Ending someone’s employment is one of the highest-risk decisions you’ll make as an employer.
Even when you have genuine performance, conduct, or operational reasons, a termination can quickly turn into a legal dispute if the process is rushed, documentation is thin, or the reason (or timing) is connected to a protected right.
If you’re searching for unlawful termination in Australia, chances are you’re trying to do the right thing while protecting your business from claims, penalties, and reputational damage. The good news is that with a clear process, the right paperwork, and a focus on fairness, you can significantly reduce your risk.
Below, we’ll walk you through what unlawful termination means in Australia from an employer perspective, how it differs from unfair dismissal, common triggers, and a practical roadmap to exit staff more safely.
What Is Unlawful Termination In Australia (From An Employer Perspective)?
In Australia, unlawful termination is a specific concept under the Fair Work Act that broadly involves ending an employee’s employment for certain prohibited reasons. There’s also a related (and commonly used) pathway called general protections (also known as “adverse action”), which can cover dismissals and other detrimental action taken for prohibited reasons.
For small businesses, the practical takeaway is similar in both areas: you can terminate for legitimate reasons (like ongoing poor performance or serious misconduct), but you can’t terminate because of a protected attribute or because someone exercised a workplace right.
Unlawful termination risk is less about whether you “meant well” and more about whether:
- the reason for termination is prohibited,
- the decision appears connected to a protected matter (like a complaint or taking leave), and
- you can prove a lawful, evidence-based reason and a fair process.
Common “Prohibited Reasons” That Can Make A Termination Unlawful
While the categories can be technical, these are common risk areas that often show up in small business disputes:
- Workplace rights (for example, the employee made a complaint, asked about their pay, requested flexible work, or raised a safety issue)
- Temporary absence due to illness or injury (this is a regulated area and depends on factors like length of absence and whether required evidence, such as medical certificates, was provided)
- Discrimination-related reasons (for example, termination connected to pregnancy, parental responsibilities, disability, race, sex, age, religion)
- Industrial activity (for example, union involvement)
Even if you have a separate “real” reason (like performance), you still need to manage the process carefully so it doesn’t look like the protected reason was a factor.
Unlawful Termination vs Unfair Dismissal: Why The Difference Matters
One of the biggest sources of confusion for employers is that “unlawful termination” is often used as a catch-all phrase. In practice, employers may be dealing with (1) an unfair dismissal risk, (2) an unlawful termination risk (in the technical sense), and/or (3) a general protections (adverse action) risk.
As a practical employer checklist:
- Unfair dismissal is usually about whether the dismissal was harsh, unjust or unreasonable (often focusing on procedure and proportionality).
- Unlawful termination / general protections issues are about whether the dismissal happened for a prohibited reason (for example, because someone exercised a workplace right or due to discrimination).
Why does this matter?
- You might be a small business employer and think “unfair dismissal doesn’t apply to us” (or that you have a stronger position under the Small Business Fair Dismissal Code), but you can still face general protections claims.
- General protections claims can move fast, feel more serious, and can involve reverse onus issues (meaning you may need to show you terminated for lawful reasons).
In other words, even if you believe an unfair dismissal claim wouldn’t succeed, you still need to manage the unlawful termination and general protections risks properly.
Where Small Businesses Get Caught Out: High-Risk Termination Scenarios
Most small business owners don’t set out to breach employment laws. Problems usually arise because the business is busy, the employment relationship is strained, and the termination happens quickly after a “trigger event”.
Here are some common scenarios where unlawful termination claims in Australia can arise (and where we recommend slowing down and getting advice early).
1. Termination After A Complaint Or Workplace Issue
If an employee has recently complained about pay, bullying, rostering, safety, or management decisions, terminating them soon after can look like retaliation - even if you had separate concerns.
Practical risk-reducer: document the legitimate concerns before the complaint (where possible), and ensure your termination decision is based on evidence, not frustration.
2. Termination During Or After Sick Leave
Ending employment around sick leave is risky because it may be alleged that the termination was due to illness, injury, or a temporary absence.
