Costs Orders: The Solution to Rising Unfair Dismissal Claims in Australian Higher Education

In recent years, Australian higher education institutions have faced a growing wave of unfair dismissal claims, straining resources and diverting attention from core academic missions. The Fair Work Commission (FWC), Australia's primary tribunal for workplace disputes, reported a record 44,075 applications in the 2024-25 financial year, with unfair dismissal claims numbering 16,500—accounting for 37 percent of the total. This surge, up 11 percent year-on-year, has prompted calls for reform, including the introduction of costs orders to deter weak or opportunistic claims. While the current no-costs regime under the Fair Work Act 2009 (Cth) promotes access to justice, critics argue it encourages a litigious culture, particularly in universities where employment relationships are complex due to casual contracts, research pressures, and administrative restructures.

Higher education stands out as a hotspot for these disputes. Prestigious institutions like the University of Melbourne have been embroiled in multiple high-profile cases, highlighting procedural flaws and the high stakes involved. As universities navigate budget constraints and performance expectations, the absence of financial deterrents for claimants exacerbates the issue, leading to prolonged proceedings that cost institutions dearly in legal fees and management time.

📊 The Escalating Tide of Claims in Australian Universities

The Fair Work Commission has described its workload as 'unsustainable,' with President Justice Adam Hatcher noting in late 2025 that dismissal-related applications are overwhelming the system. While comprehensive industry-specific data remains limited, anecdotal evidence from recent judgments points to higher education as disproportionately affected. For instance, in 2024-25 and early 2026, the University of Melbourne alone featured in several overturned dismissals, including those of senior academics for alleged serious misconduct dating back years.

This trend mirrors broader patterns but is amplified in academia by factors such as high casualization rates—over 50 percent of academic staff in some institutions are casual or contract-based—and restructures driven by funding shifts. Genuine redundancies, a common defense, have been scrutinized intensely, as seen in the 2013 RMIT case where a sham redundancy led to a $37,000 compensation order. Fast-forward to 2025, and cases like the reinstatement of a University of Melbourne professor dismissed over student texts underscore procedural missteps that fuel claims.

• Record FWC lodgements: 44,075 in 2024-25, 24% above five-year average.
• Unfair dismissal applications: 16,500, plus 6,209 general protections involving dismissal.
• Higher ed examples: Reinstatements at UniMelb (Paladino, Matthai), JCU's $1.45m Peter Ridd payout (2019).

These figures illustrate a system under pressure, where even meritorious defenses come at significant non-recoverable cost to universities.

Unpacking Unfair Dismissal: Eligibility and Process

Unfair dismissal, governed by Part 3-2 of the Fair Work Act, applies to employees dismissed harshly, unjustly, or unreasonably. To be eligible, a claimant must have at least six months' service (12 months for small businesses under 15 employees), earn below the high-income threshold (currently $175,000 plus superannuation), and not be covered by an enterprise agreement excluding the general protections. Casual employees qualify only if their employment was regular and systematic with reasonable expectation of continuation.

The process unfolds in stages: Lodge Form F2 within 21 days of dismissal (extendable only in exceptional cases); attend conciliation (80% settle here); if unresolved, proceed to hearing where the FWC assesses validity of dismissal reason, notification, opportunity to respond, and support person presence. Remedies prioritize reinstatement, but compensation caps at six months' pay or half-year average earnings, whichever lower.

In higher education, dismissals often stem from performance issues, research misconduct allegations, or restructures. Universities must document meticulously—failure invites claims, as in the University of Melbourne's 2026 appeal loss over a seven-year-old incident.

The No-Costs Regime: Origins and Implications

Australia's workplace tribunals operate as a 'no costs' jurisdiction, meaning parties bear their own legal expenses regardless of outcome—except in rare instances under sections 611 and 611A. Costs may be ordered for unreasonable acts causing delay, applications without reasonable prospects, or misconceived claims. In practice, such orders are exceptional; FWC data shows fewer than 5 percent of cases result in costs awards.

This stems from the Fair Work Act's intent to democratize access, avoiding the 'English rule' (loser pays) that could chill legitimate claims from lower-paid workers. However, in higher education, where academics earn median salaries around $120,000-$150,000, the asymmetry burdens well-resourced universities. Claimants face minimal downside—$83.30 filing fee, no lawyer often needed—while institutions spend $20,000-$100,000 defending even strong cases.

Recent AI proliferation exacerbates this; a February 2026 AFR report highlighted 'glossed-up' claims generated by tools like ChatGPT, flooding the system with baseless applications.

Photo by 0xk on Unsplash

Case Studies: Lessons from University Disputes

James Cook University's 2019 dismissal of physicist Peter Ridd for critiquing Great Barrier Reef research became emblematic. After FWC found the process unfair, courts awarded $1.2 million compensation plus economic losses, totaling $1.45 million. No costs recovery for JCU despite victory at some stages.Read the full Guardian coverage.

Closer to now, University of Melbourne's 2025-26 saga: Professor reinstated after texts to students deemed inappropriate; Director Angela Paladino back after 'serious misconduct' from 2019 overturned; Dr Eric Descheemaeker settled post-leaked email. These underscore documentation gaps and time-bar issues, costing tens of thousands each.

La Trobe's $9.3 million underpayment remediation (2015-2022) indirectly fuels distrust, priming dismissal claims.

Stakeholder Perspectives: Unis vs Unions

Universities Australia and sector leaders advocate reform, citing diverted resources—HR teams overwhelmed, vice-chancellors testifying instead of strategizing. Experts like employment lawyers argue costs orders would filter frivolous claims, preserving FWC for genuine disputes.

Conversely, the National Tertiary Education Union (NTEU) warns costs could silence casual academics facing power imbalances. Balanced views from legal scholars suggest calibrated costs: scaled by income, only for no-prospect cases.

Why Costs Orders Could Solve the Problem

Implementing a limited 'loser pays' for unreasonable claims mirrors reforms in other jurisdictions. Benefits include:

• Deterring 20-30% baseless applications (per SME reports).
• Reducing FWC backlog, faster resolutions.
• Encouraging early settlements, lowering overall costs.
• Promoting robust HR practices pre-emptively.

In higher ed, this would protect against 'fishing expeditions' amid restructures. Overseas models, like UK ET fees (pre-2017), showed deterrence without barring access.

Challenges and Alternatives to Costs Reform

Critics fear disproportionate impact on vulnerable staff. Alternatives: Raise thresholds, mandatory pre-filing mediation, AI detection protocols, or specialist higher ed benches.

FWC's 2025 changes—conference directions, early filtering—offer interim relief.

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Future Outlook for Higher Education Employment

As 2026 unfolds, expect legislative scrutiny. Government signals 'all options' amid court spillovers (1,600+ Fair Work claims 2024-25). Universities should invest in training, clear policies, early advice.

For academics: Document interactions, seek union support. The debate underscores balancing access with efficiency—costs orders may emerge as pragmatic solution.

Actionable Insights for Stakeholders

For Universities: Audit dismissal processes; use templates; engage external counsel early.

• Train managers on FWC benchmarks.
• Explore enterprise bargaining protections.

For Employees: Assess prospects via free FWO advice; consider no-win-no-fee.

Reform promises a fairer system, safeguarding higher ed's future.