Sustained Absence From Work and Medical Incapacity in Employment: When Can an Employer "Fairly Cry Halt"?

How long can the parties to the employment relationship be expected to put up with this situation?  What is required of each of them before they can end it one way or another, with the employee either returning to work, or the employer justifiably declaring the relationship as terminated on medical grounds?  In other words, at what point, and after taking what steps, can an employer "fairly cry halt"?  Helpfully, a recent judgment of the Employment Court has provided a useful summary of the key principles in play in these circumstances.

The decision is that of Employment Court Judge Holden delivered on 1 March 2018 in the case of Lyttelton Port Company Limited v Chris Arthurs 1 . The case concerned a Lyttelton Port cargo handler, Mr Arthurs, who had been off work for a period of over 12 months at the time his employer, the Lyttelton Port Company Limited ("LPC"), terminated his employment on medical grounds.  The initial reason that Mr Arthurs gave for his medical absence was post-traumatic stress disorder (PTSD) caused by an historic workplace fatality that Mr Arthurs had witnessed, compounded by a more recent further workplace fatality to a friend and colleague (not witnessed by him, but accepted as having compounded his initial PTSD).  Subsequently, while on medical leave, Mr Arthurs fell heavily on a wet deck injuring his shoulder seriously enough to affect his ability to resume any work duties for some considerable time.

While Mr Arthurs did provide medical certificates to his employer every month or so, it was noted in the Employment Court's judgment that these were quite uninformative.  They told the employer nothing much more than that Mr Arthurs was medically unfit to work, but should be fit to resume work on a date generally four weeks or so from the date of each certificate.  The only way in which the employer learned more detail about Mr Arthurs' medical difficulties was when it received advice from ACC that Mr Arthurs' initial PTSD claim had been accepted and, some six months later, that his claim for injury due to his fall on the wet deck had also been accepted as an injury preventing him from returning to work.

After a little more than six months of Mr Arthurs' absence LPC commenced an inquiry process into Mr Arthurs' health status, and any prognosis for a return    to his work role.  LPC contacted Mr Arthurs pointing out that it had very little information from Mr Arthurs' doctor.  While LPC was met with an initial refusal by Mr Arthurs to meet and discuss the problem, Mr Arthurs did eventually agree to attend an appointment with an LPC-appointed medical specialist.

Eventually, some 11 months into Mr Arthurs' period of medical absence, Mr Arthurs visited the specialist who then provided a report to LPC confirming that  Mr Arthurs was still not fit to work and it might be several months more before his situation improved.  The report also noted that there was no certainty that Mr Arthurs' health would actually improve to the point of him being able to return to work.

LPC therefore contacted Mr Arthurs advising that it was considering bringing his employment to an end because of medical incapacity, and inviting a response from him before any decision was made.  Mr Arthurs did respond suggesting LPC should have allowed further time for recovery before any assessment was undertaken and claiming that he was being victimised by LPC.  LPC a week or so later informed Mr Arthurs of its decision that it was terminating his employment on medical grounds.  At that point it had been over a year that Mr Arthurs had been off work.

Mr Arthurs brought a personal grievance challenging LPC's decision and he was initially successful in that claim in the Employment Relations Authority.  However, LPC was successful in overcoming the Authority's decision on a challenge it brought in the Employment Court.

Judge Holden very usefully identified and considered the main case law and legislative authorities in this area, and condensed them into the following summary of key principles:

1. The employer must give the employee a reasonable time in the circumstances to recover.
2. The employer must carry out a fair inquiry in making its decision about whether to dismiss the employee, and in doing so must balance fairness to the employee and the employer's reasonable practical business requirements.
3. The employer's fair and reasonable procedure will include notification to the employee of the possibility of dismissal, and a fair inquiry so as to ensure an informed decision, including seeking input from the employee.
4. In terms of what a reasonable decision would be in any particular circumstances, the following further factors are likely to need to be taken into account:

• The terms of the employment agreement between the parties and any applicable employer policies;
• The nature of the position held by the employee; and;
• The length of time the employee has been employed by the employer.

5. Where the employer's own actions have caused the employee's condition, the employer may have some ongoing responsibility to take reasonable steps to rehabilitate the employee.
6. Even in a large organisation, an employer is not obliged to keep a job open indefinitely.
7. Notably, the relationship is a 'two-way street': a lack of positive engagement from an absent employee may count against him or her in bringing any later complaint.

