Man­ag­ing ill or injured employ­ees A del­i­cate bal­anc­ing act

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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