Dismissed while on workers' comp leave for PTSD
A council CEO dismissed while on workers' compensation leave has been ordered reinstated by the Federal Court in a disability discrimination ruling.
On 23 March 2026, Justice Bromwich of the Federal Court of Australia handed down a decision in Stonhill v Katherine Town Council that will have HR professionals reaching for their termination checklists.
Ingrid Stonhill was Chief Executive Officer of Katherine Town Council in the Northern Territory from 7 February 2022, with her extended contract running until 7 February 2028. On 17 September 2025, she went on workers' compensation leave by reason of post-traumatic stress disorder, which she attributed to workplace bullying by a former councillor.
Things moved quickly from February 2026. On 13 February 2026, the Council issued Stonhill a show cause notice. Before that process could run its course, she lodged a complaint with the Australian Human Rights Commission (AHRC) on 20 February 2026, alleging disability discrimination. On 5 March 2026, the Council terminated her employment on the stated grounds of serious and wilful misconduct, citing her conduct during an industrial dispute with council employees and her handling of conflict of interest issues.
Notably, the Court took a close look at how the show cause process was handled. Rather than responding substantively to Stonhill's reply, the Council relied on her reference to the grounds of termination in her AHRC complaint as a substitute for engaging with the show cause letter at all.
Stonhill filed a second complaint with the Commission on 10 March 2026. Two days later, on 12 March 2026, she filed an urgent application in the Federal Court seeking reinstatement to her CEO role, continuation on workers' compensation leave, and reinstatement of access to her emails and electronic files at the Council for the purposes of her two AHRC complaints — all to take effect until the conclusion of the complaints process.
Justice Bromwich was not asked to decide who was right. The question at this stage was whether the circumstances were serious enough to warrant an interim order putting Stonhill back in her position while the AHRC process played out. The Court found they were.
While Justice Bromwich did not accept Stonhill's contention that the dismissal was a sham, he found that "the express basis for the dismissal provided by the Council may not be the complete reason for that having taken place." The Court found it was reasonably arguable that Stonhill's inability to perform her CEO duties, due to the disability arising from workplace bullying, may have been a contributing factor in the termination decision, a form of what is known as direct disability discrimination.
It is also worth noting that Stonhill did not seek unconditional reinstatement, a point Justice Bromwich specifically highlighted in his weighing of the competing interests.
The Court also took into account that Katherine has been experiencing severe flooding, making the Council's inability to fill the CEO position a pressing concern. Despite that, Justice Bromwich wrote that "I have concluded that, on balance, those competing considerations presently favour Ms Stonhill, and accordingly, a subset of the relief sought should be granted."
The Council was ordered to reinstate Stonhill as CEO while she remains on workers' compensation leave until the AHRC complaints process concludes. It was also ordered to pay her costs. The Court declined to order the restoration of her access to work emails and electronic files, though it noted that denying her reasonable access to copies of those records could become a complication for the Council.
The reinstatement is not open-ended. Stonhill must take all reasonable steps to expedite the AHRC process, and the Council retains the right to apply to have the order discharged if she does not.
For HR leaders, the case raises some pointed questions about process and timing. When a show cause notice and an active discrimination complaint are running simultaneously, the sequence of decisions matters enormously. Terminating an employee on workers' compensation leave for a mental health condition, even where genuine conduct grounds exist, carries real legal exposure. And courts can move quickly. From Stonhill's first AHRC complaint to a Federal Court reinstatement order took just over a month.
