Dismissal of an employee that is carried out by an employer without sufficient or acceptable reason and/or without the employer following proper procedure may be declared an unfair dismissal by an industrial tribunal and reinstatement or compensation may be ordered. Eighty per cent of all unfair dismissal claims are settled either prior to, or at, conciliation and usually involve a payout to an employee.

Note the relevance of the unlawful dismissal provisions in the broad context of dismissals.

Having a valid reason for dismissal doesn't necessarily mean the termination was fair. When considering unfair dismissal claims, the Fair Work Commission must also determine if the dismissal was harsh, unjust or unreasonable – see Unfair Dismissal.

There is a threshold remuneration level over which a category of non-award employee is excluded from the unfair dismissal provisions of the Fair Work Act; this is varied each year in line with the CPI.

Employees who fail to lodge unfair dismissal applications within the 21-day time limit must establish 'exceptional circumstances' to be allowed to continue.

Preventing unfair dismissal claims requires clear and consistently applied performance management policies and practices, supported by training and coaching of managers and appropriate documentation processes. Training and coaching of managers should cover: managing problems when they arise; ensuring compliance with organisation policies and practices; and taking proactive steps that can hopefully avert the need for dismissal in the first place. Legally enforceable employment documents and formal Fair Work Commission orders can all impact on the outcome of unfair dismissal litigation.

This section provides an overview of the key aspects of the unfair dismissal provisions of the Fair Work Act as well as how to avoid dismissal problems. Employee warnings are also discussed.