Terminating employment on medical grounds - Employment Lawyer - Dukesons Business Law

May 2018

This Blog isn't legal advice – if you need legal advice on any employment law issue, please contact me. I'm an employment lawyer and business lawyer in Auckland who provides advice on a wide range of business law or commercial law issues.

Dealing with employees and sick leave and incapacity can be more difficult than many employers would like. One issue is at what point an employer can terminate employment where an employee can’t attend work over a prolonged period on medical grounds.

The good news for employers, without losing sympathy for the employees concerned, is that an employer isn’t required to keep the job open indefinitely. The more difficult issue is to determine at what point the employer can terminate the employment when faced with uncertainty as to when the employee can return to work.

The basic legal principles that are applicable are settled, as confirmed in a recent Employment Court case (Lyttelton Port Company v Arthurs [2018] NZEmpC 9).

  • The employee is entitled to a reasonable time to recover from their injury or illness.
  • If things get to the point where the employer is reasonably concerned as to the time that it is taking for employee to recover, the employer must carry out a fair enquiry to determine what the employee’s chances are of a return to work within a reasonable time. Only once the employer has undertaken that inquiry can it decide whether to terminate the employment.
  • Termination has to be fair and reasonable in the circumstances, balancing fairness to the employee and the reasonable practical requirements of the employer’s business. Both parties are under obligations to deal with each other in good faith and to respond to each other. The refusal by the employee to participate in the consultation may allow the employer to make a decision based on what information they can otherwise gather.
  • A fair and reasonable procedure will require consultation with the employee before any decision is made. This will include notifying the employee of the possibility of dismissal, discussing that possibility with the employee and seeking input from the employee, and taking into account all relevant circumstances.
  • Relevant circumstances will include the terms of the employment agreement, any relevant policies, the nature of the employee’s position, and the length of time that the employee has been employed.
  • Where the actions of the employer caused or contributed to the employee’s condition, the employer may be obligated to take reasonable steps to rehabilitate the employee.

This doesn’t sound too difficult, but it can be, in which case, legal advice should be sought.


  • contact me if I can help you with any employment law or other business law or commercial law issues;
  • subscribe to update alerts (if you don't already get them);
  • feel free to forward a link to this blog to anyone who would be interested.
Back to list

Level 3, Achilles House, 8 Commerce Street, Auckland 1010. PO Box 946, Shortland Street, Auckland 1140.
Telephone: +64 9 379 4556 Mobile: 021 404 306. Fax: +64 9 379 4557 Email: steve@dukesons.co.nz