Key employment law risks on termination of employment
Inherent requirements and case law
General protections under FW Act and case law
Unfair dismissal and case law
The area of ill and injured employees is a highly regulated one under Australian law, and one in which employers should exercise caution having regard to legal and practical risks.
This article draws on relevant legislation and case law to provide an overview of the considerations for employers in managing ill and injured employees and safety concerns, where relevant up to and including termination of employment.
Ill and injured employees in a new world of work
This area of law has become increasingly pressing in the "new world of work", given operational changes and challenges faced by all following the outbreak of the covid-19 pandemic.
Statistics show that working from home in Australia has almost doubled during the covid-19 pandemic,(1) and that this has contributed to levels of psychological illness and injury in the workplace. According to an Australian Bureau of Statistics survey,(2) only 17% of respondents who reported feelings that impacted their mental wellbeing discussed them with a doctor or another health professional.
Against this background, termination of employment is always, but particularly in the context of ill and injured employees, a "last resort". That said, the need for termination may arise in circumstances including:
- prolonged and extended absences from work, where the medical evidence shows an employee is unable to perform the inherent requirements of their position; and
- in the context of managing an employee's poor performance or misconduct.
Complexities may arise in both of the above scenarios, including where:
- medical conditions are disclosed during, or are exacerbated by, a process undertaken by an employer in respect of an employee's illness or alleged poor performance or misconduct (see the case under "Inherent requirements and case law" below);
- there is a question as to what is a lawful and reasonable direction in the context of an ill or injured employee (see the case under "General protections under FW Act and case law" below); or
- disputes arise as to an employer's obligation to provide a safe place of work, including in the context of ongoing work from home arrangements (see the case under "Unfair dismissal and case law" below).
This article considers these complexities and what they may mean for employers, from both a legal risk and practical HR or "people" perspective.
Key employment law risks on termination of employment
The main risks associated with managing ill and injured employees, and with termination of employment in this context, include:
- state and federal anti-discrimination legislation, which protects employees from discrimination including because of a disability;
- the general protections or "adverse action" protections under the Fair Work Act 2009 (Cth) (FW Act), which prohibit:
- adverse action (eg, dismissal or other disciplinary action) taken because of the exercise of a "workplace right" or to prevent exercise of a workplace right;
- an employer from dismissing an employee because of a temporary absence or illness; and
- discrimination because of a disability;
- the unfair dismissal regime under the FW Act, which provides remedies to employees where a dismissal is "harsh, unjust or unreasonable"; and
- workers' compensation legislation, which in New South Wales (NSW) for example provides further limitations on termination of employment within six months from the date of injury.
The law for NSW employers derives from the Disability Discrimination Act 1992 (Cth) (DDA), at the federal level, and the NSW Anti-Discrimination Act 1977.
Section 4 of the DDA provides a definition of "disability", which includes (relevantly):
- the total or partial loss of bodily and/or mental functions; and
- the presence in the body of organisms causing disease or illness.
Discrimination, including under the DDA, may be direct or indirect. The difference between the two concepts was explained in the case of Waters v Public Transport Corporation(3) as follows:
- direct discrimination occurs where one person is treated in a different manner (in a less favourable sense) from the manner in which another is or would be treated in comparable circumstances on the ground of some unacceptable consideration (which can include disability); and
- indirect discrimination occurs where one person appears to be treated just as another is or would be treated but the impact of such "equal" treatment is that the former is in fact treated less favourably than the latter.
In other words, the major difference is that in the case of direct discrimination the treatment is on its face less favourable, whereas in the case of indirect discrimination the treatment is on its face neutral but the impact on an individual employee is less favourable.
The DDA provides for two types of direct discrimination. The first involves the failure to make reasonable adjustments to facilitate an employee's ability to perform their role (section 5(2)(b)).
Reasonable adjustments can be made (and should be considered) to:
- the workplace or work-related premises;
- equipment or facilities;
- work-related communications;
- work methods or work arrangements;
- work-related rules, policies or processes; and
- co-worker or supervisor training.(4)
However, such adjustments are not necessary if they are deemed to cause unjustifiable hardship (section 11 and section 21B).
The second involves dismissing an employee because of a disability, unless an employee without the same disability would be treated in the same way in circumstances that are not materially different (section 5(1)).
Further, where an employee cannot perform the inherent requirements of the role, even with reasonable adjustments, this will not amount to direct discrimination (section 21A(1)(b)).
