A recent case highlights the tricky balancing act employers must navigate when illness or injury sidelines a staff member – supporting recovery while keeping the business running.
While an employer does not have to hold a job open forever, they must allow a sensible recovery window and engage with the employee to obtain and consider relevant information prior to dismissal.
Background
If an employer seeks to dismiss an employee for medical incapacity, this is required to be justified the same as if it were a dismissal for misconduct or performance. This is assessed under section 103A of the Employment Relations Act 2000. This section refers to what a fair and reasonable employer could have done in all the circumstances at the time of the dismissal.
What is fair and reasonable will depend on the process followed and the substantive reasoning for dismissal. In other words, was recovery a reasonable prospect and was the employee provided with fair opportunities to respond to the employer’s reasons for proposing dismissal?
Sheridan v Pact Group – a recent employment court judgment
In Sheridan v Pact Group [2026] NZEmpC 51, the Employment Court held a dismissal for medical incapacity was unjustified where the employer moved too quickly and focused on ending employment rather than rehabilitation.
In this case, the employer, Pact Group, was a charitable trust that provides care services to vulnerable clients, including those who have physical and intellectual disabilities. Ms Sheridan worked in a community home operated by the employer.
One night a resident became agitated and threatened to slit Ms Sheridan’s throat. The police were called but no charges laid. Following this incident, the Pact Group issued a letter to Ms Sheridan raising concerns about her ability to deal with clients and advising that disciplinary action may follow, including dismissal.
After receiving this letter, Ms Sheridan went on a period of sick leave caused by PTSD from the workplace events. Pact Group raised medical incapacity as a possibility after 1.5 months of sick leave. There were numerous requests made to Ms Sheridan for information where Pact Group was advised that an ACC specialist report was imminent which would inform a return-to-work plan. Instead of waiting for the report, Pact Group then proceeded to dismiss Ms Sheridan on the basis of medical incapacity six months after the workplace incident.
Key findings
- Where the incapacity stems from a workplace incident, there is an added expectation to support recovery and consider alternatives before ending the employment relationship.
- A dismissal after six months was too soon in this case and the employer should have waited until the specialist report was provided and considered.
- The Court criticised a “set” mindset towards incapacity. The expectation was that the employer should have prioritised rehabilitation over dismissal planning.
- The employer relied on staffing pressures as the reason for a dismissal but had made minimal efforts to source interim staff cover.
If you require assistance in navigating a termination for medical incapacity, reach out to us for specialised employment advice for both employers and employees.
