HR Insights April 2025 | Medical Incapacity Case Law Development

April 2025 Update

Running a Successful Medical Incapacity Process 

A recent case, Wilson v Chief Executive of Inland Revenue Department [2025] NZERA 18; 17/01/25, has highlighted some key elements in terminating an employee’s employment due to medical incapacity. While this case involved a claim for unjustified disadvantage, I will focus on the process elements that IRD got right to justify terminating Mr Wilson’s employment due to medical reasons.

Background

In 2017, Mr Wilson was affected by an organisational change in October of that year, he was offered a new position as a Customer Service Officer (CSO). His role remained largely unchanged until, in 2020, IRD advised its staff that they would be expected to field incoming calls for four hours a week.

Mr Wilson suffered from tinnitus. A workplace assessment report, September 2020, noted his condition worsened significantly when he worked from the office, particularly when taking calls. The report recommended that his role be reviewed to reduce the time he spent on tasks that aggravated his symptoms. To accommodate the recommendation, IRD did not require Mr Wilson to take inbound customer calls.

In 2022, IRD looked to implement the changes first proposed in 2017. After discussions with affected staff, CSO staff agreed to occasionally answer the phones full-time, and at a minimum of 20% of the time when things were quieter.

Mr Wilson disputed the legality of the changes and, after several rounds of email exchanges, agreed to see a specialist in June 2023. The specialist’s report established that while Mr Wilson was able to plan and carry out outgoing calls, the unpredictable nature of incoming calls caused him stress, which affected his tinnitus. The report offered no prognosis and instead recommended a suitable treatment provider for Mr Wilson to consult with. IRD proposed a six-month halt on inbound calls while Mr Wilson consulted the recommended provider, and IRD proposed training and support to assist him with incoming calls. Mr Wilson rejected the offer, which led to IRD terminating his employment for medical reasons, and him subsequently raising a personal grievance.

Decision

The ERA found Mr Wilson that had been justifiably dismissed. 

Penalties

None Comment: IRD was an exemplary employer in this case. Note that a prognosis was not available to IRD.

Key Takeaways

• Employer must raise all its concerns and give the employee a reasonable opportunity to respond before terminating the employee for medical incapacity.
• Employers must genuinely consult with employees and take reasonable actions to accommodate a medical condition.
• Employers must obtain up-to-date medical assessment information before considering terminating an employee for medical incapacity.
• Employers must allow reasonable time for employees to recover from a medical condition.
• Employers should offer training and support to accommodate a medical condition reasonably 
  
  

For specialist advice in this area, please contact us at hradvice@cecc.org.nz.