Most employers do not want to be in the position of considering termination because of medical incapacity.
It is uncomfortable. It feels personal. It often involves a long-serving employee, complex medical information, genuine compassion and a business that still needs the work done. Leaders can find themselves stuck between two very real pressures: wanting to support someone through illness or injury, and needing to understand whether the employee can actually perform the role now or in the reasonably foreseeable future.
That is where medical incapacity at work becomes one of the more difficult people decisions a business can face.
The mistake is thinking the decision turns on absence alone.
It does not.
Long absence may trigger the need to review the situation, but it should not be treated as the reason by itself. A defensible decision needs to be based on the inherent requirements of the role, current medical evidence, reasonable adjustments, consultation and careful documentation.
Put simply: employers can make decisions where an employee cannot perform their role, but the process needs to be evidence-led, fair and patient enough to withstand scrutiny.
The real issue: can the employee perform the inherent requirements of the role?
The starting point is not “How long have they been away?”
The better question is: “What does this role genuinely require, and can the employee perform those essential requirements safely and sustainably?”
Inherent requirements are the essential duties or characteristics of the role. They are not every minor task, personal preference or convenient roster arrangement. They are the core requirements that sit at the centre of why the role exists.
For example, the inherent requirements of a customer-facing ferry role may include attending allocated shifts, working safely in a marine environment, standing or moving for certain periods, responding to passengers, following safety procedures and performing the role within the employer’s operational model.
For a disability support worker, inherent requirements may include safe manual handling, driving between client locations, administering support in line with care plans, responding to incidents and maintaining professional boundaries.
For an administration role, inherent requirements may include using core systems, meeting deadlines, communicating with clients, maintaining accurate records and attending work with enough consistency to perform the role.
This is why current position descriptions matter. If a business cannot clearly explain what the role requires, it becomes much harder to assess medical capacity. A vague position description creates a weak foundation for a high-stakes decision.
A good position description should reflect the actual role, not just the version that existed three years ago or the version that sounds neat in a template. It should identify core duties, physical or cognitive demands, safety requirements, licences, qualifications, reporting lines, work patterns and any role-specific conditions.
When medical incapacity at work becomes an issue, that clarity is not just administrative. It becomes central to fair decision-making.
Medical evidence needs to be current, relevant and specific
Employers should avoid making decisions based on assumptions, frustration or incomplete information.
A pile of medical certificates saying “unfit for work” may explain absence, but it may not answer the question the employer needs to resolve. Can the employee perform the inherent requirements of their role? Are there restrictions? Are those restrictions temporary or ongoing? Is there a likely timeframe for return? Would adjustments make a return possible? Are there safety risks?
Medical evidence should be current and connected to the actual role.
That may involve asking the employee to provide medical information from their treating practitioner. It may involve providing the practitioner with a copy of the position description and specific questions about capacity. In some cases, it may involve an independent medical examination, often called an IME.
An IME can be appropriate where there is uncertainty about the employee’s capacity, conflicting medical information, unclear restrictions or a need to understand whether the employee can safely perform the role. It should not be used as a fishing expedition or a way to override the employee’s doctor simply because the employer dislikes the answer. It should be used to obtain objective, relevant information that assists the employer to make a fair and informed decision.
The questions asked matter.
A useful medical capacity request might ask:
Can the employee perform the inherent requirements of the role?
Are there any restrictions or limitations?
Are the restrictions temporary or permanent?
What adjustments, if any, would support a safe return to work?
Is the employee likely to return to full duties in the reasonably foreseeable future?
Would performing the role create a risk to the employee, colleagues, clients or others?
The more precise the questions, the more useful the response.
Reasonable adjustments must be considered, not assumed away
Reasonable adjustments are often where employers get nervous, and understandably so. The phrase can sound open-ended, as though every adjustment requested must be accepted.
That is not the test.
Employers need to genuinely consider whether adjustments are reasonable and practicable in the circumstances. That assessment may include the nature of the role, the operational impact, cost, safety, rostering, workload distribution, impact on other employees, customer or client requirements, and whether the adjustment would actually allow the employee to perform the inherent requirements of the role.
Some adjustments may be straightforward.
A temporary change to start and finish times. Additional equipment. Modified seating. A phased return over a defined period. Temporary removal of a non-essential task. Adjusted communication methods. Short-term flexibility while treatment is completed.
Other adjustments may be much more difficult.
For example, if a role requires a person to work alone overnight and the medical restriction prevents lone work, the employer needs to assess whether that requirement is inherent to the role and whether any adjustment would be reasonable. If a shift-based role requires a minimum number of employees to be present for safety or service delivery, reduced hours may affect the roster, other employees and service coverage. If a physically demanding role requires lifting, driving or responding to emergencies, removing those duties permanently may mean the role is no longer the same role.
The key is not to dismiss adjustments too quickly.
The employer should be able to show what was considered, why certain options were or were not practicable, and how the decision was reached. A short internal note saying “modified duties not available” is rarely enough. A stronger process explains the operational reasoning.
