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Jan 07, 2025 • 9 min read
Can You Fire an Injured Worker? Workers Comp Risks Explained
Written by: Eisabess Chee
As an employer, dealing with an injured worker is not just a business challenge – it’s a legal and ethical one too.
In Australia, laws surrounding terminating an injured employee, especially those on workers compensation, are strict and complex. Missteps can result in serious consequences. Keep reading to understand how to navigate this tricky area responsibly.
Understanding the Legal Landscape
When dealing with injured workers, employers must navigate two key laws: the Fair Work Act 2009 and the Workers Compensation Act 1987 (NSW). Each law provides protections for employees in different ways.
Workers Compensation in NSW
Under the Workers Compensation Act 1987 (NSW):
- Employers cannot dismiss an employee within six months of a workplace injury if the reason is solely their inability to work due to the injury.
- After six months, termination while on workers compensation in NSW is permissible, but only if the employer has met all legal obligations, such as making reasonable efforts to provide suitable duties and support recovery.
However, workers compensation absences are not considered paid personal leave under the Fair Work Act, so employees can still be terminated after the three-month period, provided the employer adheres to all other legal requirements.
Fair Work Act Protections
The Fair Work Act 2009 offers additional safeguards. Employers cannot terminate an employee for a temporary absence due to illness or injury, provided the absence:
- Does not exceed three consecutive months or a cumulative total of three months in a 12-month period; and
- Is supported by appropriate medical evidence
Terminating an Injured Employee
Terminating an injured employee requires careful consideration and compliance with legal obligations. Employers must ensure they act ethically, follow proper procedures, and meet all requirements to minimise risks.
Key Considerations for Termination
When considering termination, employers must ensure:
- Genuine Operational Reasons: Termination must be based on legitimate business needs, such as the inability to adjust duties or provide suitable work. It cannot be solely due to the employee’s incapacity.
- Fair Work Act Compliance: Ensure the absence exceeds three months (or a total of three months over a year) and is unsupported by paid personal leave, per the Fair Work Act 2009.
- NSW Workers Compensation Act Compliance: Dismissal is prohibited within six months of a workplace injury if the reason is solely the worker’s inability to perform their duties.
Employer Obligations Prior to Termination
Before dismissing an injured worker, employers must:
- Engage in Injury Management: Collaborate with the worker and insurer to develop an injury management plan aimed at recovery and return to work.
- Provide Suitable Duties: Offer alternative or modified duties aligned with medical advice and restrictions, wherever practical.
- Document Efforts: Keep detailed records of all communications, adjustments, and accommodations made to support the employee.
Balancing Both Laws
In NSW, the Workers Compensation Act provides a longer ‘protected period’ of six months for injured workers, prohibiting dismissal solely based on their incapacity. Meanwhile, the Fair Work Act allows termination after three months of absence if all conditions are met.
Employers must ensure they comply with both laws before opting for termination.
Meeting these obligations not only complies with the law but also fosters goodwill and reduces the risk of unfair dismissal claims.
Workers Compensation Benefits Continue Despite Termination
If you terminate an injured worker, their workers compensation benefits don’t automatically stop. Here’s how it works:
- Medical Certification: Workers will keep receiving benefits as long as their doctor certifies that they’re still unfit to perform their pre-injury duties.
- Weekly Payments:
- If the worker is completely unfit for work, they’ll continue to receive weekly compensation and medical benefits during their entitlement period.
- If they’re partially fit and can handle modified duties, they’ll receive adjusted weekly payments. For example, if they can only work half their normal hours, their benefits will cover the rest up to the approved rate.
- Payment Responsibility: While employed, the employer might be responsible for paying weekly benefits. After termination, the insurer takes over these payments directly to the worker.
Risks of Unlawful Termination
Failing to follow the correct legal process when terminating an injured worker can result in significant consequences for your business. These include legal claims, financial penalties, and reputational damage.
Can an Employee Sue the Employer in a Common Law Claim?
Yes, injured workers can sue their employer for work injury damages under certain conditions:
- The injury was caused by the employer’s negligence.
- The injury meets or exceeds the 15% whole person impairment threshold.
Work injury damages compensate for past and future lost earnings but do not cover medical or treatment expenses, which remain under workers compensation.
Additionally, injured workers can take further action if the employer’s non-compliance results in harm or unfair treatment:
- Unfair Dismissal Claims: If the termination process isn’t fair, the employee may lodge an unfair dismissal claim with the Fair Work Commission. This can result in compensation payments or even reinstatement of the employee.
- Discrimination Claims: Dismissing an employee because of their injury, which is often considered a disability under the Disability Discrimination Act, could lead to claims of unlawful discrimination.
- Breach of Contract: Failing to follow the terms of the employment contract – such as notice requirements or agreed processes – can result in legal action for breach of contract.
Penalties for Employers Who Fail to Meet Obligations
Employers in NSW who fail to fulfill their legal duties risk facing serious penalties:
- Fines exceeding $11,000 for breaching obligations under workers compensation laws.
- Complaints filed by injured workers to State Insurance Regulatory Authority (SIRA), which can lead to investigations and enforcement actions.
To avoid these risks, ensure you fully comply with legal requirements, document all steps, and seek legal advice before making termination decisions.
Best Practices for Employers
1. Develop Clear Policies and Procedures
Establish transparent policies for handling workplace injuries, workers comp claims, and return to work processes. Ensure all staff are familiar with these guidelines.
2. Train Managers on Legal Requirements and Sensitive Communication
Equip managers with training on employment laws and best practices for handling sensitive conversations about illness, injury, and performance concerns.
3. Build a Positive and Supportive Workplace Culture
Foster empathy and respect towards injured workers by promoting programs that support employee well-being and mental health.
4. Prioritise Communication and Compassion
Maintain open lines of communication with injured employees. Show empathy and explore every possible avenue to retain them within the organisation.
5. Seek Legal Advice
Given the complexity of workers compensation and employment laws, consult legal experts to ensure compliance and avoid costly mistakes.
FAQs About Employee Termination
1. Can you fire someone without a certificate of capacity?
Yes, but a certificate of capacity is vital for assessing a worker’s fitness for duties. Terminating without proper medical evidence increases the risk of an unfair dismissal claim.
2. What happens if I terminate an employee during the six-month protected period in NSW?
Termination during this period due to incapacity is prohibited under the Workers Compensation Act. Employers can face penalties for non-compliance.
3. Can a terminated worker still claim workers compensation?
Yes, terminated employees remain eligible for workers comp benefits, provided their condition is certified by a doctor.
With AusRehab, You Can Handle Sensitive Situations With Compliance and Care
At AusRehab, we understand that navigating the legal and ethical considerations around termination can be overwhelming.
Our team has experience assisting with developing tailored injury management plans, identifying suitable duties, and facilitating open communication between all parties.
By helping you explore all alternatives to termination, we minimise the risk of unfair dismissal claims or financial penalties.
Contact us today to learn how your business can benefit from our knowledge and expertise.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. Employers should consult an employment lawyer or legal expert to ensure their actions comply with relevant laws and best practices.
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Eisabess Chee is a seasoned writer with over 8 years of diverse experience in education, journalism and marketing. At AusRehab, she oversees content creation through research, writing, editing, and the crafting of resources that tackle workers compensation and workplace injury. Eisabess also curates the AusRehab newsletter, ensuring it’s packed with valuable and well-researched insights.
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