Deciding whether to end an employment relationship on medical grounds can cause quite the headache for employers.
Helpfully, drawing on existing cases, the Employment Court (Court) has confirmed the core principles to follow in medical incapacity situations in its recent decision in Lyttelton Port Company v Arthurs  NZEmpC 9.
Mr Arthurs had been a cargo handler with the Lyttelton Port Company (LPC) since 2000.
In 2008, he witnessed a fatal workplace accident and then, in 2014, a friend and colleague of Mr Arthurs was involved in a second fatal workplace accident. Suffering from PTSD as a result of the accidents, Mr Arthurs went off work sick in December of 2014 and did not return, providing a string of medical certificates that contained very little information. To complicate matters, during this time, Mr Arthurs suffered a non-workplace injury to his shoulder.
In July 2015, after seven months away from work, the company began an enquiry into Mr Arthurs’ health status, prognosis and ability to return to his role. As part of that enquiry, LPC obtained a medical report from Mr Arthurs’ doctor, and had Mr Arthurs evaluated by a specialist.
This medical information indicated that there was no clear recovery time on the horizon for Mr Arthurs, and that it was possible he would never fully recover.
In December 2015, LPC terminated Mr Arthurs’ employment for medical incapacity on the basis that there was no likelihood of him returning to work in the foreseeable future. Mr Arthurs challenged LPC’s decision in the Employment Relations Authority (Authority) and successfully argued that his dismissal was unjustified.
Hearing the case on appeal, the Court confirmed the general principle that there will come a time when an employer “can fairly cry halt” in medical incapacity situations and set down the other key principles to be considered in such cases:
a. The employer must give the employee reasonable time (in the circumstances) to recover from the injury or illness;
b. 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;
c. 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;
d. 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;
e. 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;
f. Even in a large organisation, an employer is not obliged to keep a job open indefinitely; and
g. The relationship is a “two-way street”. A lack of positive engagement from an absent employee may count against any later complaint.
Considering the above principles in the context of the case, the Court overturned the decision of the Authority and held that LPC’s decision to terminate Mr Arthurs’ employment on medical grounds was justified in the circumstances. The Court was of the view that LPC had not only acted reasonably in commencing an enquiry process into Mr Arthurs’ prolonged absence, it was objective in considering the medical prognosis and other information provided to it before making a decision. Further, the Court was critical of the “general lack of positive and constructive engagement from Mr Arthurs throughout”.
Medical incapacity dismissals are fraught with risk – both from a legal and PR perspective. As such, an employer considering the termination of a sick employee should pay particular regard to the principles in Lyttelton Port Company before embarking on any process.
Partner Aaron Lloyd and Senior Associate Chris Baldock, MinterEllisonRuddWatts