Losing A Job Because Of Injury Or Illness
Losing a job through no fault of your own is always an unfortunate way for an employment relationship to end. Redundancy is the obvious example of this, but another situation is where a worker faces job-loss during an extended absence due to an injury or illness – sometimes called “medical incapacity.” Like redundancy, employers in these cases do not have to retain the affected worker forever and prejudice the employer’s ability to stay afloat. There will come a point where it’s contrary to good business to have a sick or injured team member away from work. The hard legal issue is finding out when the parties have reached that point.
The Employment Relations Authority reviewed the law in a 2023 decision. The Authority noted that while an employer is entitled to “fairly cry halt,” it is also obliged to “engag[e] appropriately with the employee.” The affected worker is entitled to a reasonable opportunity to recover. What is “reasonable” can depend on the employment agreement, in-house policies, the nature of the position (e.g., permanent full-time), and/or the length of service.
In this particular case, the employment agreement said medical incapacity kicked in after three weeks’ continuous absence. The worker only worked two weeks before taking time off due to a shoulder injury, which was covered by ACC. A little over a year later (yes, a year!), the employer took steps to dismiss the worker. This followed a query from the worker about his holiday pay. This prompted the employer to start the dismissal process, which was poor timing by the employer, but it couldn’t be denied that this was a long absence from work.
The employer had requested medical reports on the worker’s condition and offered an assessment by the employer’s own nominated doctor: a common feature in these cases, which employees should be prepared to respond to in a constructive manner. The Authority approved of the tone of the employer’s correspondence, which showed it “kept an open mind as to outcome”.
The employer considered redeploying the worker to an alternative role, as it was required to do before the dismissal could be justified, but decided that it could not provide “light duties,” and what was more, it made business sense to close off the worker’s role once the employment was terminated. Even if it could be shown that the employer could afford to keep the role open, the Authority found the worker had failed to meet the employer halfway and give any assurance that the risk of further injury could be managed on returning to any kind of full-time work. In other words, the worker did not engage in the process in “good faith,” a crucial concept which cuts both ways in employment relationships.
Remember how the worker had queried his holiday pay before the dismissal process began? The Authority upheld this part of the claim, despite finding that the query did not motivate the decision to dismiss the worker for medical incapacity, and that the dismissal was justified.
The Authority noted that even though he was getting ACC cover, the worker was still an employee up to the date of dismissal and continued to accrue annual holidays. But what should he be paid for those annual holidays? Because the Holidays Act 2003 excludes ACC weekly compensation from “gross earnings,” it seemed his “earnings,” for more than a year, had been zero. But holiday pay can be based on either “average weekly earnings” or “ordinary weekly pay.” The Authority approached “ordinary weekly pay” in a common sense way, under the definition in section 8(1)(a) of the Holidays Act 2003: “the amount of pay that the employee receives under his or her employment agreement for an ordinary working week”. Only in employment situations where the concept of an ordinary working week is too hard to calculate, will a “formula” approach be necessary. If someone works a clearly-defined number of hours per week, for a base rate of pay, ordinary weekly pay may be reasonably obvious.
In this case, even though he had only worked two weeks, it was reasonably clear what the worker’s ordinary week should look like, so the Authority granted him a four-week annual holiday payout, as he had technically reached his anniversary of employment, and had become entitled to four weeks of holidays. He also received a small amount for the second, incomplete year of employment.
If you have questions about medical incapacity, or how long periods away from work might impact holiday pay, remember each case is different, so consider contacting a lawyer, employment advocate, union representative, or local Community Law Centre for more guidance.