Medical incapacity dismissal: fair process and reasonable timeframes
Employers are not expected to keep a sick or incapacitated employee's job open for an indefinite period. The tests of fairness and reasonableness apply.
Medical incapacity dismissals are not "no-fault free passes". Employers still must act fairly and reasonably, and the process often turns on medical information, communication, and whether there were realistic options short of termination.
Key points
- Time and support: the employer usually must give a reasonable opportunity to recover and explore support options.
- Proper medical inquiry: the employer should seek and consider relevant medical information and discuss it with the employee.
- Engagement and alternatives: modified duties, reduced hours, or redeployment should be explored where reasonably available.
- Document the process: letters, meeting notes, and the timeline often decide the outcome if the dispute goes to mediation, the ERA, or Court.
Termination Letter Medical Incapacity
The Employment Court has set down the following principles as it noted that section 103A, the Test of Justification, does not sit comfortably with a no-fault based dismissal for cases such as medical incapacity. Lal v The Warehouse Ltd [2017] NZEmpC 66
- The employer must give the employee a reasonable opportunity to recover. The terms of the employment agreement, any relevant policy, the position held by the employee, and the length of employment are factors which are likely to inform an assessment of what is reasonable in the circumstances.
- The employer must undertake a fair and reasonable inquiry into the prognosis for a return to work. Necessarily this inquiry means engaging appropriately with the employee. That involves seeking and considering relevant medical information. The Court held that would involve explaining the reasons for the inquiry, the possible outcome of it, and providing the employee with an opportunity for input and comment.
- What the employee has to say before terminating the employment relationship must be fairly considered.
- In the case of medical incapacity and a reduced ability to undertake certain tasks, a level of engagement with attempts to facilitate a return to work may reasonably be expected.
The tests that apply are whether the decision to dismiss was one to which a fair and reasonable employer could come to at the time when it became effective.
Need help with a medical incapacity dismissal?
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