Unfair Dismissal in Australia: Eligibility, Deadline and Compensation (FY2026-27)

Unfair dismissal under the Fair Work Act 2009 (Cth) lets an eligible employee challenge a dismissal that was harsh, unjust or unreasonable. Applications must reach the Fair Work Commission within 21 days, and compensation, the fallback remedy, is capped at $95,050 for FY2026-27.

This article addresses unfair dismissal under the Fair Work Act 2009 (Cth) Part 3-2, which applies nationally to employees in the federal workplace relations system, information current as at 19 July 2026. It does not address general protections claims, covered on recordinglaw.com's general protections and adverse action guide, which has a different legal test despite sharing the same 21-day deadline, or state-based long service leave.

What Is Unfair Dismissal

Unfair dismissal is a specific statutory claim under Part 3-2 of the Fair Work Act 2009 (Cth). An eligible employee who has been dismissed can apply to the Fair Work Commission (FWC) for a remedy if the dismissal was "harsh, unjust or unreasonable" (Fair Work Act 2009 (Cth) s 387). The FWC must weigh a defined list of factors under s 387, including whether there was a valid reason related to the person's capacity or conduct, whether the person was notified of that reason and given an opportunity to respond, any unreasonable refusal by the employer to allow a support person, and, for a dismissal related to unsatisfactory performance, whether the person had been warned about it beforehand. No single factor is decisive; the FWC weighs the whole process and the reason together. This is a fairness-of-process-and-reason test, distinct from the general protections test of whether adverse action was taken for a prohibited reason.

Who Is Eligible: The Minimum Employment Period

An employee must have completed a "minimum employment period" before they can bring an unfair dismissal claim. Under s 383, that period is 6 months for most employers, or 12 months where the employer is a small business employer. A small business employer is defined in s 23 as one that employs fewer than 15 employees at the relevant time. The head count includes all full-time and part-time employees and any regular casual employees, associated entities are counted as a single employer, and the dismissed employee (and any others being dismissed at the same time) is included in the count, not excluded from it. That head-count rule means a business that looks small in day-to-day terms can still fall outside the small business definition once related entities and regular casuals are added in.

The Earnings Bar for Employees Not Covered by an Award or Agreement

A separate exclusion applies to higher earners. If a dismissed employee is not covered by a modern award and no enterprise agreement applies to their employment, they are excluded from the unfair dismissal jurisdiction if their annual rate of earnings exceeds the high income threshold, which is $190,100 for a dismissal taking effect on or after 1 July 2026, up from $183,100 for FY2025-26. The threshold re-indexes every 1 July, and the figure that matters is the one in force immediately before the dismissal, not the figure current when a claim is later assessed. Employees who are covered by an award or an enterprise agreement are not excluded by this earnings bar, regardless of how much they earn, because award or agreement coverage is itself what keeps the unfair dismissal jurisdiction open to them.

The Small Business Fair Dismissal Code

Employers that are small business employers, under the same fewer-than-15-employees definition used for the minimum employment period, have access to the Small Business Fair Dismissal Code. If a small business employer dismisses an employee in a way that is consistent with the Code, the dismissal is taken to have been fair, regardless of how the FWC would otherwise have weighed the s 387 factors. The Code covers both summary dismissal for serious misconduct and dismissal after a warning process for lesser conduct or performance issues, and the FWC publishes a checklist small employers can use to document their compliance with it. Whether a specific dismissal actually complied with the Code, rather than merely being labelled that way, is itself a question the FWC decides on the evidence.

The 21-Day Deadline

An unfair dismissal application must be made within 21 days after the dismissal took effect (s 394(2)(a)). This is the same 21-day period that applies to a general protections dismissal application; the two jurisdictions share the same statutory timeframe even though the underlying test is different. The FWC can only allow a further period where it is satisfied there are exceptional circumstances, taking into account the reason for the delay, whether the person became aware of the dismissal only after it took effect, action taken to dispute the dismissal, prejudice to the employer, the merits of the application, and fairness as between the applicant and others in a similar position (s 394(3)). Missing the 21-day window is one of the most common reasons a claim never gets heard on its merits, and an extension is the exception, not something to plan around.

What Happens After You Apply

Once an application is lodged, the FWC typically first checks jurisdiction, whether the applicant is eligible and the application was made on time, before moving to conciliation, an informal, confidential conference intended to help the parties reach their own resolution without a formal hearing. Most unfair dismissal matters that proceed past the jurisdictional stage resolve at or after conciliation. Matters that do not settle proceed to arbitration, a hearing or determination on the papers, where a Commission member decides whether the dismissal was unfair and, if so, what remedy should follow.

Remedies: Reinstatement Is the Primary Remedy, Compensation the Fallback

If the FWC finds a dismissal was unfair, the Fair Work Act treats reinstatement to the person's old position, or an equivalent one, as the remedy it must consider first. Compensation is only available where the FWC is satisfied that reinstatement is inappropriate, for example because the employment relationship has broken down irretrievably. Where compensation is ordered, s 392 sets strict boundaries around the amount. The FWC weighs listed factors including the effect an order would have on the viability of the employer's enterprise, the person's length of service, the remuneration the person would likely have received had they not been dismissed, their efforts to mitigate the loss, and any earnings already received or reasonably likely to be received during the relevant period. Misconduct that contributed to the dismissal reduces the amount the FWC would otherwise order. Two limits apply on top of that assessment: the compensation ordered cannot include any component for shock, distress, humiliation or other analogous hurt caused by the manner of the dismissal (s 392(4)), and the total amount cannot exceed the lesser of 6 months' pay or half the high income threshold immediately before the dismissal, which is $95,050 for a dismissal taking effect on or after 1 July 2026.

Application Fee

Lodging an unfair dismissal application with the FWC costs $92.70 for FY2026-27. The fee can be waived where the FWC is satisfied that paying it would cause the applicant serious financial hardship. The fee is separate from, and much smaller than, any potential remedy, and is not refundable simply because a claim is later unsuccessful, although the FWC has discretion over costs orders in limited circumstances such as a party acting unreasonably in the proceedings.

Unfair Dismissal at a Glance

This is a different structure from a general protections claim over the same dismissal, which has no compensation cap and puts the onus on the employer once the applicant establishes the adverse action and the alleged reason. Where a dismissal was also connected to a genuine redundancy, see recordinglaw.com's guide to redundancy pay in Australia; the separate entitlement to notice of termination applies regardless of whether a dismissal is later found to be unfair.

This article provides general legal information about the Fair Work Act 2009 (Cth) and, where noted, state and territory long service leave legislation, current as at 19 July 2026. It is not legal advice and does not account for your individual circumstances. Figures are stated for the 2026-27 financial year and are re-indexed on 1 July each year; the applicable figure for a dismissal or termination is usually the one in force on the date it took effect, not the date you read this article. For advice about a specific situation, consult a legal practitioner admitted in the relevant Australian state or territory.