Can employees be dismissed while they are on sick leave?

A recent FWC decision highlights the challenges employers face when sick leave interrupts investigation and dismissal processes. Here are some practical steps HR can take to reduce risk in situations like this. 

When an employee goes on sick leave in the middle of a disciplinary process, employers are often uncertain about how to proceed. Can they dismiss someone who is absent on medical grounds, or does medical leave create an automatic shield against termination?

This conundrum was explored in a recent ruling by the Fair Work Commission (FWC).

The case involved a former general manager at a hospitality and property management business who was dismissed for performance and conduct issues. 

The allegations against him included incomplete cash reconciliation, which had left over $30,000 unaccounted for, and unauthorised access to a leased property controlled by the business. 

An investigation into these issues had been underway for around three months before the termination. At the time he was dismissed, the employee was on a two-week period of sick leave. 

In response, the employee filed an unfair dismissal claim against his former employer, citing a lack of procedural fairness and arguing that it was unfair to dismiss him during medical leave. 

However, despite the employee’s absence at the time of his dismissal, the FWC ultimately found that the employer had valid grounds for termination and dismissed the employee’s application.

“There might be an expectation that if an employee is on sick leave, no dismissal can be carried out,” says Chris Hill, Principal at Onside Law. “But the commissioner quite clearly says at the end [of the ruling] that you can dismiss someone on sick leave. [However], she also pointed out that it’s unlawful to dismiss someone because they’re on sick leave.”

Below, Hill offers insight on HR’s key learnings from this case and how employers can navigate situations like this without crossing a line. 

When medical leave intersects with dismissal

A key factor weighing in the employer’s favour in this case was the fact that the employee had been given a chance to respond to the allegations against him before he went on sick leave. 

“The commissioner was satisfied that the disciplinary process had got to a stage where, if they had waited for the sick leave to end, all it would have done was delay the decision that had already been made,” says Hill.

However, cases like this grow more complicated when the employee takes an extended period of leave that prevents them from responding to the original allegations.

“Managing long-term absence while also running disciplinary investigations and performance processes is probably one of the hardest employee relations matters for HR to manage,” says Hill.

Employers should make every effort to obtain an employee’s response to allegations, he says, as failing to do so can increase the risk of an unfair dismissal claim. Medical leave should not necessarily prevent employers from creating avenues for the employee to engage.

“There’s a number of steps you can take,” he says. “You can contact the employee and say, ‘We can see you’ve got this really long sign-off from your doctor. We’d like to give you a questionnaire to take to your doctor, which asks things like: How long will that be off? Can they come to a meeting? What can’t they do?’ Or, with [the employee’s] consent, you can talk to the doctor directly.”

A third option is to engage an independent medical examiner (IME).

“It might be a specialist in whatever symptoms the employee is suffering from, or might be a GP,” he says.

“Managing long-term absence while also running disciplinary investigations and performance processes is probably one of the hardest employee relations matters for HR to manage.” – Chris Hill, Principal, Onside Law

What if an employee refuses to engage?

Conducting investigations while an employee is on leave is especially difficult if they refuse to cooperate or don’t supply evidence to justify their absence.

“Under the Fair Work Act, employees have to provide evidence that will satisfy a reasonable person that they need the sick leave,” says Hill.

“Also, if you’ve taken one or a number of these steps, and the employee just says no to all of them, then you can look at something called ‘failure to follow a lawful and reasonable direction’.”

This makes it possible to discipline an employee not for the original allegations, but for refusing to cooperate with a lawful process. However, this may still leave employers in the risky situation of dismissing someone without a formal response from them. 

Before it gets to this stage, Hill recommends trying every available route to engage them in the process.

“One option is stepping away from the allegations and taking a wellbeing approach – trying to talk to them, [referring them] to EAPs and trying to get to the bottom of the issue,” he says.

This will also ensure the investigation and dismissal processes don’t create hazards to mental health.

“Because, to throw another [challenge] into the mix, employers have a duty to manage psychosocial risk, including during workplace investigations,” says Hill. 

HR has a key role to play here in balancing efficiency and business needs with protecting employee welfare, he adds – and this requires a nuanced approach.

“The issue is there’s no magic yard stick for the right amount of evidence for a dismissal in all situations. It’s about minimising risk [as much as possible],” he says.

In practice, this means making every effort to engage the employee in the process, seeking medical input where relevant and keeping a paper trail that demonstrates procedural fairness at every stage. 

Taking these steps will ensure employers are well-positioned to defend their dismissal processes, even when the employee is absent for all or part of them.

 All information, content and materials available on this site are for general informational purposes only. The contents of this article do not constitute legal advice and should not be relied upon as such.

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