Managing Ill and Injured Employees in Australia: An Employer's Guide

Personal and carer's leave — the starting point

The National Employment Standards in Part 2-2 Division 7 of the Fair Work Act 2009 (Cth) provide full-time and part-time employees with 10 days of paid personal/carer's leave per year of service, accruing progressively and calculated by reference to ordinary hours (see Mondelez v AMWU [2020] HCA 29). Casual employees are not entitled to paid personal leave but may take up to 2 days of unpaid carer's leave per permissible occasion under s 102. Under s 104 employees are entitled to 2 days of compassionate leave per permissible occasion — paid for full-time and part-time employees, and unpaid for casuals. Section 97 permits personal leave to be taken because the employee is unfit for work because of a personal illness or injury, or to care for an immediate family or household member. Section 107 requires the employee to give notice as soon as practicable and, if required by the employer, to provide evidence that would satisfy a reasonable person that the leave is properly taken.

Modern awards, enterprise agreements and employment contracts often add to (but cannot detract from) these entitlements — for example, by specifying acceptable forms of evidence or by providing enhanced paid leave. Employers should confirm the applicable instrument before insisting on particular evidence.

The temporary-absence protection under s 352

Section 352 of the Fair Work Act prohibits an employer from dismissing an employee because the employee is temporarily absent from work due to illness or injury. Regulation 3.01 of the Fair Work Regulations 2009 (Cth) defines a 'temporary absence' as one where the employee has provided notice and evidence in accordance with the Act, and either the absence has extended for no more than 3 months, or the total absences of the employee within a 12-month period (in respect of which the required notice and evidence were given) have been no more than 3 months in aggregate. Paid personal/carer's leave taken under Division 7 is not counted toward those limits.

Section 352 is a narrow protection. Its expiry does not itself render a dismissal lawful — it removes only a specific statutory bar. Once the temporary-absence protection has ended, the employer's decision remains exposed to the unfair dismissal regime in Part 3-2, the general protections regime in Part 3-1 (including adverse action for exercising a workplace right such as taking personal leave), the Disability Discrimination Act 1992 (Cth) and state equal-opportunity legislation, workers compensation protections and any contractual or industrial-instrument obligations. Employers who treat expiry of the temporary-absence period as a green light to terminate are commonly the subject of successful claims.

The overlapping regimes — different tests and remedies

A capacity-based dismissal can be attacked under several separate regimes at the same time, each with different tests, eligibility criteria, evidentiary burdens and remedies:

• Unfair dismissal under Part 3-2 asks whether the dismissal was harsh, unjust or unreasonable having regard to the criteria in s 387, including whether there was a valid reason related to capacity and whether the employee was afforded procedural fairness. Remedies focus on reinstatement or compensation subject to statutory caps.
• General protections and adverse action under Part 3-1 include protections for exercising a workplace right and against discrimination on certain attributes; s 361 reverses the onus of proof for reasons if adverse action and a protected reason are alleged. Available remedies may include uncapped compensation and civil penalties, but neither is automatic and outcomes depend on the pleaded case, evidence and the exercise of the Court's discretion.
• Disability discrimination under the Disability Discrimination Act 1992 (Cth) and state equal-opportunity legislation (in Victoria, the Equal Opportunity Act 2010 (Vic)) prohibits direct and indirect discrimination. The 'inherent requirements' defence in s 21A of the DDA is available only if the person cannot perform the inherent requirements even with reasonable adjustments, and unjustifiable hardship is a stringent, evidence-based test.
• Workers compensation statutes impose their own protections against dismissal and their own return-to-work obligations (in Victoria, the Workplace Injury Rehabilitation and Compensation Act 2013 (Vic)).
• Contract and industrial instruments — express contractual clauses, awards and enterprise agreements may prescribe consultation, notice and process obligations that stand alongside the statutory regimes.

No single defence resolves all of these regimes. 'Inherent requirements' is not a universal answer; success under one regime does not immunise the employer from the others.

Inherent requirements and reasonable adjustments

The inherent requirements of a role are its essential functions — the tasks that must be performed at the required standard for the role to exist as that role. They are drawn from the position description read against the actual work, historical performance standards and outputs, legitimate safety and legal requirements attaching to the role, and (where relevant) customer- facing or field-based requirements that cannot fairly be substituted. Non-essential features such as particular hours, particular seating arrangements or historical peripheral tasks are generally not inherent requirements and should be adjusted where reasonable.

The Disability Discrimination Act 1992 (Cth) and the Equal Opportunity Act 2010 (Vic) require employers to make reasonable adjustments unless they would impose unjustifiable hardship. Adjustments may include:

• modified duties or a redistribution of tasks;
• adjusted hours, phased return-to-work or shorter working days;
• remote or hybrid work arrangements where compatible with the role;
• equipment (ergonomic chairs, sit-stand desks, screen-reading software, communication aids);
• reasonable physical alterations to the workplace;
• changes to supervision or reporting arrangements;
• additional recovery breaks; and
• consideration of redeployment to a suitable alternative role.

