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Do I have to hold their job open indefinitely?

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My employee has gone on ACC and I don’t know when they are coming back to work.

If you have an employee that has either injured themselves (inside or outside of the workplace) or is suffering from a long-term illness which prevents them from doing their job, you may be dealing with an “incapacity” situation. Dealing with these types of situations is never easy as an employer naturally feels sympathy for an employee who is sick or injured but, on the other hand, is keenly aware of  the pressures facing the business in the employee’s continued absence, particularly if  the employee’s role is key.

So, in answer to this commonly asked question, you do not have to keep an employee’s role open indefinitely – there is a time where an employer can “fairly cry halt.” However, there is an obligation on the employer to follow a careful process, which includes careful consideration of a number of factors.

As always, an employer must act in good faith and be fair. The Employment Relations Act 2000, s 103A test for justification applies to any decision to dismiss: “whether the employer’s actions, and how the employer acted, were what a fair and reasonable employer could have done in all the circumstances at the time the dismissal occurred.” Case law has established the kind of factors that need to be considered by an employer who is considering dismissing an employee due to incapacity:

  • The terms and conditions of the employee’s employment. You will need to review the employee’s employment agreement and other company policies to see if there are any express obligations to provide the employee with reduced or alternative duties and if there is a clause which enables you as the employer to terminate the employee’s employment on the grounds of medical incapacity. The Restaurant Association employment agreement contains the following clause: “The Employer may terminate your employment on notice (which may be unpaid) if you become incapable of the proper ongoing performance of your usual duties as a result of physical or mental illness or injury.” You will be able to rely on this clause if you are faced with an incapacity situation.
  • The nature of the medical condition or injury including how long it has already continued and the prospects of the employee recovering from it and returning to work. For example, if the employee has only been away from work for a few weeks due to a minor injury like a sprained wrist for example and his/her doctor has indicated a return to work date, then it is likely that it would be considered unreasonable to terminate the employee’s employment. However, if the employee has been away with a severe back injury and his/her doctors are unable to indicate a return-to-work date, then it may be reasonable to consider possible termination due to incapacity.
  • The nature of employment and whether the employee is in a key or senior position within the business. If the employee’s role is key to the business, for example, if he/she is the Head Chef, and you are able to show that the absence of the employee from their role would have a significant detrimental effect on the business, it is more likely that considering termination on the grounds of incapacity would be considered reasonable. You must consider factors such as how crucial it is to the success of the business that the role continues to be filled and how difficult it would be to find a temporary replacement for the role. In this context, the size of your business and the pressures faced by you as an employer will also be relevant.
  • How long the employee’s employment was likely to last in the absence of sickness or injury. You should consider the likelihood of the employee being employed long-term were it not for the incapacity. For example, if the employee is employed on a fixed-term basis, then it will likely be more reasonable to consider termination at an earlier stage than with a permanent employee.
  • Length of employment to date. Typically “long-standing” employees should be given longer to recover.
  • Cause of the incapacity. This is an important consideration. If the employee’s illness or injury has in some way been caused by the company (for example, an accident due to inadequate health and safety precautions being taken), it may difficult to justify moving away from your initial obligation as an employer to support and rehabilitate the employee.

What is the first step?

If you are dealing with an incapacity situation, the first step you should take should be to meet with the employee informally to discuss the employee’s injury or illness and their likely return to work date. If it appears that the employee may be away from work for some time and the business will struggle in the employee’s absence, this is something that you will need to communicate with the employee.

The next step will be to begin a formal process whereby you would invite the employee to a formal meeting to discuss their illness or injury and likely prognosis, how the employee’s absence is impacting the business and the possibility that the employee’s employment may be terminated due to incapacity. The Restaurant Association Helpline can help you draft a letter like this. You must be aware that terminating due to medical incapacity is not a simple process and there may be a need for several meetings before any final decisions are made regarding the employee’s employment.

Must-dos – procedural fairness and common errors

When dealing with an incapacity situation you must ensure that you do the following:

  • You must give the employee adequate notice of the possibility of dismissal and you must not provide any false reassurance regarding the employee’s job
  • The employee must be aware of their right to be represented during the process
  • There must be adequate notice of the possibility of dismissal
  • You must make a fair and adequate enquiry including seeking information about the employee’s illness or injury, requesting medical reports and so on
  • You must make the employee aware of the information that you hold about the situation
  • You must keep the lines of communication with the employee open and consult with the employee

It is important to be aware that the Courts are likely to scrutinise closely any decision to dismiss an employee on the grounds of medical incapacity. We recommend calling the Helpline if you are dealing with a situation like this.

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