Termination of Employment Contracts in Australia

1. Grounds for Termination

Dismissal with Notice

A performance related dismissal requires the giving of notice, or payment in lieu of notice if the payment in lieu is allowed by the contract itself. “Notice” refers to the period of notice that is necessary to terminate the contract.

Summary Dismissal

In order to summarily dismiss an employee (immediately without notice), the employee’s misconduct must be willful and demonstrate that the employee has disregarded an essential condition of the contract of employment.

Remedies for Unfair Contracts

A party to an applicable contract for services may apply to the Federal Court or the Federal Circuit Court to determine whether the contract is “unfair” or “harsh”. The court has the power to vary or set aside the contract, or provisions within the contract, but does not specifically have the power to award compensation.

2. Separation Agreements

Where an employee, whose employment has terminated (for whatever reason), receives a payment, which is higher than the employee’s minimum legal entitlements, it is almost always advisable to seek that a separation agreement (commonly known as a deed of release in Australia) be executed by the employee in exchange for that additional payment.

The following terms are standard in a separation agreement:

  • release and indemnity;
  • non-disparagement obligations; and
  • confidentiality obligations.

3. Remedies for employee seeking to challenge wrongful termination

Wrongful Dismissal

The common law action of “wrongful dismissal” is available to all employees. However, due to the cost of pursuing a claim in the civil courts, it is not often pursued. Those employees who are eligible to pursue a claim of “unfair dismissal” will generally choose that option, as it is a much cheaper and quicker course of action. Damages for wrongful dismissal can in some circumstances be limited to the amount of notice provided in the employee’s contract of employment or, if no period of notice is specified, “reasonable notice”.

Fair Work Act: Unfair Dismissal

A dismissed employee may apply to the FWC for relief on the basis that his or her dismissal was “harsh, unjust or unreasonable”. This is commonly known as an unfair dismissal claim.

For more information on these articles or any other issues involving labour and employment matters in Australia, please contact Michael Harmer, Partner at Harmers Workplace Lawyers ( at
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