Whether redeployment is a 'reasonable adjustment' or a distinct requirement of the unfair-dismissal analysis varies with the facts, the industrial instrument and the regime under which a claim is brought; either way, the question of whether a suitable alternative role is available should be genuinely considered and documented. Unjustifiable hardship is a stringent, evidence-based standard that considers the nature of the benefit and detriment, the effect of the disability, the financial circumstances of the employer, the availability of financial and other assistance and any relevant action plan; discomfort or inconvenience is not unjustifiable hardship.

Medical information, fitness for work and independent medical examinations

Employers may request information about an employee's capacity to perform the inherent requirements of the role, and may direct an employee to attend an independent medical examination (IME), where the request is lawful and reasonable in the circumstances. The lawful basis usually comes from the employment contract, a workplace policy, an applicable award or enterprise agreement, or a statutory framework (for example, occupational health and safety duties, or the return-to-work provisions of the WIRC Act in respect of workers compensation cases).

A request or direction should be:

• necessary and proportionate to a specific, legitimate purpose (typically assessing capacity to perform the inherent requirements and any adjustments required, and prognosis);
• made in writing, explaining the purpose, the practitioner and the process;
• accompanied by the position description and any inherent-requirements statement, so the practitioner can address capacity role-specifically;
• limited to information reasonably necessary — employers should not seek broad diagnoses, unrelated conditions or entire medical histories where information about capacity, prognosis and adjustments would be sufficient;
• procedurally fair — offering the employee an opportunity to raise legitimate concerns (such as a conflict of interest with the nominated practitioner) and to receive and comment on the report; and
• paid for by the employer, including reasonable travel expenses.

Overreach — particularly requests for underlying diagnostic information not needed to assess capacity — is a common source of privacy complaints, general protections claims and industrial disputes. A refusal to attend a lawful and reasonable IME may support further action, but whether any particular direction is lawful and reasonable is a case-by-case question.

Privacy and the employee-records exemption

Health information about employees is 'sensitive information' under the Privacy Act 1988 (Cth) and attracts heightened protections under the Australian Privacy Principles. The 'employee records' exemption in s 7B(3) is narrower than commonly assumed: it applies only to acts and practices of an organisation that are directly related to a current or former employment relationship between the organisation and the employee, and only to an employee record of the employee. It does not authorise unlimited collection of new health information from third parties, does not apply to prospective employees, and does not extend to purposes unrelated to the employment relationship. In Victoria, handling of health information also engages the Health Records Act 2001 (Vic).

Practical implications: collect only what is reasonably necessary for a specified purpose; be transparent with the employee about what will be collected, from whom and how it will be used; store health information securely and separately from ordinary personnel files; restrict access to those with a need to know; and avoid disclosing health information to internal audiences beyond those who require it to make or implement a decision.

Consultation obligations

Consultation obligations may arise from multiple sources at the same time. Modern awards and enterprise agreements commonly contain consultation machinery, but whether it is engaged by a particular decision depends on the terms of the clause and the nature of the proposed change — typically a major workplace change that is likely to have a significant effect on employees, or a change to regular rosters or ordinary hours of work under the applicable term. Ordinary minor operational adjustments do not automatically trigger those clauses. Contracts and policies may impose additional process. Under s 35 of the Occupational Health and Safety Act 2004 (Vic), employers must, so far as is reasonably practicable, consult with employees and any elected health and safety representatives on matters that will or may directly affect their health or safety, including proposed changes to the working environment or the way work is done. The WIRC Act requires consultation with the worker (and, where appropriate, treating practitioners) as part of return-to-work planning. Consultation is not a formality; whether a failure to consult renders an otherwise defensible decision unfair depends on the source of the obligation, whether it was engaged on the facts and the circumstances of the case.

Return-to-work and workers compensation in Victoria

Where an illness or injury is work-related in Victoria, the Workplace Injury Rehabilitation and Compensation Act 2013 (Vic) applies. Part 4 imposes return-to-work obligations, including that the employer, to the extent that it is reasonable to do so, plan the worker's return to work, provide suitable employment (or, when the worker has capacity for pre-injury employment, pre-injury employment), consult with the worker and (as appropriate) treating practitioners, and cooperate with the WorkCover agent. 'Suitable employment' is defined in the Act by reference to a range of factors including the worker's capacity, age, skills, work experience, place of residence and any injury management plan.

Separately, s 410 restricts an employer from dismissing a worker because the worker is not fit for employment during the 'employer obligation period', subject to the statutory qualifications and exemptions in the Act. The employer obligation period is defined by the Act and WorkSafe guidance as an aggregate period totalling 52 weeks — it is not necessarily 52 consecutive calendar weeks — and its statutory commencement is tied to the employer receiving a certificate of capacity or a claim for weekly payments in respect of the worker, or being advised by the Agent of receipt, rather than simply the date on which the worker first became unfit for employment. Employers should confirm the commencement, calculation and remaining balance of the period in the particular case before acting.

