Disciplinary process meets medical incapacity

The Employment Relations Authority has recently determined a matter involving a highly complex factual matrix that contains good learnings for employers who have undergone a disciplinary process which is derailed by the respondent’s health concerns.

In VXO v Northland District Health Board [2023] NZERA 97 a supervising Senior Medical Officer (VXO) was alleged to have breached the employer’s Policies, Code of Conduct and Values and “displayed unprofessional conduct in his capacity as a senior doctor”. The allegations were investigated and upheld.

The decision-maker’s preliminary view was that conduct met the definition of bullying and harassment, and collectively, was likely to meet the threshold of sexual harassment. Therefore there was no alternative outcomes other than dismissal.

Promptly after this preliminary decision, VXO took ill with chest pain. The disciplinary process was subsequently put on hold until VXO had clearance from the cardiologist. After a three month absence from work, the employer wrote to VXO explaining that, pursuant to the collective employment agreement, it was undertaking a medical incapacity process to determine whether VXO was able to perform his role due to illness or injury.

Medical evidence provided by VXO included a diagnosis of a Major Depressive Episode. A report from an Auckland psychiatrist was also submitted in which it was explained that: “[VXO] expressed significant reservations about his ability to return to working duties if his name is not cleared through the process of resolving the complaints.”

The employer considered that it was necessary to complete the disciplinary process, however this could only occur upon his return to work.  Yet the medical evidence did not provide any indication of when VXO could return. Further, it had been 8 months since VXO had gone on sick leave, and more than 11 months since he had been at work. While VXO’s wellbeing was a primary concern, this had to be balanced against the interests of NDHB, the patients, and other staff because his extended absence was starting to have a detrimental effect on service delivery.

The employer formed a preliminary view that termination of VXO’s employment on the basis of medical incapacity was appropriate. VXO’s lawyer argued that the employer’s actions give rise to a constructive dismissal claim and, following the final decision, raised personal grievances for unjustified dismissal and unjustified disadvantage, and breach of good faith. The employer re-considered all of the evidence and concluded that the decision to terminate was appropriate in all the circumstances, and that in the investigation process was fair and reasonable.

The Employment Relations Authority found that the employer’s investigation process and decision to terminate VXO’s employment was justified as:

  • VXO was given reasonable opportunity to recover, and his employer did not commence a review until three months after his absence as per the collective employment agreement;
  • the employer took a fair and reasonable inquiry into prognosis for return to work by attempting to gain relevant medical information which gave “sufficient information on which to base a view that, unless the disciplinary process was abandoned, VXO would not be returning to the workplace within a reasonable timeframe”;
  • the employer was active in seeking VXO’s engagement in the process, and communicative and responsive;
  • VXO’s continued absence was having detrimental effect on the wellbeing of staff and patients and was at a significant monetary cost to the employer;
  • redeployment was not practical as it was more likely than not, that dismissal would have been the outcome of the disciplinary process, and VXO was “given ample opportunity to participate in in the disciplinary process and his communicated response was he could only return to work if he was cleared of the allegations made against him.”

As a result, Northland District Health Board had acted as a fair and reasonable employer, and VXO’s termination on the grounds of medical incapacity did not give rise to a personal grievance for unjustified dismissal, unjustified disadvantage, or claim for breach of good faith (other than one minor procedural flaw).

This case demonstrates that it is possible to move from a disciplinary process to a medical incapacity process, depending on the circumstances. Further, Lal v The Warehouse Group Ltd [2017] NZEmpC 66 remains a guiding case for medical incapacity processes, and sets out the following framework:

  • the employer must give the employee a reasonable opportunity to recover. This includes consideration of the employee’s role, the employment agreement, any relevant policy, and their length of service;
  • the employer must undertake a fair and reasonable inquiry into the prognosis for a return to work, engage appropriately with the employee, and consider all medical information;
  • the employer must fairly consider what the employee has to say before terminating their employment;
  • an employer is entitled to have regard to its business needs in deciding an appropriate response to the situation and any applicable timeframe. An employer is not obligated to keep a job open indefinitely, no matter how long an employee has been employed or how large the organisation is; and
  • fairness cuts both ways. Both the employer and employee are required to be responsive and communicative.

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