Inherent requirements and case law
The case law demonstrates that, in this area, the concept of a role's "inherent requirements" is key. The term "inherent requirements" refers to an employee's substantive position (not a modified position, restricted duties or temporary alternative position if it is clear that it is only "temporary").
The inherent requirements of a job can generally be established by asking the following questions:
- Is the task an essential part of the job or can it be allocated elsewhere?
- Is the task a necessary part of the job in an emergency or a high workload period?
- Would the position be the same if the requirement was discontinued?(5)
The following should also be considered:
- the ability to work effectively in a team or other type of work organisation;
- the ability to work in a way that ensures the safety of the employee and others, and that enables smooth relationships with colleagues, the general public and/or stakeholders; and
- mandatory qualifications or legal or regulatory requirements for the position.
Exercise caution in relying only on position description
The above principles in respect of inherent requirements are best illustrated in the case of Huntley v State of NSW, Department of Police and Justice (Corrective Services NSW).(6)
In that case, the employer had moved to "medically retire" the employee, Caryn Huntley, on the basis that she could not meet the inherent requirements of her position as a result of her physical needs due to disability (which included Chron's Disease and Idiopathic Hypersomnolence).
Judge Nicholls of the Federal Circuit Court of Australia (FCCA) did not accept the employer's inherent requirements defence and found that the employer's "sole basis" for its conduct was the employee's line manager's "factually incorrect" interpretation of a medical opinion.
Judge Nicholls had regard to a number of factors in making this assessment, including that:
- The generic position description relied upon by the employer was not a clear statement of the inherent requirements of the role, in this case because there was no satisfactory evidence that any relevant supervisor had conducted any assessment to properly ascertain the inherent requirements.
- The employer did not make reasonable adjustments to enable the employee to continue in her position, or properly consider whether any such adjustments could be made.
The unlawful conduct of the employer was found to have significantly exacerbated the employee's depressive illness, and Judge Nicholls found this caused pain and suffering. The employer was ordered to recredit the employee's leave entitlements and pay compensation, including A$75,000 for pain and suffering and breach of contract, in addition to A$98,863 plus interest for:
- loss of wages;
- leave entitlements;
- psychologist costs; and
- loss of promotion opportunities.
A later appeal from the first instance decision in State of New South Wales (Department of Justice – Corrective Services) v Huntley(7) did not change the position outlined above.
General protections under FW Act and case law
The key considerations for employers arising from the FW Act are the general protections relating to:
- the exercise of workplace rights;
- discrimination; and
- temporary absence due to illness or injury.
An employer will be at risk of a general protections claim if a "substantial and operative" reason for an employee's dismissal is:
- a workplace right (section 340), which could include:
- making a workers' compensation claim;
- taking personal (sick) leave;
- starting a process under a workplace law, such as the notification of a dispute under an enterprise agreement; and/or
- instigating a complaint or inquiry, whether internally or externally (eg, a bullying complaint regarding psychological safety within workplace);
- the employee's disability (section 351), noting there is no contravention of section 351 if an action is not considered unlawful under the applicable anti-discrimination law or is taken because of the inherent requirements of an employee's position (section 351(2)); or
- a temporary absence due to illness or injury, as provided for in the Fair Work Regulations 2009 (Cth) (FW Regulations) (section 352). The definition in the FW Regulations, read alongside section 352, means that an employer must not dismiss an employee because they are temporarily absent from work due to an illness or injury:
- on paid personal leave (however described), supported by medical certificates or other evidence; and
- for less three months or for a total of less than three months over 12-month period.
Carefully consider basis for requests for further medical information
The application of the above principles is illustrated in the recent case of Wildman v IMCD Australia Ltd,(8) in the context of a direction by an employer for its then employee, Kevin Wildman, to provide additional medical information to support an absence from work.
Specifically, Judge Baird of the FCCA considered the issue of whether directions given to the employee to provide medical information were lawful and reasonable having regard to the general protections provisions under the FW Act. Judge Baird found, on the facts of the case, that they were not.
The facts were as follows: the employee had been diagnosed with rheumatoid arthritis some years prior to the events leading to his dismissal. He was later diagnosed with depression, which was exacerbated in 2017 when his father passed away.
In January 2018, the employee was advised by his general practitioner that he needed a break from work due to his health. He submitted four medical certificates to the employer from his treating general practitioner, over a four-month period, certifying that he was undergoing medical treatment and was unfit to attend for work.
