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Kate Ashcroft spoke at the Conferenz 30th Annual Industrial and Employment Relations Conference recently, on incapacity, and this article summarises key points from her presentation

Incapacity happens where an employee is unable to perform their role due to a medical condition, which could be physical or mental illness, or injury.  The law provides that employers are not obliged to hold a job open or allow employees to continue on reduced or alternative duties indefinitely.  An employer may justifiably dismiss where an employee is not fit and able to do the required work and meet the reasonable needs of the employer, and will not be able to do so with a reasonable time in all the circumstances.

As always, an employer has to act in good faith and be fair, and the Employment Relations Act 2000 s103A test for justification applies to any decision to dismiss, that is, whether the employer’s actions, and how the employer acted, were what a fair and reasonable employer could have done in all the circumstances at the time the dismissal occurred.  In the incapacity context, fair process is required, and the following factors must be considered in reaching a decision to terminate employment:

The terms of employment (oral or written), including any express obligation to provide employees with reduced or alternative duties and any provisions for termination due to medical incapacity;
The nature of the medical condition or injury including how long it has already continued and the prospects of the employee recovering from it and returning to work;
The nature of employment and whether the employee is in a key or senior position within the business;
Whether the employee had been employed for a long period.Long-standing employment relationships are subject to a higher degree of scrutiny because it is more readily assumed that the parties were prepared to accept long periods of sickness; and
How long the employment was likely to last in the absence of sickness (i.e. whether it was fixed term or casual employment as opposed to permanent, full time employment).
Active absence management will help to ensure that employees do not take advantage of sick leave where it is not justified.  Employers may request proof of illness/injury, and if this is not forthcoming or unclear (for example, where the medical certificate just says “unfit for work for x period”), may rely on the duty of good faith to encourage the employee to engage and provide more information.  The Medical Council has also issued guidelines about medical certification, and with an employee’s consent, more information can be sought from their doctor.  Relevant medical information must be collected and considered in terminating for incapacity where possible, but an employer can make a decision without this if the employee refuses to provide it.

In summary, an employer needs to be able to clearly demonstrate why it has reached the point where it can fairly “cry halt”, that is, it can’t continue to accommodate the incapacity because the business cannot continue to function effectively without the employee fully performing their role.  This is often a tricky situation, as it involves so many “shades of gray” – the employee’s position, the employer’s business needs, the nature of the injury/illness, and the information provided all must be weighed in reaching a decision about termination.  If you’re managing unwell employees and considering termination, advice is recommended.