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Folau's lawyers said it was unlawful to terminate employment on the basis of religion under Section 772 of the Fair Work Act.
In a statement, Folau said: "No Australian of any faith should be fired for practising their religion."
The 30-year-old is seeking substantial remedies according to his lawyers.
Folau had his $4 million contract with the RA terminated following a series of social media posts in April, including an Instagram post that condemned drunks, homosexuals, adulterers, liars, fornicators, thieves, atheists and idolaters to hell.
The 30-year-old, who has refused to remove the offensive posts, had his contract torn up afterbeing found guilty of a high-level breach of the organisation's code of conduct.
Folau decided not to appeal through RA's internal channels, saying that he feared he would receive unfair treatment during the process.
The Australian Financial Review reported yesterday that the former Wallabies star hired commercial law firm Macpherson Kelley.
The firm's head of employment George Haros said they believe Rugby Australia acted "unlawfully".
"We believe Rugby Australia and the Waratahs have acted unfairly and unlawfully in their treatment of Israel," Haros told the AFR.
Haros will work closely with Melbourne-based silk Stuart Wood QC, a leading lawyer in unlawful termination cases where free speech is a central issue, the AFR reported.
The Fair Work Act protects employees from unlawful dismissal on religious grounds