13 May 2011 Managing ill or injured employees – A delicate balancing act

By Warwick Ryan, Partner and Nathan Day, Law Clerk

One of the most challenging issues faced by clients of employment relations advisers is managing an employee who is either ill or injured. The difficulty arises from the need to balance the risk of exposure to claims of discrimination, unfair dismissal and the newly heralded “general protections” against the potentially exorbitant expense of workers compensation claims.

Refusing to hire because of illness or injury

Anti-discrimination legislation imposes obligations upon employers not only during the employment relationship, but also at the initial recruitment stage. Consequently, where an employee who is ill or has an injury seeks employment, the HR manager or person responsible for recruitment will need to take particular care and should seek legal advice to minimise the risk of a discrimination claim being lodged against the business.

Recruiters need to be aware of who can be excluded from hiring, which questions can be asked during an interview and which should not, as well as what tests can lawfully be carried out in determining the suitability of a candidate.

Van Der Kooij v Fire and Emergency Services Authority of WA [2009] WASAT 221

The applicant was a volunteer firefighter who applied to become a career firefighter with the Fire and Emergency Services Authority of WA (FESA). During the recruitment process, the applicant failed the medical clearance because he was assessed as being colour blind. FESA determined that the applicant was unfit for the nominated role until further medical information was obtained.

FESA subsequently referred the applicant to an optometrist who administered the wrong test and found that the applicant was fit for the role. However, the occupational physician rejected these results and arranged for the applicant to undergo a simulated clinical test in New South Wales, known as the Fire Brigades Colour Vision Test. After the applicant failed the NSW test, FESA rejected his employment application.

The applicant argued that FESA had unlawfully (directly and indirectly) discriminated against him in the selection process because of his impairment, and had also discriminated against him in arranging for him to sit the NSW test.

The inherent requirements exception

FESA sought to rely upon the so-called inherent requirements exception to an action in direct and indirect discrimination – namely, that it was reasonable to conclude that the applicant would be unable to carry out reasonably required work in the course of the employment.

On appeal from the State Administrative Tribunal's decision that FESA was entitled to rely upon this exception, the Full Bench outlined that the central issue concerned the nature of the work performed by a firefighter and whether the applicant's impairment affected his ability to the extent that FESA could rely upon the inherent requirements exception.

The Full Bench stated that for this exception to apply, the employer had to:

  • Show, through appropriate evidence, what the inherent requirements of the job are, the nature and conduct of the job and the methods of performing it
  • Fairly and objectively assess an inability to perform the inherent requirements of the job and not base its decision on perceived notions of ability because of the impairment
  • Consider the individual applicant and his/her specific abilities and provide him/her with every opportunity to show that he/she could do the job despite the impairment

The Full Bench found that colour is an important component in the role of career firefighters because they must make decisions quickly and accurately in very difficult circumstances and often based on colour. Further, colour is a fundamental cue in firefighting and reliance upon other cues is unacceptable because it increases the time taken to make a decision and influences the accuracy of the decision in circumstances where a mistake could be catastrophic.

In relation to FESA's decision to arrange for the applicant to undertake the NSW test, it was found that this is the most appropriate practical test for ascertaining acceptable and unacceptable levels of risk that colour vision deficient candidates pose to themselves, their work colleagues and the public. Further, the Full Bench found that by arranging for the applicant to take this test, FESA demonstrated that it did not apply a blanket policy of refusing to employ individuals with colour vision deficiency. The applicant's claim was rejected on the basis that FESA had successfully proven the inherent requirements exception.

This case demonstrates that employers are within their rights to require prospective employees to disclose any injuries or illnesses which may affect their capacity to carry out the duties required of the advertised position. However, where such injury or illness is disclosed, the employer needs to identify the inherent requirements of the job and objectively assess the prospective employee's ability to carry out these requirements. Further, any test which is implemented by an employer must represent a fair and objective method of carrying out this assessment, must be performed by highly qualified assessors and must be tailored to the inherent requirements of the specific role. This can involve considerable expense. 

J  Boag  and Son Brewing Pty Ltd v Button [2010] FWA 4022; [2010] FWAFB 4022

The inherent requirements exception was revisited by Fair Work Australia (FWA) in the context of an unfair dismissal claim. The applicant was employed by J Boag and Son Brewing Pty Ltd as a brewery technician. During his employment, the applicant developed an abdominal hernia.

After the applicant was advised by his specialist that he should avoid lifting anything in excess of five kilograms, Boags arranged for an OH&S consultant to assess his fitness for work. This assessment found that the applicant should avoid strenuous activity, including kneeling, squatting, lifting above five kilograms, lifting from floor level, running or jumping. From this date, the applicant continued to perform his duties with the assistance of work colleagues whilst observing these restrictions.

