Navigating the complexities of medical incapacity due to mental health in the workplace is a growing challenge faced by employers across New Zealand. Here, Senior Associate Raymond Wheeler provides practical advice for managing these sensitive situations where an employee’s mental health is impacted by factors outside of the work environment.
Across New Zealand, employers are seeing a rise in staff absences due to mental health conditions. When faced with this situation, a key consideration for employers is whether the situation represents a potential case of medical incapacity or a possible breach of the Health and Safety at Work Act 2015. It is essential to recognise the fundamental differences between these situations.
Understanding the differences
Medical incapacity, whether due to illness or injury, focuses on whether the employee is able to continue fulfilling the core functions for which they were employed, and is managed under the good faith obligations outlined in the Employment Relations Act 2000.
In contrast, psychological harm resulting from an unsafe workplace environment or system is addressed in New Zealand through the Health and Safety at Work Act 2015, with potential enforcement consequences if breaches are found.
If psychological harm is work-related—such as from bullying, overwork, or an unsafe environment—the employer must take all practical steps to ensure they are providing a safe workplace, support the employee (e.g., by reducing workload or modifying duties). If the harm stems from the work environment, employers must address health and safety issues before considering termination.
However, if the mental health conditions being faced are not a result of the work environment, and the employee is unable to undertake the role they were employed for, then medical incapacity may apply.
Can you terminate employment due to medical incapacity?
New Zealand employment law does not explicitly define “medical incapacity dismissal,” but it does allow for termination if an employee is unable to perform their role for an extended period due to illness or injury (including mental health conditions).
However, a fair and lawful process is essential to avoid legal risk.
What does a fair process involve?
1. Start with consultation
Employers must consult with the employee in good faith, as required by Section 4 of the Employment Relations Act 2000. This includes:
– Requesting relevant medical information
– Discussing the employee’s condition and potential return to work, remember to focus on how long it will take for the Employee to return and not how long they have been off work.
2. Seek consent and cooperation
Employees are expected to cooperate in providing relevant medical information. Ideally, how this will work is set out in the Employee’s employment agreement. If they refuse, employers may make reasonable decisions based on available evidence.
3. Review options and discuss adjustments
Once medical information is received:
– Explore alternative duties or reduced hours
– Discuss whether the likely duration of the incapacity, is it temporary or permanent?
– Consider the employee’s views on the situation.
4. Allow reasonable time for recovery
Employers must give the employee a fair opportunity to recover. If no return-to-work date is likely, and all options have been explored, termination may be justified.
Avoiding legal pitfalls
Skipping steps or rushing the process can expose your business to personal grievance claims. To protect your business:
– Document every step
– Act in good faith
– Keep communication open and respectful.
Need help to manage medical incapacity in your workplace?
If you’re dealing with long-term absences due to mental health, illness, or injury, it’s wise to seek expert advice. Managing medical incapacity with care not only protects your business, it also supports your team’s wellbeing.
If you would like guidance on managing medical incapacity or mental health-related absences, contact our team for specific advice.