Terminating an employee on Workers' Compensation

We have an employee who has been on workers' compensation on a long term basis. He has not worked for more than 5 years. We were advised by our insurer that his WorkCover entitlements had ceased in late 2015. Our insurer has determined that the employee will not be able to return to employment with us. The employee has completed vocational training for work elsewhere. Are we able to terminate the employee's employment because he has not worked with us for such a long period of time? We have been told that we will have to pay the employee redundancy pay in order to avoid an unfair dismissal claim.

Ending employment due to incapacity can be complex and only general advice can be provided here. It is important to note that there are set procedures that must be followed in order to end employment due to incapacity and there are significant claims that may be made against an employer if these procedures are not followed.

Such claims may include, for example, unfair dismissal, adverse action and discrimination claims.
In summary, an employer is unable to automatically regard employment as ended because an employee has been absent due to injury for a significant period of time or because an insurer submits that the employee will not be able to return to work.

Procedures for managing an ill or injured employee (which may lead to termination)

The procedures are too extensive to be detailed here. However, some of the procedures involved include:

• The steps involved with the investigation of an employee’s future capacity;
• The invitation to an employee to respond to the allegation that they may be unable to fulfil the inherent requirements of their role;
• The request for contemporary medical evidence from an employee in regards to their fitness for work; and
• Consideration of any reasonable adjustments that the employer may be obliged to make.
• The publications contain template documentation which employers can use as they move through the stages associated with the management of an ill or injured employee and potentially ending employment due to incapacity.

Ai Group sells publications titled ‘Guide to Dealing with Ill and Injured Workers’ for Victoria, New South Wales, Queensland and Adelaide. These guides detail the processes to be followed for the management of an ill or injured employee, including the procedures expected to be followed for termination due to incapacity.

Redundancy pay

Section 119 of the Fair Work Act states that an employee is entitled to be paid redundancy pay by their employer if the employee’s employment is terminated at the employer’s initiative because the employer no longer requires the job done by the employee to be done by anyone, except where this is due to the ordinary and customary turnover of labour or because of the insolvency or bankruptcy of the employer.

The business appears to be considering ending employment due to incapacity as opposed to due to redundancy. In this case, it would not appear to be appropriate for redundancy pay to be provided.

Unfair dismissal

Section 387 of the Fair Work Act details the criteria for considering harshness in regards to unfair dismissals. In considering whether the Fair Work Commission is satisfied that a dismissal was harsh, unjust or unreasonable, it must take into account factors such as

• Whether there was a valid reason for the dismissal related to the person’s capacity or conduct; and
• Whether the person was given an opportunity to respond to any reason related to the capacity or conduct of the person; and
• Any unreasonable refusal by the employer to allow the person to have a support person present to assist at any discussions relating to dismissal; and
• Any other matters that the Fair Work Commission considers relevant

In this way, the question of whether a dismissal is unfair will be based on matters such as those discussed above. This means that an employer cannot avoid an unfair dismissal claim by simply making a payment to an employee (such as a payment for ‘redundancy’) where the dismissal would otherwise be seen as unfair.