Managing Medical Incapacity: Enough To Make You Feel Sick?

From an emotional/human perspective, it is incredibly tough when an employee truly wants to work but cannot. From a business perspective, the “show must go on” which often requires juggling other employees’ workloads or recruitment of temporary cover.

Perhaps the most challenging aspect is the legal perspective – balancing the employee’s and employer’s rights can be a real minefield. There are a raft of issues around sick leave, health and safety, ACC, and gradual return to work plans (each of which could be an article in themselves) but perhaps the most difficult issue of all is deciding when (and how) employment should be terminated for medical incapacity.

As with all dismissals, employers will ultimately be judged on whether what the employer did (i.e. dismiss the employee) and how they did it (i.e. the process followed) was what a fair and reasonable employer could have done in all the circumstances. In addition to the general test of justification, there is a large body of case law in this area which provides further guidance.

It has long been accepted that employers do not have to hold a position open for a sick/injured employee forever. However, the oft-cited question from a 1985 case, Hoskin v Coastal Fish Supplies Ltd, is at what point an employer “can fairly cry halt”?

There have been several recent Employment Court judgments on this issue (for the very keen, you can read these here: Lal v The Warehouse Ltd, Idea Services Ltd v Crozier, and Lyttleton Port Company Ltd v Arthurs). Helpfully, in the most recent of these decisions, Lyttleton Port, the Court set out a summary of the key principles employers should consider when considering termination for medical incapacity:

1. The employer must give the employee a reasonable time (in the circumstances) to recover.
2. The employer is required to carry out a fair enquiry and then to make its decision about whether to dismiss the employee, balancing fairness to the employee and the reasonable dictates of its practical business requirements.
3. Fair and reasonable procedure will include notification of the possibility of dismissal and a fair enquiry enabling an informed decision, including seeking input from the employee.
4. The terms of the employment agreement and any relevant policy, the nature of the position held by the employee and the length of time the employee has been employed with the employer are factors that are likely to inform an assessment of what is reasonable in the particular circumstances.
5. Where the actions of the employer caused an employee’s condition, the employer may have an ongoing responsibility to take reasonable steps to rehabilitate the employee.
6. Even in a large organisation, an employer is not obliged to keep a job open indefinitely.
7. The relationship is a “two-way street”. A lack of positive engagement from an absent employee may count against any later complaint.

These principles are going to apply, and be weighted differently, depending on all of the particular facts of the situation.

Despite what some people might think, there is no magic number of days’ absence that will allow an employer to “cry halt”; each case is going to involve an assessment of the business requirements, medical capacity, prognosis and ‘fairness’. And of course, the requirements of good faith will apply to this process, as with all aspects of the employment relationship.

This really is one of the trickiest, most emotionally-charged areas of employment law. We have found that it often takes a toll on everyone involved – the situation is no-one’s fault, but nonetheless, has to be dealt with. Getting advice at an early stage will help give you the framework to navigate through this minefield. Please give us a call if you think that you have a situation developing – as usual, we find that the earlier we are involved, the better the outcomes, and the less time and cost is incurred.

If you would like to upskill in this area, and hear more about recent developments, the Hesketh Henry Employment team has been invited to present at the 5th Annual ‘Managing Ill & Injured Employees Masterclass’ in Wellington on 24th July 2018, and in Auckland on Monday, 30th July 2018.

If you are interested in attending and would like a 10% discount, please use VIP code: Leader-10 when registering. Registrations can be made online at http://mii-nz.aventedge.com/