Terminating an employee on workers’ compensation is a very delicate process and may expose you to significant liability if you don’t do it in the correct way. In particular, you may breach section 385 of the Fair Work Act 2009 (NSW) if you terminate in circumstances that are construed as harsh, unjust or unreasonable.

In the case of Jack v Sigma Healthcare the Fair Work Commission (FWC) found that the employer, Sigma, had attempted to keep the employee’s position open and available while Ms Jack was away from work. The steps taken by Sigma to ensure procedural fairness were also acknowledged. This means they had written to Ms Jack on several occasions outlining their intention to terminate her employment if she was unable to fulfil the requirements of her intended role.

The Commission rejected the employee’s application because the employer had a valid reason for the dismissal, stating that Ms Jack’s incapacity to perform the requirements of her role had been established and was longstanding.

If an employee fails or is unable to fulfil the inherent requirements of the employment contract then a lawful dismissal will be warranted. Such a situation generally arises in the context of an employee experiencing an illness that limits their capacity to perform the requirements of their employment contract, or where serious misconduct arises in the context of the employee’s injury or illness – for example, if they are dishonest or uncooperative with a reasonable process.

What to take away

Terminating an employee on workers’ compensation is a very delicate process, and may expose you to liability if a proper process is not followed.

You may dismiss an employee if they are unable to perform the inherent requirements of their role. Such a situation may occur if the employee’s incapacity to perform the inherent requirements of their role is assessed and supported by medical evidence.

Ideally, you should have in place a comprehensive sickness and injury policy that sets out the process you will follow if someone gets sick or suffers an injury. You should then follow this policy through to its conclusion, which may be a return to work or lawful termination.

What you need to do

Before dismissing an employee on workers’ compensation, you must follow a fair process, and your conclusion that the employee is no longer able to fulfil the inherent requirements of their position with your business must be clearly supported by medical evidence.

Prior to termination, your process should ensure that all reasonable alternatives have been considered to possibly get the employee back to work and resuming their role, and this should be documented. The outcome of this process should be clear evidence that you have followed a procure that is fair and equitable to the employee. If you do this properly, the case of Jack v Sigma Healthcare is good authority that you will not incur an obligation to pay compensation or a penalty.

Call us now to get prepared. We can help you draft an appropriate policy to proactively manage this issue before it arises. We can also assist you navigate through a termination process if you already have an employee on workers’ compensation:

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