Also note that “temporary absence” has a specific meaning under workplace laws and regulations, and whether an absence is protected can depend on factors like how long the employee has been away and whether they provided required evidence (such as medical certificates).
If the issue is capacity (i.e. they can’t do the inherent requirements of the role), you generally need a careful process: medical information, consultation, and clear consideration of alternatives. “Inherent requirements” is also a technical concept and often requires you to consider whether the employee can perform the core duties of the role, including with any reasonable adjustments (where applicable).
If you need to pause a situation while you investigate allegations, a structured approach matters - and in some cases employers consider standing down an employee pending investigation (where it’s legally available and appropriate).
3. Termination Around Pregnancy, Parental Leave, Or Carer Responsibilities
Timing matters. If someone is pregnant, has requested parental leave, or is dealing with caring responsibilities, a termination can quickly raise discrimination issues if the reasons and process aren’t handled carefully.
Practical risk-reducer: keep your communications neutral and factual, avoid “off the record” comments, and ensure decisions are anchored to role requirements and documented performance expectations.
4. “It’s Not Working Out” During Probation
Probation can make termination simpler, but it doesn’t make it risk-free.
You still need to avoid prohibited reasons and you should still follow a fair process proportionate to the situation. If you’re unsure what you can and can’t do, termination during probation is a common area where getting the steps right early can save you time later.
5. “Mutual” Exits That Aren’t Truly Mutual
Sometimes employers try to avoid risk by encouraging a resignation. If the employee resigns because they felt they had no real choice, that can still lead to disputes (including arguments about forced resignation).
Practical risk-reducer: if you’re exploring a negotiated exit, keep it professional, avoid threats, and consider a properly documented separation arrangement.
A Safer Termination Process: Steps To Reduce Unlawful Termination Risk
There isn’t one perfect template for all workplaces, but there is a consistent approach that reduces risk: evidence, procedural fairness, and well-managed communication.
Here’s a process we often recommend small businesses follow (and tailor) when ending employment.
1. Identify The Real Reason (And Check It’s Lawful)
Before you do anything else, get clear on the lawful reason for termination. Common lawful reasons include:
- ongoing underperformance (after support and warnings)
- misconduct or serious misconduct
- genuine redundancy
- capacity issues (with medical evidence, where relevant)
Then ask a simple but critical question: could the employee argue the termination is connected to a protected attribute or workplace right?
If the answer is “maybe”, don’t panic - but do slow down, gather evidence, and consider getting advice before any final decision is communicated.
2. Investigate And Document (Especially For Misconduct)
If misconduct is involved, take the time to investigate properly. A rushed decision is a common reason terminations unravel later.
Depending on what happened, investigation steps might include:
- collecting written statements
- reviewing CCTV or system logs (lawfully)
- interviewing witnesses
- putting allegations clearly to the employee and giving them a chance to respond
In many cases, a formal letter helps you communicate the issues and the potential consequences clearly. This is where show cause letters can be useful to structure the process and demonstrate procedural fairness.
3. Provide Procedural Fairness (Warnings, Support, Opportunity To Respond)
Procedural fairness doesn’t always mean multiple warnings. What is “fair” depends on the circumstances (for example, serious misconduct may justify faster action).
But for performance management, your risk generally reduces when you can show you:
- explained what the issue is (with examples)
- set clear expectations
- gave a reasonable opportunity to improve
- provided support or training where appropriate
- gave the employee a chance to respond before making a final decision
Fairness is also about consistency - if you’ve handled similar issues differently for other staff, be ready to explain why this case is different.
4. Check Notice, Final Pay, And Your Contract Terms
Even if your reason is lawful, disputes often escalate because final pay and notice are mishandled.
Before termination, confirm:
- minimum notice requirements (contract, award, enterprise agreement, and the National Employment Standards)
- annual leave payout requirements
- any redundancy pay obligations (if applicable)
- superannuation treatment for relevant components
Some businesses prefer to end the relationship quickly by paying out notice rather than having someone work it. Where appropriate and permitted, payment in lieu of notice can reduce operational risk - but you still need to apply it correctly and in line with the contract and workplace laws.
