay helps avoid disputes. If relevant, consider superannuation on termination payments.
Practical Documents That Help
Strong documentation supports a fair process and shows you acted reasonably:
- Employment Contract that sets expectations, duties and policies.
- Clear workplace policies (for example, a Workplace Policy) that outline standards of conduct and procedures.
- Well-structured correspondence, including warnings and show cause letters that capture the issue, the evidence and the possible outcomes.
- Investigation notes and meeting records so there’s a transparent paper trail.
Common Questions
Can I dismiss without a warning? For performance issues, the Commission usually expects prior warnings and a chance to improve. For serious misconduct (for example, theft or violence), summary dismissal can be justified if you have clear evidence and you’ve followed a fair process (including notifying the allegation and hearing a response).
Do I have to allow a support person? The test is whether you unreasonably refused a request for a support person at a discussion relating to dismissal. You don’t have to offer one if they don’t ask, but it’s best practice to be flexible if they do.
What if I run a small business? The Commission will consider your size and HR resources under Section 387. Processes can be simpler in small teams, but the core fairness steps still apply: clear reasons, a chance to respond, reasonable consideration and proper notice or pay in lieu.
Key Takeaways
- Section 387 sets out the factors the Fair Work Commission uses to decide if a dismissal was harsh, unjust or unreasonable.
- You need both a valid reason (capacity or conduct) and a fair process; getting either wrong can result in an unfair dismissal finding.
- Genuine redundancy is a separate test under Section 389; if a dismissal is a genuine redundancy, unfair dismissal is generally excluded.
- Support person obligations are limited to not unreasonably refusing a request at a discussion about dismissal.
- Plan your process, document it carefully, provide proper notice or payment in lieu, and finalise entitlements correctly to reduce risk.
- Well-drafted agreements and policies, including an Employment Contract and Workplace Policy, make it easier to follow fair procedures and resolve issues early.
If you would like a consultation on managing staff dismissals or employment law compliance, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.
