Most employers are understanding and compassionate when one of their employees gets sick or suffers a significant injury. There are many stories of employers going above and beyond to support their employees. However, there are cases when an employer reasonably reaches the view that either the employee is not being completely honest about their condition, or the employer simply must move on in order to preserve their business.

If you believe your employee is taking excessive leave, or you have a pressing need to fill their position to keep your business moving forward, then there are steps you can take to bring things to a head.

Do you need to pay sick leave?

The first thing to note is that you are required to pay sick leave in accordance with the National Employment Standards. For long term employees, they may have considerable sick leave accrued. However, when the sick leave runs out, you are no longer required to pay the employee while they remain on leave. At this point, the employee may elect to take their unused annual leave, or simply go onto leave without pay.

When do you have a right to terminate a sick employee?

The Fair Work Act 2009 (Cth) provides some limited guidance to employers about excessive sick leave and termination when employees who are away from work for an extended period and cannot perform their duties.

Under the Fair Work Regulations 2009, regulation 3.01 states that if an employee is away from work on unpaid leave, for more than 13 weeks in a 52-week period, the employer has a right to terminate the employee. The terminated employee will not be protected by the unfair dismissal laws or the general protection laws.

Termination in such circumstances is a fairly simple process to follow. It only involves the employer advising the employee that they have been on unpaid leave for more than 13 weeks and consequently, their employment is terminated. We can assist you draft this letter.

What if you need to terminate an employee before they have been on such extended leave?

The bottom line is that it is potentially dangerous to terminate an employee while they are on sick leave and before you have passed the above unpaid 13 weeks in 52 threshold. We understand that this threshold is long… We also realise that the employee may still not be on workers’ compensation at this stage, but merely be asserting they are unwell.

It is up to you then to decide whether you wish to terminate the employee based on their inherent inability to perform the requirements of the role. There are a few steps we strongly recommend you take before going down this path.

Ask the employee to provide direct evidence from their doctor about their condition

First, you should write to the employee and request permission to approach the employee’s treating doctor to ascertain directly the employee’s medical condition and the employee’s future prognosis, i.e. when they are likely to recover and be able to attend work. In many cases, the employee will simply refuse to provide such permission, maybe on privacy grounds. Without the employee’s permission, the treating doctor will simply respond to you that they are unable to provide any information on the employee without the employee’s consent.

We can assist you to draft a letter to the employee requesting access to their treating doctor.

Get an independent medical assessment

If your employee refuses to provide you with direct contact with their own doctor, you can then direct the employee to get an independent medical examination (“IME”). The IME will provide you with an independent opinion regarding the employee’s sickness or injury and prognosis for recovery. This information will assist you with your decision about the prospects and timing for rehabilitation, recovery and a return to work.  You, as the employer, will be responsible for paying the cost of the IME. These are usually between $2,000-$5,000, depending on the complexity of the matter.

We can also assist you to draft a direction for the employee to submit to an Independent Medical Examination. In addition, we can put you in touch with doctors happy to provide these IME reports.

If your employee refuses to attend the IME, you are then likely to have the right to terminate the employee for failure to follow a reasonable direction. However, it is important that you carry out this process correctly to minimise the risk of a claim by the employee for unfair or unlawful termination. We strongly recommend that we guide you through this process.

How long should you wait before making inquiries about the employee’s medical condition?

In our view, if your employee has been away from work for around 2 months, and there is no indication that they are likely to return to work (i.e. if you have not been informed about some process of rehabilitation or recovery), then you should begin the process of making your own inquiries about their situation, and whether you need to consider their termination and replacement. You may wish to start this process sooner if you believe the employee is not being genuine about their condition.

That said, you are likely to have already made a number of inquiries well prior to this time, for example, requiring a medical certificate from the employee, and reaching out to them on a personal basis to see what is happening and how/if you can assist.

Employers should also be mindful that whilst an employee is on paid leave or workers’ compensation, they continue to accrue their leave entitlements. For more information on leave entitlement please speak with one of our lawyers.

Termination of employment

You can only properly terminate an employee for a valid and lawful reason. If you do you follow the correct procedure, or terminate someone for an invalid or unlawful reason, then you will need to pay compensation and may be subject to penalties.

A valid reason to dismiss an employee includes poor performance, serious misconduct, or changes to your business’ operations.

Before terminating someone for taking excessive sick leave, you should have taken into consideration the following factors:

  1. The amount of time that the employee has been away from work. As noted above, if this is more than 13 weeks unpaid within 52 weeks, you automatically have a statutory right to terminate;
  2. Failure to obtain an adequate response from the employee’s treating doctor;
  3. The content of the report received from the independent medical examination. This will either say that the examiner sees no reasonable basis for the leave, in which case you may terminate for poor performance/serious misconduct. The report may otherwise say that the employee is seriously injured or ill, and is unlikely to be able to return to work for a significant period of time, if at all, in which case you may terminate based on the necessities of your business;
  4. The employee’s response to the independent medical examination report. The employee may put forward a reason not to be terminated, which must be taken into account in your considerations; and

If based on these factors, you reach the conclusion that the employee does not have the capacity to fulfill the inherent requirements of their role in your business, either when they return to work, or because they are unlikely to return to work, then you may terminate them on these grounds.

We strongly recommend that we help you formulate a written position paper based on these factors, which can be used if the employee asserts unfair or unlawful termination. We can also assist you to communicate your decision to the employee in a way that minimising the chances of what you say being used against you in an action by the employee.

Even if you follow all of the above, there is still a good chance that the employee will lodge an unfair or unlawful dismissal claim. However, if you have followed our advice, and sought our assistance along the way, then you will be in the best possible position to fight such a claim.

What to do next?

Get us involved early.

We can guide you through a practical process to either get the employee back to work and performing their role appropriately, or we can assist you to move them on in an appropriate way to make room for their replacement.

  • Call John Morrissey on 0407 069 507
  • Call Sladjana Skoric on 0410 900 248

Other resources on this topic

Terminating an employee for excessive sick leave – a case study