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Having regard to the above principles, key factors which counted in favour of LPC's position were:

   
1. LPC had allowed considerable time before even commencing its inquiry process, and probably could have done so earlier.
   
2. When it did start the process it acted reasonably in making inquiries by seeking further medical information and, following receipt of the specialist's report, by inviting further input from Mr Arthurs.         
   
   
3. There was no evidence of disparity of treatment by LPC in considering Mr Arthurs' situation.
   
4. On the medical evidence, and having regard to Mr Arthurs' employment position, there was genuinely no viable option for his gradual return to work.        
   
   
5. While LPC was a large employer and it was accepted that it had greater capacity to keep a medically unfit employee on its books for a longer period of time than a smaller employer could, this did not mean that it needed to do so indefinitely.
   
6. In his claim, Mr Arthurs sought to place some reliance on the almost pro forma medical certificates that his own general medical practitioner had been providing, the last of which had included a statement that he should be fit to resume work within a further eight weeks or so. However, the Court recognised that LPC was by then entitled to treat that statement as being no more reliable than the same or similar statements on the previous 11 monthly medical certificates it had been provided. It was reasonable therefore for LPC to put that statement to one side and instead rely on the specialist's report stating that no confident prediction could be made of when Mr Arthurs could be expected to return to work, if at all.

The main points that can be taken from Judge Holden's decision:    

   
1. The need for fair informed inquiry by the employer – if the employee's own medical reports and certificates are uninformative, the employer will generally need to arrange and require the employee to see a medical specialist, and to cooperate in having the specialist provide a full report to both the employer and employee on conclusions including a prognosis for the employee's return to work. A well drafted employment agreement setting out the  employee's obligation to cooperate in this regard in the event of sustained medical absence from work, will greatly assist employers with this.
   
2. That the employer and the affected employee's obligations constitute a two way street – this is consistent with the mutual good faith obligations that bind all employers and employees as laid down in the Employment Relations Act 2000. An employee who refuses to engage with the employer, or cooperate with an employer's requests for medical information or cooperation in having an observation and assessment done, is likely to be on weak ground if later complaining that an employer faced with intransigence and a lack of information in response to its efforts to undertake a fair inquiry, were as a result to act on less complete information by ending the employment relationship on medical grounds.
   
3. The judgment does not attempt to specify what is a reasonable amount of time for an employer to hold an employee's position open while they are on medical leave. This is understandable. Every situation will depend upon its particular circumstances including; the nature and importance of the role; the size of the employer; and any circumstances in which an employer may have contributed to the employee's medical absence.
   
4. What can be said though, is that for a particularly important and specialised employment role, and where the employee's absence is likely to have a significant detrimental effect upon the employer, particularly a smaller employer with more limited resources, there will likely be greater justification for the employer to commence the potential medical dismissal inquiry process earlier; probably within a matter of weeks instead of months. Again,  a well drafted employment agreement making provision for this process, and a timeframe appropriate to the particular employment role covered by that agreement, is likely to minimise uncertainty in this area.

For inquiries or requests for assistance related to the subject matter of this article, or more general employment law inquiries, please contact McVeagh Fleming's employment law specialists:

Craig Andrews on (09) 306 6745 (candrews@mcveaghfleming.co.nz) and John Burley on (09) 306 6741 (jburley@mcveaghfleming.co.nz) in our City Office, and James Turner on (09) 966 3603 (jturner@mcveaghfleming.co.nz) in our Albany Office.

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1 [2018] NZEmpC 9 

It is a fairly familiar situation: an employee sustains an illness, or suffers an injury – probably due to no fault of their own or their employer - and is unable to work for a long period of time. Uncertainty may arise about when he or she can return to work, if ever.  Repeated visits to a doctor or specialist, frustratingly for both the employee and the employer, fail to provide a definite prognosis about when the employee will be fit to return to work or, indeed, whether they will ever be able to do so.  Meanwhile the employee may be receiving no income, or less than their full former salary or wage while receiving an ACC benefit. The employer is also left in the difficult and uncertain position of not being able to hire a permanent replacement employee but needing to reassign the absent employee's tasks to others, or make do with a potentially more expensive temporary employee.