Employment Law

Medical Incapacity – At What Point Can an Employer Fairly Cry Halt?

Dealing with an employee who is on sick leave and has an uncertain prognosis for recovery can be frustrating.  It is well established that an employer is not bound to hold an employee’s job open indefinitely for an employee who is unable, due to illness or injury, to attend work.  However, if an employer does decide to terminate an employee for incapacity, the employer must have regard to their good faith obligations and their obligation to act as a fair and reasonable employer.

The key to any process for an employer is to seek medical information.  This means obtaining a medical report which provides the employer with information regarding the sickness or injury, the treatment plan and most importantly, a timeframe for when the employee is likely to be able to return to work.  An employee can refuse an employer’s request for a medical report.  However, if they do that, the employer can then proceed to make a decision based on the information that they have to hand.

If the medical information shows that the employee cannot return to work within a reasonable time, or there is no certainty as to when they will be able to return to work, the employer can then start discussions regarding possibly terminating the employment relationship.  The employer should first meet with the employee and explain why the time has possibly come to “cry halt” to the employment relationship.  The employer should invite the employee to respond to or comment on the medical information they are relying on, and to the suggestion that the time may have come to bring an end to the employment relationship.  The employer should consider any alternatives including redeployment.  Only once a full and fair process has been undertaken, can the employer then make the decision about terminating the employee’s employment.

In making any decision, the employer must have regard to the Employment Agreement and any relevant policies.  The employer should also consider the employee’s position, the length of their employment and any other relevant factors.

A few important points to remember are:

  • If the employer’s actions caused the employee’s condition, the employer may have an ongoing responsibility to take reasonable steps to rehabilitate the employee.
  • The relationship is a “two-way street“. Both the employer and the employee have obligations to positively engage, and a failure on the employee’s part to do so can be taken into account.

As a final comment, termination based on medical incapacity is always a high risk process.  A great deal turns on the particular circumstances of the employer and the employee.  It is always recommended that you take advice before conducting such a process.

If you have any queries regarding the above, or any other workplace issues, please contact Cathy Fisher at Fortune Manning, cathy.fisher@fortunemanning.co.nz, 09 915 2412.