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Perspective

When is it OK to terminate during Workers’ Compensation?

Kim McLagan
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It is well established law since Boags v Button, that it cannot be a valid reason (in an unfair dismissal claim) to terminate employment because of an employee’s incapacity to work for an accepted compensation claim. That is because all workers’ compensation law throughout Australia prohibits it within certain time frames or other limitations. Outside of those limitations and time frames, you can terminate employment based on incapacity so long as you can establish.

  1. The employee is unfit for the inherent requirements of their job with reasonable adjustments;
  2. They will be unfit for the inherent requirements of the job  for the foreseeable future with reasonable adjustments; and
  3. Their absence is longer than the temporary absence period under the FWA [S.352 FWA, Reg 3.01 FWR].

In Victoria, and in many other jurisdictions, there is an obligation period (in Victoria 12 months – s.103 WIRC Act) where, to the extent it is reasonable, the employer must continue to offer work (suitable duties). That doesn’t mean you can’t terminate employment for misconduct. Yet, in what can only be described as a curious argument, that is exactly the point raised in Morovan v Laverton Cold Storage Pty Ltd. Quite rightly, Colman DP dismissed an argument that a serially rude, aggressive and intimidating employee on a Performance Improvement Plan (PIP) for just such behaviour, and then offended again, could be terminated as his misconduct was a valid reason to terminate.

The case, not so accurately, considered PIP as an implied warning and accepted an oral warning that such conduct will not be tolerated. That is not the law. But little I suspect will turn on this error, as the applicant’s behaviour, as found by Colman DP, was so bad that any appeal would fail. A Warning [s.397(e) FWA], at law, is shorthand for, I warn you that If you act in this manner again (specifying the manner) you will be subject to disciplinary action up to and including the termination of your employment. The magical ingredient is warning of termination. Less than that is not a warning. A warning is best in writing but the words and intent must be made clear.

In terms of the impact on the workers compensation claim and employer’s premium, section 185 of the WIRC Act allows the insurer to reduce the amount of weekly payments following termination of employment if the termination relates to misconduct and is not related to the injury. This can either stop or reduce weekly benefits (but not medical and like expenses) which can significantly reduce the impact of the claim on premium.

Kim McLagan
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