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Can You Terminate an Injured or Ill Employee?

Published March 11, 2024 (last updated on July 11, 2024) | Adam Wyatt - Content Writer


Terminating an employee due to injury or illness is a complex area fraught with legal, ethical, and human resource challenges. In Australia, the legal framework surrounding this issue is designed to protect both the rights of employees and the operational needs of employers.  

This article delves into the key considerations and legalities of terminating an injured or ill employee, with a focus on NSW and workers' compensation implications. 

Understanding the legal landscape 

In Australia, employment laws strictly regulate the termination of employees, especially those suffering from injury or illness. The Fair Work Act 2009 and state-specific legislation like the Workers Compensation Act 1987 (NSW) provide a clear framework that employers must navigate carefully. 

Terminating an injured employee: the considerations 

Terminating an injured worker is a delicate and legally complex matter. While you might face justifiable business concerns, navigating this situation ethically and within the bounds of Australian law is paramount. 

Fair Work Act protections 

The Fair Work Act prohibits dismissal on the grounds of an employee's temporary absence due to illness or injury. This is provided the absence is supported by appropriate medical evidence and does not exceed three months, or a total of three months over a 12-month period. 

Workers’ compensation in Australia 

Workers' compensation is a mandatory insurance scheme that provides financial support and medical care to employees injured or sickened because of their work. Workers' compensation legislation differs across states and territories, but in general, employers must purchase workers' compensation insurance to cover themselves and their employees.  

Workers' compensation benefits include things like expenses for medical treatment, lost wages, permanent impairment, and death benefits. Terminating an injured employee on workers' compensation is illegal unless there are exceptional circumstances like redundancy. 

Workers’ compensation in NSW 

Employees on workers' compensation in NSW are further protected. The Workers Compensation Act states that you cannot dismiss an employee within six months solely because of their injury or incapacity to perform work resulting from a workplace injury. Beyond six months, dismissal of an injured employee is permissible only once the employer has fulfilled all responsibilities towards the employee. 

Genuine operational reasons 

Employers must demonstrate that any decision to terminate is based on genuine operational requirements of the business and not the employee's incapacity. This might include the inability to adjust the work or provide suitable duties after reasonable adjustments have been considered. 

Consultation and support 

Before making any termination decision, employers should consult with the employee, review possible workplace adjustments or alternative positions,  

Documentation and communication 

Maintaining transparent communication and thorough documentation throughout the process is vital. This includes keeping detailed records of consultations, medical assessments and any efforts made to accommodate the employee's condition. 

Explore alternatives to termination 

Consider alternatives that can help you support your employees and maintain business continuity. If the injured worker can't return to pre-injury duties, this could include modified duties — performing adjusted duties with less physical or mental demand — redeployment, flexible working arrangements, rehabilitation programs to support the employee's return to work or utilising accrued leave entitlements, including sick leave, annual leave or personal leave, to cover the absence.  

Risks of unlawful termination 

Terminating an employee without adhering to the legal and procedural requirements can lead to claims of unfair dismissal, discrimination or breach of employment contract. These cases may be referred to the Fair Work Commission (formerly the Industrial Relations Commission). Employers in NSW must be mindful of the potential legal implications and the importance of proceeding with caution and due diligence. 

Best practices for employers 

Running a small business comes with its fair share of challenges, and navigating employee illness or injury can be particularly tricky. Here are some best practices for striking the right balance between supporting your people and maintaining business continuity.  

Develop clear policies and procedures 

Establish well-defined guidelines outlining sick leave, workers' compensation claims and return-to-work processes. Ensure policies are readily accessible and easily understood by all employees and stay updated on relevant workers' compensation legislation and workplace safety regulations. 

Train managers on legal requirements and sensitive communication 

Equip managers with the knowledge and skills to handle sensitive conversations about illness, injury, and performance concerns. Train them on legal requirements, fair dismissal principles and respectful communication practices. 