However, approximately one year later, the applicant was allegedly flagged by Boags' insurance company as a high risk and liability. This led Boags to arrange for an occupational therapist to assess his capacity to perform the inherent requirements of a brewery technician's job, which inevitably confirmed that the applicant was unable to perform his role safely. Given his limited skill set, it was decided that he could not be redeployed to another role and his employment was terminated. The applicant lodged an unfair dismissal claim against Boags, which defended the claim on the basis that the applicant could not perform the inherent requirements of the job, constituting a valid reason for the dismissal.

The applicant, in reply, asserted that although he could not perform the inherent requirements of the job without the assistance of work colleagues, Boags had modified the inherent requirements to accommodate his restrictions by requiring his work colleagues to provide necessary assistance.

The first instance decision was that although it is almost universally the case that a failure of an employee to carry out the inherent requirements of the job will constitute a valid reason for dismissal, the present case was rather unique. This was because the applicant had continued to work in a satisfactory manner within the confines of his restrictions by relying on his co-workers, whose workloads had increased.

FWA agreed with the applicant's submissions that Boags had modified the inherent requirements of the job and that therefore there was no valid reason for the dismissal. As a result, FWA ordered that the applicant be reinstated.

On appeal, the Full Bench relied upon High Court authority in X v Commonwealth (1999) 200 CLR 177 to reach a finding that where an employer relies on the inherent requirements exception, it is the substantive role of the employee that must be considered, not some modified, restricted duties or temporary alternative position.

The Full Bench concluded that the applicant's incapacity to perform the inherent requirements of the job constituted a valid reason for dismissal. The appeal was allowed and the reinstatement order was overturned.

Terminating ill or injured employees

A clash of obligations is created when the employer is confronted with the risk on the one hand that the dismissed ill or injured employee will make a discrimination, unfair dismissal or general protections claim, and the risk on the other hand that he or she will make a workers compensation claim. The particular issue with workers compensation is its expense.  

An additional risk for the employer is the possibility of a breach of occupational health and safety legislation if the continued employment of an ill or injured worker could pose a danger to the health and safety of his or her colleagues. Other employees of the business could make a workers compensation claim because the employer has failed to provide a safe working environment by continuing to employ the sick or injured employee.

Employers who find themselves in this situation are likely to need specialist legal advice if they are to make an accurate assessment of the risks of terminating employment versus the risks of not terminating employment. An important factor to consider is that the lodgement of a workers compensation claim can dramatically increase an employer's workers compensation premium to the point where the business becomes unviable. (See breakout box.) Typically, it can cost medium-sized employers from $70,000 to $300,000 in increased premiums if they terminate an injured worker.

The practical reality is that the cost of a discrimination or unfair dismissal claim is likely to be equal to only a fraction of the cost of an increase in premiums following a workers compensation claim. Sadly, what this means for employers is that it can be much cheaper to break the law than to comply with it.

Workers compensation premiums

Estimation of claims

A claim will be estimated in accordance with the Claims Estimate Manual (capped at $150,000.00 per worker) even where it is disputed, unless a notice of discontinuance of payments has been issued to the worker and a period of three months has elapsed without response from the worker or their solicitor.

Termination/redundancy related claims

Where the worker has an entitlement to weekly benefits under the relevant workers compensation scheme and their employment has been terminated or they have been made redundant, the insurer must immediately increase the estimated claim in accordance with the following formula:

  • Where the claim is up to 26 weeks - 104 weeks of compensation
  • Where the claim is between 26 weeks and 52 weeks - six years of compensation or 80% of the benefit to retirement age (plus one year)
  • Where the claim exceeds 52 weeks - eight years of compensation or 80% of the benefit to retirement age (plus one year)

This figure is a significant factor in the calculation of the workers compensation premium, which can double, triple or multiply by an even higher factor as a result. This increase will then be sustained for three policy years. It may well be that the anticipated increase in workers compensation premiums can make it unaffordable to terminate a staff member who is on workers compensation, regardless of any history of poor performance.

Capping of workers compensation premiums

In general, a workers compensation premium will be the total amount of wages multiplied by the WorkCover Industry Code rate (basic tariff) before being adjusted, taking into account the size of the business. In addition to this amount, the premium will also include an amount based on the cost of your claim, as set out above. However, there is some relief for smaller employers.

For example, where the basic tariff is under $10k or the wages are under $300k, the workers comp premium will be unaffected by any claims. Further, where the basic tariff is under $50k, the workers comp premium can increase by up to 1.5 times the basic tariff by reason of claims lodged by workers. Finally, where the basic tariff is greater than $50k, the premium can increase by up to two times the basic tariff because of lodged claims.

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This article is not legal advice and the views and comments are of a general nature only. This article is not to be relied upon in substitution for detailed legal advice.

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