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Medical Incapability – October 2016


When can an employer fairly cry halt?


In Hosin v Coastal Fish Supplies Ltd [1985] ACJ 124, the Court used a phrase which is often referred to nowadays in cases of dismissal of employees for long-term absence or medical incapability, namely:

‘There can come a point at which an employer (particularly in a small shop) can fairly cry halt.’


The crucial question however is, ‘When is that point reached?’


Two Employment Relations Authority (ERA) cases in this regard, although very different in many respects, do however both reiterate a few basic truths embedded in employment law and in the good faith provisions of the Employment Relations Act 2000:

  • The employee needs to notify the employer of any issues or concerns regarding their employment or workplace – if the employer isn’t aware, it can’t act.
  • If the employee is away from work for an extended period, he/she needs to keep the employer informed of their general state of health, the doctor or specialist’s prognosis; expected return to work; whether the return will be to full duties or modified duties, and so on. Communication is a two-way street.
  • The employer needs to keep in touch with the employee; ascertain the medical status of the employee; how long he/she is likely to be away and most importantly keep the employee apprised of the impact their absence is having on the business.
  • The employer must, at some point after an informed assessment of the situation has been made, indicate to the employee that their job is in jeopardy if they are unable to return within a reasonable time.


In Douthett v West Auckland Pacific Island Fono Inc [2004] the Applicant Mrs Douthett suffered severe health problems and her employment was terminated after some nine months’ absence. She took a personal grievance claim for unjustified disadvantage and unjustified dismissal.


In her evidence, Mrs Douthett claimed she had been unfairly treated and overworked. She had received a written warning early on in her employment, and although this was later resolved in a full and final settlement, Mrs Douthett never got over the warning and her relationship with her employer was never the same.


The Applicant claimed undue interference in her job by the Board and Chairperson; excessive work hours, and increased stress levels which were not addressed by the Respondent. She submitted that the ‘ongoing oppressive treatment’ she suffered at the hands of the Chairperson made her feel undermined and undervalued. Her evidence further indicated that she was not visited after she became ill, nor was she telephoned to enquire how she was. She submitted that the Respondent effectively ‘disowned her’. She was also told to take unpaid sick leave once her sick leave entitlement was exhausted, or use her outstanding annual leave – another example of lack of consideration in her view.


The Respondent asserted that he (Mr Prescott) and Mrs Douthett were in frequent communication and when she asked if she could take up secondary employment, Mr Prescott expressed concern about her ability to fulfil both roles adequately. Further, when Mrs Douthett was off sick, the Respondent rang her, took her out to lunch for her birthday and dropped off fruit and flowers at her home. Later a staff member reported that Mrs Douthett had advised that she did not want people visiting her at home and the visits ceased out of respect for her privacy.


The Authority Member summarised its position by stating that merely claiming ‘I’m alive’ when asked to comment on workload, was not sufficient evidence to indicate the employer did not address her concerns.


If an employee doesn’t tell the employer about the excessive workload or the increased stress that the employee might be under, then the employer cannot be expected to act. Regarding the warning: that was addressed in a full and final settlement signed by both parties, so could not still be held against the employer unless the terms had been breached – there was no evidence to suggest they had.


So the Authority Member dismissed Mrs Douthett’s claim for unjustified disadvantage.


However, the unjustified dismissal claim was upheld. Despite the lengthy absence and ongoing communication with the Applicant, the employer omitted one very important step: it did not provide the Applicant with a timely warning that should she not be able to return to work by xxx date, her job would be in jeopardy. The ERA considered this a fatal flaw in the process.


In the May 2008 Authority case, Marnie Hunter v Store-It Limited, the Applicant claimed she was treated unfairly which resulted in her becoming too ill to work. She claimed she was unjustifiably dismissed.


Store-It Limited is a small business and Ms Hunter held a key position, that of facility manager. Ms Hunter was taken through an intensive induction and training programme, but she continued to have difficulty with Store-It’s systems, ’Storman’ in particular.


After two months, Ms Hunter’s performance was reviewed. She expressed frustration at the lack of training she’d received. She was complimented on her customer service skills but the employer raised concerns about her inability to grasp the Storman system. Ms Hunter stated she felt she was ‘being spied on’. Further training was provided following which a disciplinary meeting was held to address Ms Hunter’s ongoing high error rate and failure to produce the requested training checklist. Discussions followed but no disciplinary action was initiated.

As a result of the pressure she was under, Ms Hunter went on sick leave for two weeks. Upon her return Ms Hunter claimed the workplace was ‘an unsafe place for her to be’, and again went off on sick leave.


After another two months away from work, Ms Hunter was asked to undertake an independent medical examination at the employer’s cost. She declined.


Mr Price (the owner) then wrote to Ms Hunter asking for further medical information. A full report was provided by her general practitioner. The doctor concluded that she did think Ms Hunter could return to work for at least six more weeks, possibly longer.


Two or three letters were sent to Ms Hunter advising her of the employer’s concerns about her ongoing absence and the uncertainty of when she’d be able to return to work. Ms Hunter was provided with one final opportunity to provide any information that might convince Store-It that her employment should continue. Nothing was received, so a week later, her employment was terminated on the provision of 30 days’ notice.


The Authority Member’s summation of the case indicates that the workplace was not ‘unsafe’ as the employee had intimated. The employer had legitimate concerns about Ms Hunter’s ability to perform her role and was entitled to address these with her. Also the Store-It business is small and Ms Hunter had been absent for more than three-and-a-half of her seven-month term of employment, so the employer could reasonably conclude that it could no long keep her position open.


The other point the Authority looked at was, ‘Did the employer act as a fair and reasonable employer in all the circumstances at the time?’ It found that, given its size and the pressures it faced at the time, the Company was justified in terminating Ms Hunter’s employment. The Applicant’s claims were dismissed.


Further reading: Lee Brown v AICS [29/07/16] NZERA Wellington; B Loftus.