Termination of employment due to a worker’s illness or incapacity can be a very complex issue


The Fair Work Act prohibits the dismissal ( termination) of a worker where the reason is due to the worker’s temporary absence from work because of personal illness or injury.

A worker is protected from dismissal when temporarily absent due to illness or injury unless the employee’s absence on unpaid personal/carer’s leave extends for more than 3 months, or total absences of 3 months within a 12 month period. Any absence on paid personal/carer’s leave is not to be included in the 3 month period, however, a period of absence on workers compensation is included as part of the 3 months.

Alternatively, a worker who is dismissed because of illness or incapacity may make a claim under relevant disability discrimination law

Although a worker absent on workers compensation is protected from dismissal under the Fair Work Act for the first 3 months of their period of absence, many state and territory workers compensation laws also prohibit the termination of an employee’s employment by the employer within a specified period of time where the sole or primary reason for the dismissal is because of the employee’s absence on workers compensation. The ‘specified period’ can range from 6 months (under NSW law), to 12 months (under Victorian law), or indefinitely (under South Australia law where the employer employs 10 or more employees).

Refer to the relevant state or territory workers compensation law to determine whether the employer can terminate an employee who is absent on workers compensation. See section: Workcover Employment Issues

Where the illness or incapacity is not connected to employment and therefore not covered by workers compensation, the employer is entitled to terminate employment on the ground that there is a valid reason related to the worker’s capacity. In such a case, the requirements of dismissal with notice must be met. Note however that it would still be possible for a worker to lodge a claim of unfair dismissal on the basis that he/she still had the capacity to perform the job, and/or that the termination process was handled unfairly. ( see section Inherent requirements).

Therefore, employers must ensure they have solid evidence of the worker’s incapacity to work (such as independent medical assessments) as a basis for their decision. Employers should also consult with the worker, particularly a long-serving worker, about the situation, and examine the viability of possible ‘coping strategies’ such as transferring the worker to a job that is less physically demanding, or modifying the existing job.