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Medical Incapacity

One of the most difficult issues for employers is when they can justify terminating an employee for long-term absences for medical reasons.

The Overall Process

The broad framework to follow to ensure a decision to dismiss an employee for medical incapacity is justified can be outlined in four key steps:

  1. The employer must give the employee a reasonable opportunity to recover;
  1. The employer must make a fair and reasonable inquiry into the employee’s diagnosis and their prognosis for a return to work;
  1. The employer must fairly consider what the employee has to say and in doing so the employee must be made aware of the possibility of a dismissal as an outcome of the process; and
  1. The employer must consider whether there are any reasonable alternative positions for the employee.

In making a decision an employer is entitled to have regard to its business needs. This can include:

  • its need for permanent staff;
  • whether it is possible to arrange cover while the employee is absent;
  • the kinds of additional costs that will be incurred and whether these are feasible for the business;
  • the effect of the employee’s absence on the wider team; and
  • any health and safety concerns.

No employer is obliged to keep a job open indefinitely regardless of how long the employee has been employed by the employer for or how large the organisation is, though these matters have some bearing on what a reasonable opportunity to recover is.

The terms of the employment agreement will also inform an assessment of what is reasonable in the circumstances.

An employment relationship is a two-way street. The interests of both the employer and the employee must be balanced. While the employer is expected to make a fair and reasonable enquiry and provide the employee with a reasonable opportunity to recover, the employee is also expected to engage with the employer and their attempts to facilitate recovery and a return to work.

Intermittent Absences

Dismissing an employee for medical incapacity gets more difficult when the employee is not off work for a prolonged period of time but rather has numerous intermittent periods of absences of sick leave but is capable of performing their full duties when they are at work.

The issue of dismissing an employee for intermittent absences on sick leave has not yet come before the courts and is therefore untested.

It is likely that dismissing an employee for medical incapacity based on excessive intermittent absences (but where they are capable of performing their full duties when they are at work) will require an extra step.

In such a case, before an employer starts the general process for investigating medical incapacity, the employer should engage in good faith with the employee about the reasons for their absences and seek to assist the employee to either minimise their absences, or otherwise accommodate those absences. This might involve considering flexible working requests, temporary changes to duties, or other accommodations recommended by medical practitioners, before starting down the medical incapacity route.

If following this process the employee is still intermittently off work for periods at a time, the employer can, at this point, notify the employee that they are considering termination and begin the medical incapacity investigation process.

Health and Safety

As mentioned earlier, one consideration that may be taken into account by the employer when undertaking an investigation for medical incapacity is the health and safety of other employees or other persons due to the employee’s incapacity.

Idea Services Limited v Crozier [2017] NZEmpC 77

This case went through the Employment Court in 2017 illustrating this point.


  • Ms Crozier was employed as a Care Support Worker who was responsible for the care and support of intellectually disabled clients many of whom had been charged with or convicted of criminal offences and had the potential to be violent, dangerous, volatile and manipulative.
  • Ms Crozier’s job required her to be able to physically restrain the clients, or run to track and keep with absconding clients.
  • Ms Crozier had respiratory issues which meant she could not walk for long distances, let alone run, nor physically restrain a fit client who was fighting back.
  • Idea Services was concerned about the risk her respiratory issues posed to the clients and other staff members if Ms Crozier could not restrain or track the clients when necessary.
  • Following a full, proper, and reasonable medical incapacity investigation process Idea Services terminated Ms Crozier’s employment for medical incapacity.


Ms Crozier raised a personal grievance for unjustified dismissal alleging that her employer took into account irrelevant factors.


The Employment Court confirmed that Health and Safety concerns were reasonable factors to take into account in determining whether to dismiss an employee for medical incapacity.

Case Law Examples

Lal v The Warehouse [2017] NZEmpC 66

This is a case where the Employment Court found that the employer had fairly and reasonably given the employee an opportunity to recover, inquired into her diagnosis and prognosis, communicated with the employee and considered alternative options.


