Unfortunately, there may be a time when an employee is unable to work for a prolonged period due to a serious illness or injury. In these circumstances, the Fair Work Act 2009 (Cth) provides protections for employees who are absent from work because of illness or injury.
What is termination for medical incapacity?
Termination for medical incapacity is also referred to as termination on medical grounds. It is when, after considering all reasonable options and adjustments and finding no suitable alternative, you decide to end an employee’s employment.
The decision should be based on available medical evidence that indicates the employee can no longer perform the inherent requirements of their role. An inability to perform the inherent requirements of a position may provide a valid reason for dismissal.
While termination on medical grounds may be justified in some circumstances, getting the process wrong could expose your business to an unfair dismissal, general protections or discrimination claim.
Fair Work Act
Under the Fair Work Act 2009 (Cth) (the Act), discrimination legislation and applicable state and territory workers’ compensation legislation, employees may have protections relating to illness, injury or disability.
As an employer, you cannot dismiss an employee because of a temporary absence from work due to illness or injury where the relevant protections apply.
An absence due to illness or injury is no longer considered a temporary absence if:
- the employee’s absence extends for more than 3 consecutive months, or
- their total absences due to illness or injury are more than 3 months within a 12-month period, whether for the same or different illnesses or injuries, and
- the employee is not on paid personal/carer’s leave for the duration of the absence.
If an employee remains on accrued paid personal/carer’s leave for the entire absence, they continue to be protected from dismissal because of their absence, regardless of how long they are away.
Once the relevant three-month threshold is exceeded and the employee is no longer on paid personal/carer’s leave, the specific protection against dismissal because of a temporary absence may no longer apply. However, this does not automatically mean the employee can be lawfully dismissed, as other workplace protections and obligations may still apply.
Informal meeting
Where an employee has been absent due to long-term illness or injury, an appropriate first step is to invite them to an informal meeting.
You should notify your employee about the meeting in advance and outline its purpose. The meeting should be used to discuss the employee’s current circumstances and understand their prognosis as it relates to their capacity to perform their role and return to work. You can also ask about the likely timeframe for their return.
Steps to take before making a decision
When an employee is unable to work due to illness or injury, you need to balance compassion and understanding with your operational business needs and legal obligations.
Before making a decision, you need to understand whether your employee can safely return to work and perform the inherent requirements of their role. This means obtaining current medical evidence, consulting with the employee and genuinely considering reasonable adjustments or other alternatives:
- Engage in an open conversation with your employee.
- Outline your concerns, ask for relevant information about their capacity to work, and discuss support and potential return-to-work options.
- Where reasonable, request additional medical information or consider obtaining an independent medical assessment where appropriate.
- Identify the essential tasks and capabilities of the role. Consider whether modified duties or hours, equipment or hybrid work arrangements may be reasonable. Record the adjustments considered and why any were not suitable.
- Thoroughly document all relevant communications.
Mitigating risks during long-term sick leave
When an employee is unable to work because of illness or injury, you are often left to answer some difficult questions:
- How long can the role remain unfilled?
- What medical information can reasonably be requested and relied on?
- Are modified duties, reduced hours or other adjustments options to consider?
- At what point might termination of employment become a last resort?
As a business owner, extended sick leave or injury recovery can leave you in a challenging position. There is a difficult balancing act between continuing to support your employee, managing your operational needs and meeting your legal obligations.
What if an employee can’t return to work?
You should meet with your employee to discuss the outcome of the review process.
Where the available evidence establishes that an employee is unable to perform the inherent requirements of their role, and reasonable adjustments or other appropriate alternatives have been considered, this may provide a valid reason for termination.
Where the final decision is to terminate employment, this should be communicated to the employee in a formal meeting and confirmed in writing. The usual rules around termination of employment, including applicable notice requirements, will continue to apply.
If you have an employee who is unwell due to a long-term illness or injury and you’re unsure how to manage the situation, speak with Peninsula for free initial expert advice.
This article is for general information purposes only and does not constitute as business or legal advice and should not be relied upon as such. It does not take into consideration your specific business, industry or circumstances. You should seek legal or other professional advice regarding matters as they relate to you or your business. To the maximum extent permitted by law, Peninsula Group disclaim all liability for any errors or omissions contained in this information or any failure to update or correct this information. It is your responsibility to assess and verify the accuracy, completeness, and reliability of the information in this article.