The workers compensation regime does not replace the federal and state employment-law regimes; it operates alongside them. Comparable but differently-framed obligations exist in other Australian jurisdictions; employers operating in more than one state should confirm the current statutory framework, definitions and employer obligations in each jurisdiction before acting.

OHS duties and psychosocial risks

The Occupational Health and Safety Act 2004 (Vic) requires employers, so far as is reasonably practicable, to provide and maintain a working environment that is safe and without risks to health, including psychological health, and to consult with employees on matters that may affect their health or safety. Since 1 December 2025 the Occupational Health and Safety (Psychological Health) Regulations 2025 (Vic) have supplemented the Act, requiring employers at a high level to identify psychosocial hazards in the workplace, to eliminate the associated risks so far as reasonably practicable or, if that is not reasonably practicable, to reduce them so far as reasonably practicable using the prescribed control hierarchy, and to review and revise control measures in the prescribed circumstances. The approved Psychological Health Compliance Code provides practical guidance on complying with those duties. WorkSafe Victoria publishes further material on managing psychosocial hazards — such as high job demands, low job control, poor support, poor workplace relationships, exposure to traumatic content, bullying and harassment. Where an employee's illness or injury has a psychological dimension, or where workplace factors may be contributing to that condition, the OHS duties and the ill-and-injured-employee framework operate together. For a broader discussion see our companion article on psychosocial hazards in Victorian workplaces.

Distinguishing incapacity from performance, misconduct and redundancy

Incapacity, performance, misconduct and redundancy are separate grounds with different processes and evidence. Incapacity is a medical question addressed through current medical evidence and consideration of adjustments. Performance is managed through a properly conducted performance-improvement process — see our article on managing underperformance. Misconduct is investigated through a disciplinary process consistent with contract, policy and procedural fairness — see our articles on workplace investigations and suspension pending investigation. Redundancy under s 389 of the Fair Work Act concerns whether the employer no longer requires the person's job to be performed by anyone — see our article on genuine redundancy and consultation. Mischaracterising incapacity as another ground — particularly relabelling it as redundancy or performance — is a common source of unfair dismissal and adverse action findings.

A disciplined process for capacity decisions

There is no formulaic 'safe' absence period after which an employer acquires a right to terminate, and no set of steps guarantees a defence. Employers who make defensible capacity decisions typically follow, and document, a disciplined process:

1. obtain current treating-practitioner evidence, framed by the position description;
2. if the treating evidence is thin, out of date or inconsistent, consider whether a lawful and reasonable direction to attend an IME is available and appropriate;
3. brief the IME properly, with the position description, inherent-requirements statement and defined questions about current capacity, prognosis and adjustments;
4. share the report with the employee and invite a response;
5. genuinely consider and document reasonable adjustments, including any suitable alternative role;
6. comply with consultation obligations under the award, enterprise agreement, contract, policy and OHS law;
7. hold a decision meeting at which the employee may bring a support person;
8. make the decision on the evidence, issue reasons in writing, address adjustments and alternatives considered, and pay all applicable entitlements; and
9. where a workers compensation claim is on foot, coordinate with the WorkCover agent, apply the Part 4 return-to-work obligations and confirm the commencement, calculation and remaining balance of the employer obligation period for the purposes of the s 410 restriction on dismissal.

Records should be respectful, factual and shared only on a need-to-know basis. Communications should never be retaliatory. Surveillance, coercion and pressure to resign expose the employer to general protections and adverse action claims that are more serious than the underlying capacity issue.

Common employer errors

The errors we see most often include: treating expiry of the temporary-absence period as an automatic right to terminate; relying on stale medical certificates rather than current, role-specific evidence; commissioning an IME without the position description or defined questions; asking for broad diagnostic information where capacity information would be sufficient; failing to document consideration of reasonable adjustments and suitable alternative roles; failing to comply with award, enterprise agreement, contract or OHS consultation obligations; dismissing an injured worker during the employer obligation period contrary to s 410 of the WIRC Act; relabelling a capacity issue as performance, misconduct or redundancy; and communicating the decision in short, dismissive correspondence rather than a fully reasoned letter.

How Parke Lawyers can help

Parke Lawyers advises Victorian and other Australian employers on managing ill and injured employees — reviewing employment contracts and position descriptions, preparing lawful requests for medical information and briefing IMEs, drafting reasonable-adjustment plans and considering suitable alternatives, running consultation and decision processes, coordinating with WorkCover agents and rehabilitation providers, and defending unfair dismissal, general protections, discrimination and workers compensation claims where they arise. Early advice, before positions have become entrenched, helps employers keep their options open. Our employment law for employers team works with our commercial and business law team so employment, insurance and governance issues are managed together within a single matter.

Frequently Asked Questions