5. Communicate The Termination Professionally (And Keep Records)
How you communicate matters. Termination meetings should be calm, factual, and short. Avoid debating history or venting frustrations.
We usually recommend:
- have a second manager present where possible
- explain the decision and key reasons succinctly
- confirm notice/final pay arrangements in writing
- provide information about return of property, handover, and access removal
Then keep a file note of what was said and keep all supporting documents organised. If a claim is lodged, your written records are often your strongest protection.
Legal Documents And Systems That Help Prevent Claims
One of the best ways to reduce unlawful termination risk is to build a workplace that runs on clear expectations and consistent processes. That starts with having the right documents in place before there’s a problem.
Here are the foundations we commonly help small businesses set up.
- Employment Contract: A tailored Employment Contract sets expectations around duties, hours, performance, confidentiality, notice, and termination processes (within legal limits).
- Workplace Policies: Policies help you enforce standards consistently (for example, conduct, bullying and harassment, leave processes, device use, social media, surveillance where relevant).
- Performance Management Templates: Having consistent templates for warnings, improvement plans, and meeting notes makes it easier to be fair and to prove it later.
- Training For Managers: In small teams, a single poorly-worded message can create legal risk. Basic training in documentation and communication can prevent expensive mistakes.
If you’re growing your team, getting practical advice early from an employment lawyer can help you set up systems that scale - so you’re not rebuilding your HR approach every time you hire (or exit) someone.
Don’t Forget The “Non-Legal” Triggers That Still Create Legal Risk
Many termination disputes start because the employee feels blindsided or disrespected, even if the business believes it did the right thing.
To reduce the chance of a claim being lodged in the first place, it helps to:
- give feedback early (don’t save it for termination day)
- be consistent between employees
- keep communication factual and professional
- avoid informal promises you can’t keep (“Your job is safe”)
These steps won’t eliminate legal risk on their own, but they make it far easier to manage issues before they escalate.
When Should You Get Legal Advice Before Terminating?
It’s not always necessary to get advice for every termination, especially when the facts are clear and the process is well-established. But there are particular “red flag” moments where legal advice can make a big difference.
Consider getting advice before you terminate if:
- the employee recently made a complaint or exercised a workplace right
- the employee is on (or recently returned from) sick leave, parental leave, or a workers’ compensation-related absence
- there are discrimination-related risk factors (for example, pregnancy, disability, age)
- you suspect the employee might lodge a claim (or they’ve threatened one)
- you’re unsure whether the issue is performance, misconduct, or capacity (each has different best-practice steps)
- you’re considering redundancy and want to confirm it’s a genuine redundancy (and correctly handled)
Often, a short advice session helps you map out the cleanest path: what to document, what to say (and not say), and what steps to take so you can reach a decision confidently.
Key Takeaways
- Unlawful termination in Australia generally involves ending employment for a prohibited reason, including reasons linked to workplace rights or discrimination-related attributes (and these issues may also arise as general protections/adverse action claims).
- Unlawful termination risk is different from unfair dismissal risk - and small businesses can still face claims even where unfair dismissal protections may be limited.
- High-risk scenarios include terminations following complaints, during/after sick leave, around parental responsibilities, and poorly handled probation exits.
- A safer termination process includes identifying a lawful reason, investigating and documenting, providing procedural fairness, and getting notice/final pay right.
- Strong foundations like tailored employment contracts, clear policies, and consistent performance management templates reduce disputes and make exits easier to manage.
- If there are red flags (complaints, leave, discrimination risk factors, or uncertainty about the reason), getting legal advice early can materially reduce cost and stress.
Disclaimer: This article is general information only and does not constitute legal advice. Because employment law is fact-specific (including the rules around temporary absence, capacity, and “inherent requirements”), you should get advice for your circumstances.
If you’d like help managing a termination process or reducing unlawful termination risk in your business, you can reach Sprintlaw at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.
