Medical Incapacity, where should you draw the line?

by | Jul 26, 2016 | Disciplinary & Dismissal

Dealing with an employee on sick leave or ACC with an uncertain prognosis of recovery can be frustrating for everyone. And however much you may want to, it may be impossible to keep your employee’s job open indefinitely. There is a point where it may be essential for your business to dismiss an employee for medical incapacity.

But what are you legally required to do when you reach that point?

As with all dismissals, when dismissing for medical incapacity the employer is required to act reasonably and fairly and to meet the test of justification set out in the Employment Relations Act. This is a test of both the employer and employees actions. Were they fair and reasonable in all the circumstances at the time the dismissal occurred?

But what does this mean in reality? As an employer you must be able to justify your decision to dismiss an employee. You are required to give the employee a reasonable time to recover, and to enquire in a fair and open minded way about the employee’s prospects of returning to work.

So, what is a reasonable time to enquire about when your employee will return to work? There are no specific guidelines; however we would recommend that you follow up with an absent employee promptly and certainly no longer than within a month of their absence starting.   

There are a number of factors that you need to consider when dismissing an employee for medical incapacity including:

What does the medical evidence show?

What is the duration of the incapacity? Is there an imminent return to work date?

What alternatives do you have available to you?

What are the terms of their employment agreement?

How have you treated other employees in similar circumstances?

Was it a work place injury? As the ACC will pay the employee for absences after the first week, it is likely to reduce your ability to claim that financial cost is a relevant factor in determining whether the employee’s job can be held open.

What is the length of employment and probability of long term employment?

What alternative duties can be assigned to the person on a temporary basis? Please note, you do not have to create another job for the employee.

Under law you are entitled to be able to run your business, so take into account the following relevant business factors:

How easily can you cover the absence?  if the employee is critical to your business and their role is not easily covered by another person then you have a stronger argument to act promptly. 

How much does the absence disrupt your company? For small companies with only a few employees, one protracted absence can be critical, but for larger companies the impact will be significantly reduced.

What information do you need to obtain? It is essential you obtain all relevant medical evidence before making a decision. Unless you and/or your employee are medical experts then this information should come from a medical professional.

Before obtaining medical information, you will need to request consent from the employee for their medical information to be released to you. It is essential that you don’t do anything until you have received a medical report on your employee’s prognosis. Once you have considered the medical evidence, it’s important that you make a fair decision on the basis of that information. Once you have all the medical information it is critical that you give the employee an opportunity to respond.

If your employee refuses to give consent for release of the information, then you are entitled to act on the basis of your own knowledge and assumptions.   

If you believe the employee’s incapacity is likely to continue past a ‘reasonable’ date for return to work, then it is likely that the dismissal will be justified. However, it is also important that you consider alternatives and dismissal is your final option. 

Examples of other options to consider may be hiring temporary staff or allowing the employee to resume work on a part-time basis. You could allow your employee to perform light duties depending on their condition, but we suggest this is documented with a return to work programme which clearly outlines when and what duties they are reasonable able to do. This may be a service ACC are able to provide.

A good way to be prepared for these situations is to develop a sick leave policy which details how you deal with medical injuries and what the contractual entitlements are.

For companies who employ very few staff, it is even more important to have an engaged and productive work force and that sick leave and  injuries are kept at a minimum. If you only employee six people and one person is absent on sick leave, it can have a huge impact on your  productivity. With prolonged absences, staff morale becomes low and managers are faced with what to do with the employee, and how to replace them. 

Research suggests that a healthy workforce, improves company productivity by:

Attracting superior quality staff

Reducing the rate of absenteeism and time lost

Enhancing on-the-job time utilisation and decision making

Improving worker morale, which in turn lowers turnover

Download our Health and Wellness Policy and let HRtoolkit help you effectively manage your team.