  • Ms Lal was employed as a shop floor member at the Warehouse in Newmarket
  • In August 2012 Ms Lal injured her ankle at work and she became medically unfit for work.
  • A rehabilitation plan was developed in June 2013.
  • Between July and September 2013 Ms Lal was assessed as being fit for some work.
  • In a meeting with HR in September 2013, Ms Lal expressed her desire to transfer to a different store.
  • In November 2013 Ms Lal was assessed as being unfit for work, though notwithstanding that assessment she said she could return to light duties provided she was transferred to a different store.
  • In February 2014 the parties met to discuss Ms Lal’s ongoing medical condition.
  • In April 2014 a medical certificate was issued supporting a gradual return to work. The Warehouse implemented a return-to-work plan accommodating the conditions in the medical certificate and confirmed the plan would be implemented at the Newmarket store.
  • Ms Lal failed to engage with the return-to-work plan.
  • From May 2014 onwards Ms Lal provided numerous medical certificates declaring her unfit for work.
  • The Warehouse met with Ms Lal in July 2014.
  • At the start of September 2014, the Warehouse notified Ms Lal that if she did not return to work by 30 September they would have no option but to terminate her employment.
  • On 1 October 2014 Ms Lal’s employment was terminated for medical incapacity.


Ms Lal raised a personal grievance for unjustified dismissal alleging that she could have returned to work on a reduced basis if the Warehouse had facilitated a transfer to a different store.


The Court found that that there was no real prospect of Ms Lal returning to work.

The Warehouse had a volume of information on which to inform its decision, including medical certificates as to Ms Lal’s fitness; a workplace assessment; an occupational medical assessment; a vocational rehabilitation assessment; and a functional reactivation programme report. The Warehouse fairly and reasonably enquired into Ms Lal’s diagnosis and prognosis.

The Warehouse’s communications clearly put Ms Lal on notice as to what The Warehouse was considering doing and what the potential impact of it was from Ms Lal’s perspective. Ms Lal was given a number of opportunities, over a lengthy period, to engage with her employer and to respond to its reasonable concerns. Ms Lal’s decision not to engage in the process or the return-to-work plans worked against her.

Honamombe v Tegel Foods Limited [2023] NZERA 721

This was a case where if the employer had followed the broad process correctly and had given the employee a reasonable opportunity to recover and had fairly and reasonably enquired into her diagnosis and prognosis it would have been justified in dismissing her, but because it did not fairly and reasonably take these steps the dismissal was unjustified.


  • Ms Honamombe worked as a quality controller. She suffered a shoulder injury at work in September 2019.
  • In October 2019 Ms Honamombe was assessed by Tegel’s doctor as being fit for light duties.
  • In May 2021 Ms Honamombe’s GP told her to stop working, she was told she needed surgery before she could return to work. In the same month Tegel wrote asking for medical information and informed her that her employment may be at risk.
  • Ms Honamombe had surgery in October 2021.
  • In February 2022 a return-to-work plan was established.
  • The work and days of work Tegel provided Ms Honamombe with did not wholly comply with the return-to-work plan. Two weeks after the return-to-work plan was implemented Ms Honamombe provided Tegel with a medical certificate, this and subsequent medical certificates put Ms Honamombe off work from the 23rd of February until the 8th of May.
  • Tegel requested information on the 7th of April 2022.
  • On the 29th of April, Ms Honamombe provided a letter from her doctor stating that she was fully unfit for work until the end of June. That letter also confirmed that she had been referred to a specialist but the earliest she was likely to be seen was the 13th of June.
  • On the 4th of May Tegel gave Ms Honamombe notice of its preliminary decision to end her employment due to medical incapacity. They invited her to a meeting to discuss the issues. The parties met on 12 May. Ms Honamombe said that she had a specialist appointment in June and that the way in which Tegel had not complied with the return-to-work plan had contributed to her situation.
  • Tegel said it considered Ms Honamombe’s feedback but confirmed its decision to end her employment. This was confirmed by letter dated 18 May.


Ms Honamombe raised a personal grievance for unjustified dismissal.


Although Tegel fairly engaged with Ms Honamombe and her doctor in developing a return-to-work plan, it did not adequately follow or implement its rehabilitation policy or the return-to-work plan. The Authority found that a fair and reasonable employer would have followed the return-to-work plan more carefully.

Tegel did not adequately enquire into Ms Honamombe’s prognosis and diagnosis after the failure of the return-to-work plan and should have waited until after the specialist information was received in June. The Authority was not satisfied Tegel gave Ms Honamombe a reasonable opportunity to recover.

There were alternative duties Ms Honamombe could have performed while on the return-to-work plan and Tegel did not, but should have, given consideration to these.

If Tegel had given Ms Honamombe a reasonable opportunity to recover and waited until after the specialist information was received, it would have been justified in dismissing her, but in the circumstances at the time it dismissed her, before the specialist appointment, it had not acted as a fair and reasonable employer could have.

Want to find out more about the medical incapacity process? Get in touch with us.

Sean Maskill

+64 6 759 5317
+64 27 555 1697

Philip McCarthy

+64 6 759 5322
+64 27 914 6796

Kayleigh Duncan

+64 6 759 5310

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