Following incapacity clause vital

22:42, Apr 20 2014
Mary-Jane Thomas
Southland Times Work to Rule employment law columnist Mary-Jane Thomas

Mr S worked as an egg collector for Inghams Enterprises. In October 2011 he suffered a back injury at work. He did not return to work and was dismissed on February 28, 2012.

Mr S claimed in the Employment Relations Authority hearing that he had been unjustifiably dismissed. Inghams claimed that his dismissal was justified on the basis that he was incapable of carrying out his usual duties.

Although initially cleared to do light duties by his doctor, from November until mid-February Mr S was deemed medically unfit for any work.

In February 2012, Mr J, Inghams' farm manager, got in touch with Mr S to arrange a meeting. Mr J told the authority he remembers telling Mr S that the meeting would be about his ongoing employment and "where we were to go from here".

During the meeting, Mr S was asked about his injury. He advised Inghams that he was receiving treatment, including an MRI and an epidural, and consulting a specialist. Light duties were discussed. Mr J explained that Inghams needed to ensure all employees were safe while at work and Mr S could not return until he was fully fit and able to carry out his normal tasks.

Mr J left the meeting and when he came back Mr S was advised that his position was terminated. The next day, Mr S received his termination in writing, which referred to the incapacity clause in his employment agreement.


Significantly, this clause set out that before terminating for medical incapacity, Inghams would: consult the employee to nominate a doctor to carry out a medical examination of the employee, at Inghams' expense;

take into account the results of that examination and the advice of the employee's doctor; and,

if termination was the outcome, give sufficient notice.

In the hearing, Mr S claimed he was not warned that the final meeting may result in his termination; he was unaware that his continued employment was at risk; and he was not given a chance to respond to the issues Inghams had about his ongoing employment.

The authority assessed whether the dismissal was justifiable, by applying the test set out in section 103A(2) of the Employment Relations Act 2000, ". . . whether the employer's actions and how the employer acted were what a fair and reasonable employer could have done in all the circumstances at the time that dismissal or action occurred."

Not surprisingly, the authority held that the incapacity clause of Mr S's employment agreement was clear.

His employment was not terminated in accordance with that clause and therefore Mr S was unjustifiably dismissed.

First, he was dismissed without notice. The clause states that the employee would be terminated with notice.

Second, Inghams had "fundamentally breached" the incapacity clause of the employment agreement as Inghams did not consult Mr S about a doctor, who would examine Mr S further. No examination took place and therefore no advice was considered by Inghams before dismissing Mr S.

Inghams also breached common law principles that apply to termination for incapacity. The employer is obliged to seek medical information and ensure the employee is aware that their ongoing employment is at risk before any decision to terminate is made. Inghams did not communicate this with Mr S and had made no effort to establish what the prognosis was for Mr S to return to work in the future.

As Mr S's injury was covered by ACC, the authority held that he had no entitlement to lost wages. Mr S was awarded $4000 for the distress his dismissal had caused.

The case highlights several things in relation to termination for incapacity.

If employment agreements have a clause governing this, know it and follow it. Second, common law principles require an employer to make sure the employee knows that their ongoing employment is in doubt; to gather appropriate medical information about the employee's health and establish their ability to work in the foreseeable future.

* Mary-Jane Thomas is a partner at Preston Russell Law. She is always interested in ideas for articles.



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