When the Employee May No Longer Be Capable of Remaining in Employment
Few situations are as emotionally charged as medical incapacity. It’s where genuine illness intersects with organisational limits. How an employer handles this defines both culture and legal risk.
1. Know What “Medical Incapacity” Actually Means
There’s no legislative definition, it’s shaped by case law. In short, medical incapacity is when an employee is unable, due to illness or injury, to perform their role safely or effectively, and there’s no reasonable prospect of recovery in a reasonable timeframe.
“Reasonable” depends on:
- The role (safety-critical vs. flexible)
- The prognosis (temporary vs. indefinite)
- The time already absent
- The impact on operations
Employers must have current, reliable medical information before acting. That usually means a doctor’s report or independent assessment (with consent). Acting on assumptions or outdated certificates is a quick route to a grievance.
And remember: a legitimate reason for absence is never misconduct.
For example, taking time off to care for a sick child is a legally protected use of sick leave under New Zealand law. As long as the reason is genuine, it cannot be treated as misconduct, even if it causes operational disruption. The focus here is on capacity, not discipline.
2. Follow a Robust, Compassionate Process
Even when incapacity seems clear, the process is as important as the outcome. Employers must show:
- Fair consultation and genuine consideration of the employee’s input.
- Consideration of alternatives (reduced hours, modified duties, or redeployment).
- Decisions based on up-to-date evidence, not frustration or fatigue.
Failures in process, not bad intent, are what typically cause employers to lose claims. A transparent, respectful process signals that the organisation values people as well as performance.
3. Keep the Human Element Central
Behind every case is a person - often anxious, unwell, and uncertain. Compassion and clarity make a difficult experience more humane.
Practical Tips:
- Communicate personally and clearly.
- Allow support persons- this is not a disciplinary meeting.
- Offer practical support (EAP, references, career transition help).
- Maintain dignity in how employment ends.
- Handled well, even a termination can leave trust intact.
- Handled poorly, it can damage lives and reputations.
Final Thought
Medical incapacity isn’t about “winning”, it’s about managing competing obligations with fairness and respect.