Build a positive and supportive workplace culture 

Promote empathy and understanding towards employees facing health challenges. Implement programs to promote employee well-being and mental health and encourage a culture of mutual respect. 

Prioritise communication and compassion 

When dealing with injured workers, it is best practice to approach the situation with empathy, maintain open lines of communication, and explore all possible options to retain the employee within the organisation. 

Seek legal advice 

Given the complexity of employment and workers' compensation laws in Australia and NSW, seeking legal advice is prudent. This ensures any actions taken are compliant and in the best interest of both the employer and the injured employee. 

Empowering employers with knowledge and support 

Understanding your obligations and the rights of your employees is crucial when facing the challenging decision of terminating an injured or ill employee. By adhering to legal requirements and adopting a compassionate approach, employers can navigate these situations with integrity and fairness. 

Need Guidance on terminating an injured or ill employee? 

Terminating an employee due to injury or illness requires careful consideration and expert guidance. Peninsula is dedicated to supporting Australian businesses through complex HR and legal challenges. 

Contact Peninsula today for comprehensive advice on managing terminations ethically and legally while upholding the dignity and rights of your employee. 

Frequently Asked Questions

Can I fire an employee who is on sick leave in Australia?

Generally, no. You cannot terminate an employee solely because they are on sick leave, as long as they meet certain criteria:

  • They have notified you of their illness and provided supporting documentation (e.g., medical certificate).
  • Their absence due to a temporary illness or injury is less than three months consecutively or a total of less than three months within the last 12 months.
  • They still have paid sick leave available.

However, there are rare exceptions like genuine redundancy or serious misconduct unrelated to their illness. Always consult legal advice for specific situations. 

How long can an employee be on sick leave before I can terminate?

Under FWA protections, employees cannot be terminated due to illness/injury if their absence is less than three months consecutively or a total of less than three months within the last 12 months. 

Beyond that period, termination might be possible under specific circumstances, but legal advice is crucial so you avoid unfair dismissal claims. 

What are my obligations when an employee has a work-related injury?

If the injury occurred at work or due to work activities, you must:

  • Notify the relevant workers' compensation authority.
  • Provide reasonable support for the injured employee to recover and return to work.
  • Consider modified duties or alternative work arrangements if possible.

Failure to comply with these obligations can lead to legal penalties. 

How does workers' compensation work in Australia?

Every employer must purchase workers' compensation insurance from a specialised workers' compensation insurer. This protects employers from the financial burden of covering medical expenses, lost wages and other costs associated with work-related injuries and illnesses suffered by their employees. It also protects employees, who can make a workers' compensation claim, to receive financial support and access to medical care funded by the premiums paid by their employer. 

Can I terminate an employee with a disability?

No, you cannot terminate an employee based solely on a disability, including those acquired through illness or injury. This is considered discrimination under the Disability Discrimination Act. Seek legal advice for any concerns regarding disability and employment.

What's the difference between temporary vs. permanent absences?

A temporary absence is generally less than three months (consecutive or combined within a 12-month period). An employee who is temporarily absent could be due to things like short-term illness, surgery recovery or minor injury. Employees are protected from termination under the Fair Work Act due solely to temporary absence. 

A permanent absence exceeds three months and could be things like severe injury, chronic illness, or permanent disability. This may significantly affect business operations and workforce planning.

What happens if an ill or injured worker can't return to normal duties?

In Australia, when an injured employee can't return to their regular duties, both employer and employee have legal obligations and options. Employers must offer suitable duties for 52 weeks, explore alternatives like redeployment or flexible work, and prioritise communication and support. 

After 52 weeks, termination might be possible under strict conditions and with medical clearance, but only after exhausting all options and seeking legal advice to ensure fair dismissal procedures and compliance with disability discrimination laws. Ethical treatment and exploring alternatives are key throughout the process.

What should I do if I'm unsure about terminating an employee?

Always consult with a qualified employment lawyer or HR professional before making any termination decisions involving illness or injury. They can guide you through the legal complexities, assess individual circumstances and help you avoid potential legal risks.

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