The employer, who had reservations about the genuineness of the certificates, directed the employee to provide additional information about the reason for his unfitness for work. Wildman declined to provide such information, and his employment was ultimately terminated.
The employer's position was that, after having provided the employee with numerous opportunities to respond and consult regarding its directions to provide further information, the employee's refusal to provide such information constituted serious misconduct.
Judge Baird disagreed, and noted that on the facts of this case:
- the employee had been absent from work for around two months when the initial direction was given that he provide medical evidence to the employer, and the employee's absences were covered by paid personal leave;
- the medical certificates, although not specific in respect of the employee's illness, were in customary form and there was no suggestion they were not legitimate;
- the employer's view that the employee was "abusing his sick leave entitlements" in the circumstances was not reasonably held; and
- in these circumstances, there was no evidence of any need for further medical examinations or the provision of medical information.
Judge Baird found the employer had contravened the FW Act, by terminating the employee's employment because he was exercising his workplace right to be on paid personal leave. Following judgment, the proceeding was dismissed by consent (presumably following the parties' agreement as to remedy).
Under section 387 of the FW Act, a dismissal will be unfair where it is:
- unjust; or
The above test generally involves the Fair Work Commission (FWC)'s consideration of three important matters being:
- whether there was a valid reason for the person's dismissal related to their conduct or capacity (section 387(a));
- procedural fairness considerations regarding how the dismissal took effect and related matters (section 387(b)-(g)); and
- any other matters the FWC considers relevant, which can include the employee's personal or economic circumstances or mitigating circumstances (section 387(h)).
How far does an employer have to go in providing equipment for employees to safely work from home?
The application of these principles to "new ways of working" will, of course, depend on all the facts and circumstances in each case. That said, the recent decision of McKean v Red Energy Pty Ltd(9) provides some guidance as to unfair dismissal risk in the context of safe work practices.
The case involved an employee, Jayson McKean, whose role of "customer assist specialist" required him to use a computer and speak to customers on the telephone. A dispute arose in the context of the covid-19 pandemic, with the employer sending a notice to employees encouraging them (and later requiring them) to work from home due to Victorian Government health orders.
In short, the employee argued that he was unable to comply with the direction to work from home including because he had recently moved to a new house and did not have furniture, including a table or desk to work from. The employee asked the employer to purchase his desk, or otherwise allow him to continue to work from the office. The employer responded by stating that while it would provide all reasonable support and equipment necessary to work from home (including a laptop, headset, adjustable chair, ergonomic assessments, access to an occupational therapist, and online resources), it would not be purchasing the employee's desk.
The employee ultimately resigned and argued, in the unfair dismissal case, that he was forced to do so because of the employer's failure to provide him with a desk. The employee contended that the employer's conduct fell short of its obligations under work, health and safety (WHS) legislation to maintain a safe working environment.
Deputy President Colman of the FWC did not agree and found that, instead of resigning, the employee could have bought a desk (at relatively nominal cost, and a cost he could have afforded) or borrowed a desk from a friend. Deputy President Colman noted that the employee had since bought a table, and that his decision not to buy a desk at the time was based simply on a "position of principle".
The FWC was not satisfied that the employer's direction to work from home was a WHS risk. The FWC upheld the employer's position, and the unfair dismissal claim was dismissed.
When working through the complex space of ill and injured employees, employers should consider the circumstances of each case. Moving too swiftly, without due consideration of all the medical evidence, can give rise to significant risks. It is critical to remember that, in this space, no two situations will be identical and as such employers should seek advice early to minimise future liability.
For further information on this topic please contact Alina Kaye at The Workplace Employment Lawyers by telephone (+61 2 8999 3300) or email ([email protected]). The Workplace Employment Lawyers website can be accessed at theworkplace.com.au.
(1) ABS, 2021 - Household Impacts of COVID-19 Survey, June 2021, Australia. Canberra: Commonwealth of Australia.
(2) ABS, 2020 - Household Impacts of COVID-19 Survey (June 2020). Canberra: Commonwealth of Australia. Retrieved from Household Impacts of COVID-19 Survey, August 2020 | Australian Bureau of Statistics.
(3)  HCA 49.
(4) Watts v Australian Postal Corporation  FCA 370.
(5) Qantas Airways Ltd v Christie (1998) 193 CLR 280 and X v Commonwealth (1999) 200 CLR 177.
(6)  FCCA 1827.
(7)  FCA 581.
(8)  FCCA 1161.
(9)  FWC 5688.