Australia's Fair Work Commission Hits Back at 'Plain Wrong' AI Legal Advice

Australia’s Fair Work Commission has delivered one of the bluntest judicial rebukes of AI-assisted litigation to date, ordering a sacked ALDI employee to pay A$1,230 of his former employer’s legal costs after his ChatGPT-guided unfair dismissal claim collapsed — and announcing that, from October 20, 2026, every applicant will be required to disclose their use of AI.

The Case: Khan v Aldi

The decision, Sadnan Khan v Aldi Pty Ltd [2026] FWC 3144, handed down by Deputy President Michael Easton, centers on a deceptively simple employment dispute. Mr Khan was dismissed three days short of the six-month minimum employment period required to bring an unfair dismissal claim under the Fair Work Act 2009. He lodged an AI-generated application the same evening.

Under Australian law, eligibility for unfair dismissal turns on when notice of dismissal is given, not when it takes effect — a distinction the Commission explained to Khan repeatedly. His AI-generated submissions never engaged with that guidance. He ultimately conceded his own ineligibility at the hearing and discontinued the application, but by then ALDI had already been put to the cost of defending a doomed claim.

Deputy President Easton’s language was unsparing. Khan, he found, had used AI as a “quasi-legal advisor” despite repeated warnings that his case had “no substantial prospects of success.” The Deputy President took what he described as “the very rare step” of ordering costs, because Khan’s “unreasonable conduct caused his former employer to incur those costs unnecessarily.”

The most cutting line in the ruling: “If Mr Khan had properly read his own AI generated replies … he would have known that his case was doomed.”

Why a Costs Order Is a Big Deal

The Fair Work Commission is a “bear own costs” jurisdiction — each party normally pays its own legal fees, and costs orders are reserved for genuinely unreasonable conduct. Easton invoked section 400A of the Fair Work Act, which allows costs orders in unfair dismissal proceedings where a party’s unreasonable act or omission causes the other side to incur costs.

Crucially, the order was framed as a deterrent: “the making of a costs order now will deter Mr Khan, and hopefully other applicants in the same position, from acting unreasonably.” Legal commentators at Hall & Wilcox read the decision as a signal that the Commission is “alive to the rise of AI-generated applications and the burden they can impose on employers forced to defend unmeritorious claims” — while stressing that using AI to prepare a claim is not, by itself, grounds for a costs order. The liability attaches to failing to critically assess what the AI produces.

The 40% Surge Behind the Ruling

The Khan decision did not emerge in a vacuum. Research commissioned by the tribunal paints a startling picture of how quickly generative AI has transformed self-represented litigation in Australia:

• Generative AI was in part responsible for a 40% surge in the Commission’s caseload between 2023-24 and 2024-25.
• 40% of surveyed cases involved a litigant using AI.
• AI use was concentrated among younger and self-represented litigants.
• More than three-quarters of that cohort used ChatGPT — and 60% of them relied on the free version.
• Non-English speakers were twice as likely to use AI as native speakers.

The scale was underscored in parliamentary testimony: the Commission’s Executive Director told a Senate committee in June 2026 that “around 40 to 50 per cent of people were telling us that AI had been used to make an application to the commission.”

New Rules From October 20

The institutional response arrived via President Hatcher’s statement of August 24, 2026. From October 20, 2026, litigants before the Commission will be required to disclose their use of AI in all claims and declare that they have checked their documents and made the changes necessary to make them accurate. A template to help AI-dependent litigants structure their submissions has also been implemented.

Australia is effectively running the first at-scale experiment in mandatory AI disclosure in a major tribunal system — a template other jurisdictions grappling with AI-generated filings are watching closely.

Access to Justice, Both Ways

What keeps the ruling from being a simple anti-AI morality tale is the Commission’s own acknowledgment that AI is improving access to justice for applicants with genuine, meritorious claims “who might otherwise have been deterred.” It explicitly denied that AI use by applicants is inherently problematic, noting that sophisticated users approach it critically as “one tool among many.”

The ABC’s reporting surfaces the perfect counter-example: Gregory Baker, a computer science lecturer at Macquarie University, this month became the first person to successfully challenge casual employment laws using a team of AI agents. Baker treated his claim “basically as a software development project” — a repository for his filings, a build process that verified every citation and checked logical coherence. He even used ChatGPT to grill him in preparation for cross-examination, though he concedes the oral hearing itself remained “a huge disadvantage.”

Baker’s estimate of the stakes is sobering: there is roughly a five-year capability window between frontier models wielded with good framing and prompting, and the free, least-sophisticated models most litigants actually use. “There are a lot of people for whom hundreds of dollars a month on AI is completely out of the question,” he told the ABC — meaning AI in the courtroom may widen inequality even as it lowers the formal barrier to entry.

Monash University law professor Genevieve Grant points to the mechanism that makes naive AI use so dangerous for self-represented litigants: the models’ “sycophantic tendency” may encourage people to believe “there are legs in a claim they’re making when that may not” be the case. AI tells the litigant what they want to hear; the tribunal tells them the law.

The Unbowed Litigant

Perhaps the most telling detail in the whole saga: Mr Khan says he now plans to appeal — using “two or three” different AI agents. “Now I’m going to use next time a mixture of Claude and ChatGPT … and two or three [others] to [get a] mixture of different views,” he told the ABC, while observing that “the main thing AI suffers is they do things not the Aussie [court] way.”

Khan’s diagnosis is accidentally precise. The gap between what a general-purpose AI assistant knows about employment law in the abstract and how the Fair Work Commission actually applies it — timing rules, jurisdictional thresholds, the difference between a colorable claim and a doomed one — is exactly where his case fell apart. Multi-model ensembles won’t close a gap that is, at bottom, about local procedural reality and the litigant’s duty to read what they file.

The Commission’s new disclosure regime bets that transparency plus verification can preserve AI’s genuine access-to-justice benefits while deterring the flood of unmeritorious claims. Whether a disclosure checkbox carries the same deterrent weight as a costs order is the question every tribunal from Delaware to Singapore will be watching Australia answer.