- Who is bound and who is protected
- The trigger: a dismissal for a prohibited reason
- The temporary absence rule: what counts as protected illness
- Who can actually bring a claim: the eligibility gate
- How a claim runs: 21 days, the Commission, then arbitration or court
- What a contravention costs
- Where the traps hide: overlaps and edge cases
- Where a lawyer helps
- The reason, not the process, is what a court examines
Most dismissal conversations in small business start and end with unfair dismissal. But the Fair Work Act 2009 (Cth) (the Act) contains a second, stricter rule that sits underneath everything else. Section 772 says an employer must not terminate an employee's employment for one or more of a list of prohibited reasons, or for reasons that include one of them. This is the "unlawful termination" rule, and it is not about process at all. It is about the reason for the dismissal, which means a termination can be unlawful even where the employer did everything else by the book.
This article explains how the unlawful termination rules actually work: what triggers them, who is protected, who can bring a claim, how a claim runs through the Fair Work Commission and the courts, and the traps that catch employers who only ever planned for unfair dismissal.
Who is bound and who is protected
The first thing that surprises employers is that none of the usual carve-outs apply. The prohibition in s 772 binds every employer. There is no small-business exemption like the one in the Small Business Fair Dismissal Code, no exemption during probation, and no earnings cap. The Fair Work Ombudsman puts it plainly: most employees are protected from unlawful dismissal under the general protections provisions, but all employees are protected from unlawful termination.
Four sets of actors are involved in the scheme:
- Employers: any employer that ends an employment relationship, of any size, at any stage of the employment.
- Employees: all employees, including casuals and probationers, with no minimum employment period of their own.
- Industrial associations: a union that is entitled to represent an employee can apply to the Commission on the employee's behalf.
- The Fair Work Commission and the courts: the Commission runs the dispute resolution process, and the Federal Court and the Federal Circuit and Family Court of Australia (Division 2) can order compensation and penalties.
The trigger: a dismissal for a prohibited reason
Section 772(1) lists the prohibited reasons. Pay attention to the wording: an employer must not terminate employment "for one or more of the following reasons, or for reasons including one or more of the following reasons". A prohibited reason does not need to be the only reason for the dismissal. It does not even need to be the main reason. If it formed part of the decision, the dismissal can be unlawful.
The prohibited reasons are:
- Temporary absence from work: illness or injury of a kind prescribed by the regulations.
- Trade union membership: being a member of a trade union, or participating in union activities outside working hours or during working hours with the employer's consent.
- Non-membership of a trade union.
- Seeking office as, acting as, or having acted as, a representative of employees.
- Filing a complaint or participating in proceedings: against an employer, involving an alleged violation of laws or regulations or recourse to competent administrative authorities.
- A protected attribute: race, colour, sex, sexual orientation, breastfeeding, gender identity, intersex status, age, physical or mental disability, marital status, family or carer's responsibilities, subjection to family and domestic violence, pregnancy, religion, political opinion, national extraction or social origin.
- Absence from work during parental leave.
- Temporary absence for a voluntary emergency management activity: the absence is reasonable having regard to all the circumstances.
Two qualifications sit on top of the discrimination ground. First, s 772(2) allows a dismissal for a protected attribute where the attribute is based on the inherent requirements of the particular position, and allows religious institutions to terminate staff in good faith to avoid injury to the religious susceptibilities of adherents of the religion. Second, s 772(3) closes off a workaround: if a position is made redundant because of an employee's absence during parental leave, the termination is treated as a termination for the parental-leave reason.
The temporary absence rule: what counts as protected illness
Ground (a) is the one employers most often trip over, because an employee does not have to be absent for long to be protected. Regulation 6.04 of the Fair Work Regulations 2009 (Cth) prescribes the kinds of illness or injury. An absence is protected if the employee provides a medical certificate or statutory declaration within 24 hours of the absence starting, or within a longer period that is reasonable in the circumstances, or complies with the notification and substantiation rules in their workplace instrument.
The protection has a limit. An illness or injury stops being a prescribed kind once the absence extends beyond three months, or once the employee's total absences within any 12-month period exceed three months. After that point the temporary absence protection falls away, though the dismissal still needs to be defensible on other grounds.
Who can actually bring a claim: the eligibility gate
The counterintuitive part of this scheme is that most employees cannot use it. An application under s 773 can only be made by an employee who cannot get a remedy through one of the other routes. The Fair Work Commission says an employee is eligible if they are not a national system employee, or if they are a national system employee who is not entitled to make a general protections dismissal application because the reason for the dismissal is not a prohibited reason under the general protections provisions. The Commission is explicit: an employee must not apply for unlawful termination if they can apply under the general protections provisions of the Act.
This is the gap unlawful termination fills. The general protections regime only prohibits adverse action for reasons connected with workplace rights and industrial activity. Discrimination attributes such as race, sex, age or political opinion are not "workplace rights", so a dismissal for one of those reasons does not attract a general protections remedy. Section 772 is the route those employees have.
The point was demonstrated in Lattouf v Australian Broadcasting Corporation (No 2) [2025] FCA 669. Ms Lattouf was a casual presenter who was dismissed within weeks of starting after she shared a social media post about the Israel-Gaza war. She had not served the minimum employment period, so unfair dismissal was unavailable, and the reason she alleged, her political opinion, was not a workplace right, so general protections did not apply either. The Federal Court found the ABC contravened s 772(1), holding that her expression of a political opinion was a substantial and operative reason for the termination, and awarded her $70,000 in compensation.
