When can you terminate an employee who has a mental illness?

In all circumstances, HR needs to ensure that a fair process is followed prior to making a decision to terminate

When can you terminate an employee who has a mental illness?

by Ashurst partner Jane Harvey and lawyer Jessica Cao

It is possible lawfully to terminate the employment of an employee who has a mental illness. However, there are a number of matters that need to be considered, and steps that need to be taken, by an employer before deciding to terminate the employment of an employee in these circumstances. An overriding consideration will be to tread carefully and patiently in dealing with such an issue, and to take sound medical and other advice along the way.

The legal risks
The issue may arise in the context where an employee has been absent from work or unable to perform his or her role for some time due to a mental illness, or where there are performance or conduct issues and the employer is aware that the employee suffers from a mental illness.

If the employment of an employee with a mental illness is terminated in these circumstances, there is a risk that the employee will make a claim alleging:

  • the termination is because of the employee's mental illness and is, therefore, in breach of the general protections provisions of the Fair Work Act 2009 or anti-discrimination legislation; or
  • the termination is harsh, unjust or unreasonable and, therefore, amounts to unfair dismissal.

Employers will have a defence to a general protections or discrimination claim, and be in a better position to defend an unfair dismissal claim, if it can be established that:

  • the employee cannot perform the inherent requirements of the role; and
  • reasonable adjustments provided by the employer are not sufficient to enable the employee to carry out the inherent requirements of the role, or the adjustments that could be made would constitute an unjustifiable hardship on the employer.

It may otherwise be important for the employer in defending such claims to be able to establish that the misconduct or performance issues in question were not linked to the employee's mental illness or if, they were, that appropriate consideration was given to that fact.

Inherent requirements
To determine whether an employee with a mental illness is capable of performing the inherent requirements of the employee's position, the employer should obtain medical evidence from the employee's treating medical practitioner and/or an independent medical practitioner. This will help to support the employer's decision-making and mitigate against the risk of the employee later making a successful claim against the employer.

The employer should provide the relevant medical practitioner with detailed information about the role that the employee is required to perform. The employer should specifically seek advice from the medical practitioner about:

  • the nature of the employee's condition;
  • the impact of the mental illness on the employee's ability to perform the role; and
  • any adjustments that can be made to accommodate the employee's condition.

The employer should review the medical evidence before a decision to terminate the employment is made. If there is conflicting medical evidence, it is not for the employer to resolve the conflict; rather, clarification must be sought from medical experts: CSL Limited t/a CSL Behring v Chris Papaioannou [2018] FWCFB 1005.

In Finnegan v Komatsu Forklift Australia Pty Ltd [2017] FWC 2433 the Commission held that the employee's dismissal was unfair despite the employee being unable to return to work due to his mental illness. The Commission considered that the employer did not have sufficient medical evidence to establish that the employee was incapable of performing the inherent requirements of his position, meaning that there was no valid reason for the dismissal.

Conduct and performance issues

Unless it can be established that the employee is unable to perform the inherent requirements of the role (notwithstanding any reasonable adjustments), employers should be careful to ensure that mental health issues do not form part of the reason for any decision to terminate an employee's employment. This can be done by remaining focussed on the performance or conduct issue at hand.

It may be that there is medical evidence which establishes that there is no link between the misconduct or performance issues and the mental illness. In Grant v State of Victoria (The Office of Public Prosecutions) [2014] FCAFC 184 the Full Court found that the medical evidence did not expressly or impliedly link the employee's misconduct with his mental illness. For this reason, absent other evidence, the dismissal could not be said to have been for an improper purpose.

If the employee's performance or conduct is affected by a mental illness, the employer must determine whether it is a mitigating factor in the event of a conduct issue, or something that could be adverted by a reasonable adjustment in the context of a performance issue.

Procedural fairness

In all circumstances, employers need to ensure that a fair process is followed prior to making a decision to terminate the employment of an employee with a mental illness. This will include giving the employee genuine opportunities to demonstrate fitness for work, or to establish a link between conduct or performance issues and the employee's mental health.


Free newsletter

Our daily newsletter is FREE and keeps you up-to-date with the world of HR. Please complete the form below and click on subscribe for daily newsletters from HRD Australia.

Recent articles & video

HRD launches game-changing website redesign

Final tickets are available for award-winning HR event

The casual conundrum hidden under the Christmas tree

Restaurant chain tests 4-day work week

Most Read Articles

What does an exceptional leader look like?

What are the burning issues facing the future of HR?

Is your workplace culture toxic?