Terminating an employee who is on long-term sick leave is rarely straightforward.
Many employers assume that once an employee has been absent for an extended period, termination is simply a matter of process. In reality, it is one of the highest-risk dismissal decisions an employer can make, with potential exposure under multiple legal frameworks.
Under the Fair Work Act 2009 (Cth) (FW Act), an employee is generally protected from dismissal if their absence due to illness or injury is temporary, that is, if the absence is less than three months, or the employee’s total absences over a 12 month period add up to less than three months, or if the employee is on paid personal/carer’s leave. The employee must also provide appropriate medical evidence to substantiate their absence. Once these thresholds are exceeded, the protection under the temporary absence provisions may no longer apply, but employers must still consider other legal risks before proceeding to termination.
If the illness or injury is work-related and the employee has an accepted workers’ compensation claim, additional protections may apply under the relevant State/Territory workers’ compensation legislation, which can prohibit dismissal for a specified period after the injury. Before dismissal, employers must also consider whether they can provide suitable employment or reasonable adjustments to accommodate the employee’s condition.
Employers must not dismiss an employee because of their illness or injury if the employee is exercising a workplace right, such as taking personal leave, making a complaint, or requesting reasonable adjustments. Dismissal in these circumstances may constitute adverse action under the general protections provisions of the FW Act, or discrimination under the Disability Discrimination Act 1992 (Cth), both of which carry significant legal risks, including uncapped compensation, penalties, and potential reinstatement orders.
Legal Risks of Termination on Sick Leave
The legal risks of terminating an employee on long-term sick leave include claims for unfair dismissal, adverse action, and/or discrimination. The onus is on the employer to prove that the dismissal was not because of the employee’s illness, injury, or exercise of a workplace right. Failure to comply with these obligations can result in substantial financial penalties and reputational harm, as these dismissals are often viewed as lacking compassion and may attract negative publicity.
Accordingly, termination of an employee who is on long term personal leave should only be considered as a last resort, after all reasonable adjustments and alternative options have been explored, and after ensuring compliance with all relevant legal requirements. Employers should document their decision-making process and reasons for dismissal to minimise legal and reputational risks. They should also keep in mind that even where termination is legally justified, they may have little opportunity to address any negative publicity or reputational damage that follows.
Before making the decision to terminate on sick leave, it is worth asking one final question – have all reasonable options genuinely been exhausted?
Get in touch to discuss your options with our team.
Disclosure statement: This information is general in nature and does not take into account any individual’s or business’ specific circumstances. You should obtain independent legal advice before making any decisions based on this information. Liability limited by a scheme approved under Professional Standards Legislation.