Contrast this with the gates on unfair dismissal. To claim unfair dismissal an employee must have completed the minimum employment period, which is six months, or 12 months for a small business with fewer than 15 employees, and an employee not covered by an award or enterprise agreement must earn below the high income threshold, which is $190,100 from 1 July 2026 and is indexed each year. None of those gates apply to unlawful termination.
How a claim runs: 21 days, the Commission, then arbitration or court
The time limit is tight. Under s 774 an application must be made within 21 days after the dismissal took effect. The Commission can allow a further period only where there are exceptional circumstances, taking into account the reason for the delay, any action the employee took to dispute the dismissal, prejudice to the employer, the merits of the application, and fairness as between the person and others in a like position. Employers should treat day 21 as the drop-dead date, because the Commission will not extend time as a matter of course.
The application is made to the Fair Work Commission on Form F9, with an application fee. Under s 776 the Commission must deal with the dispute other than by arbitration, which in practice means conciliation or mediation, or making a recommendation or expressing an opinion. If the Commission is satisfied that all reasonable attempts to resolve the dispute have been, or are likely to be, unsuccessful, it must issue a certificate to that effect. It may also advise the parties if it considers that arbitration or a court application would have no reasonable prospect of success.
After the certificate, there are two roads:
- Agreed arbitration: under s 777 the parties can agree to have the Commission arbitrate the dispute, by notifying it within 14 days after the certificate is issued. The Commission can then order reinstatement, payment of compensation, payment of an amount for remuneration lost, and orders maintaining continuity of employment and service.
- A court application: alternatively, under s 776(4) a party can make an "unlawful termination court application" to a court under Division 2 of Part 4-1 of the Act for orders in relation to the contravention of s 772(1).
What a contravention costs
The note to s 772(1) marks it as a civil remedy provision, which changes the stakes. A court can order compensation and also impose a pecuniary penalty under s 546. The maximum penalties are set out in the table in s 539 of the Act: 60 penalty units for an individual and five times that for a body corporate, which at current unit values is roughly $19,800 for an individual and $99,000 for a company, per contravention. Where a dismissal also breaches the general protections provisions, the same penalty scale applies.
Compensation is the remedy employees are usually after. In Lattouf the court ordered $70,000, and that was for contraventions of s 772(1) together with a breach of the ABC's enterprise agreement. Where the matter is arbitrated by the Commission instead, reinstatement is available as an order, which for many employers is a worse outcome than paying compensation because it puts the relationship back together under a microscope.
Where the traps hide: overlaps and edge cases
The main trap is confusing unlawful termination with the other dismissal regimes. Unfair dismissal asks whether the dismissal was harsh, unjust or unreasonable, weighing the factors in s 387 such as whether the employee was notified of the reason and given a chance to respond, and the Small Business Fair Dismissal Code and genuine redundancy are defences. Section 772 asks only one question: what was the reason? A flawless process with written warnings and a fair hearing does not cure a dismissal that was in part for a prohibited reason.
The second trap is double-dipping. The schemes are mutually exclusive in practice. Where the general protections provisions apply to the dismissal, that is the route the employee must take, and the same conduct cannot be run again as unlawful termination. Where the reason is a discrimination attribute such as race or political opinion, general protections does not apply and s 772 is the only federal dismissal remedy.
The third trap is mixed motives. Because s 772 catches dismissals where a prohibited reason is merely part of the reasons, an employer's own records often decide the case. In Lattouf the court found the prohibited reason was a substantial and operative reason for the termination, based on the decision-maker's own notes and reasoning. Contemporaneous documents that show the genuine, lawful reason, recorded before the dismissal, are the strongest defence available.
Finally, remember what does not protect you. Probation does not shield a dismissal from s 772, casual employees are protected, and a redundancy restructure driven by an employee's parental leave will be treated as a termination for the parental-leave reason.
Where a lawyer helps
The value of legal input sits at three points. Before dismissal, a lawyer can pressure-test the real reason, review the decision-maker's reasoning for any prohibited element, and help you build the contemporaneous record that will defend the decision later. After an application lands, a lawyer can manage the Commission's deadlines, prepare the response, and run the conciliation, where most of these matters resolve. If the matter proceeds to arbitration or court, the evidence of the reason is the whole case, and that is where experienced representation counts most.
A lawyer can also tell you early whether a claim has legs. If the Commission advises that a matter has no reasonable prospect of success, an early and structured settlement, documented in a deed of release, is often the cheapest way to close the file.
The reason, not the process, is what a court examines
Lattouf is the cautionary tale worth remembering. The ABC is a sophisticated employer with detailed policies, but it lost because the decision-maker's reasoning was entangled with a prohibited reason, and its own documents proved it. Before you dismiss anyone, ask the question a court would ask: if my records were read back to me, what would they show my reason was? If the honest answer could include illness, leave, a complaint, a union matter or a protected attribute, stop and get advice before you act. A short consultation is inexpensive compared with $70,000 in compensation, penalties and the cost of defending the claim.