Consultation is not a courtesy step
Before making a final decision about medical incapacity at work, the employee should understand the employer’s concerns and have a genuine opportunity to respond.
This does not mean the employee controls the outcome. It does mean they should be given a fair chance to comment on the medical information, provide additional evidence, correct misunderstandings, suggest adjustments or explain their expected recovery.
A sound consultation process will usually involve:
providing the employee with the relevant concerns in writing
explaining the information the employer is relying on
identifying the inherent requirements that are in question
asking the employee to respond before a decision is made
considering any response carefully
allowing a support person where appropriate
documenting the process and outcome
The timing also matters. If a business issues a show cause letter, receives a response and terminates almost immediately, it may create the impression that the response was not genuinely considered. That may not always be fatal, but it is rarely helpful.
Good process gives the employer space to make a better decision. It also gives the employee confidence that the business has not rushed to an outcome.
Do not confuse compassion with indefinite uncertainty
This is where the conversation becomes commercially real.
Supporting an employee does not always mean keeping the role open indefinitely. Compassion does not require a business to operate in permanent uncertainty, especially where the role is operationally important, safety-sensitive or difficult to cover.
However, operational frustration should not drive the process.
The better approach is to separate the human concern from the decision framework.
You can care about the person and still need evidence.
You can acknowledge the difficulty of their health situation and still assess whether the role can be performed.
You can provide reasonable time and support without leaving the business exposed to ongoing operational disruption.
The strongest decisions are not cold. They are clear.
Workers compensation and work-related injuries need extra care
If the illness or injury is work-related, there may be additional workers compensation, injury management and return-to-work obligations. These obligations vary by state and territory, so employers should not assume the same process applies everywhere.
This is particularly important for businesses operating across multiple states, or where payroll, HR and operational managers sit in different locations.
Before making any decision involving a work-related injury, employers should check the relevant workers compensation scheme, insurer requirements, return-to-work obligations and any applicable restrictions on termination. This is a space where tailored advice is strongly recommended.
The five questions before making a medical incapacity decision
When a medical incapacity issue becomes serious, employers can use the following five-question framework.
1. What are the inherent requirements of the role?
Start with the role, not the person.
Review the current position description, contract, roster pattern, safety requirements, qualifications, physical demands, cognitive demands and day-to-day reality of the work. Speak with the manager if needed. Check whether the role has changed over time.
Ask: what must this role be able to do?
2. What does current medical evidence say about capacity?
Do not rely only on outdated certificates or assumptions about the employee’s condition.
Seek clear, current information about capacity, restrictions, prognosis and likely timeframe. Where appropriate, ask specific questions connected to the role. If information is inconsistent or unclear, consider whether clarification or an IME is required.
Ask: what do we actually know, and what are we assuming?
3. Is the incapacity temporary, uncertain or likely to continue?
A short-term incapacity is very different to an indefinite or ongoing inability to perform the role.
The employer should consider whether the employee is likely to return to their substantive duties in the short or medium term. If the evidence suggests a return is possible soon, termination may be difficult to justify. If the evidence is uncertain, prolonged or does not support a return to inherent requirements, the employer may need to move to a more formal assessment process.
Ask: is there a clear and reliable return-to-work pathway?
4. What reasonable adjustments have been considered?
List the options. Do not keep this discussion vague.
Could duties be temporarily modified? Could hours be adjusted? Could equipment assist? Could a staged return work? Would the adjustment allow the employee to perform the inherent requirements, or would it remove essential parts of the role? What would the impact be on safety, other staff, clients, service delivery and cost?
Ask: what adjustments are reasonable, and why?
5. Has the employee been consulted before a final decision?
The employee should know the concerns and have the opportunity to respond.
This step should be meaningful, not a formality. Consider any additional medical information, alternative proposals or concerns raised by the employee before making a final decision.
Ask: have we given the employee a genuine chance to respond?
What defensible decision-making looks like in practice
A defensible process is usually built from several smaller decisions made well.
It may look like this:
The employer identifies a pattern of absence or medical restriction affecting the role.
The employer reviews the position description and confirms the inherent requirements.
The employer meets with the employee to understand their circumstances and request relevant medical information.
The employer asks role-specific capacity questions.
The employer considers whether an IME is appropriate.
The employer reviews medical evidence and identifies concerns about current or future capacity.
The employer assesses reasonable adjustments and documents why options are or are not practicable.
The employer consults with the employee before making a final decision.
The employer confirms the outcome in writing, with reasons.
None of this is about creating paperwork for the sake of it. It is about building a clear, fair and commercially sound pathway through a difficult decision.
Where employers often go wrong
The common mistakes are rarely dramatic. They are usually small process gaps that become bigger under scrutiny.
Relying on absence alone.
Using old or general medical certificates.
Failing to define the inherent requirements of the role.
Treating modified duties as the role itself, rather than assessing the substantive role.
Rejecting adjustments without explaining why.
Moving too quickly after receiving an employee response.
Failing to consider disability discrimination, general protections or workers compensation issues.
Letting operational frustration show up in the wording of letters and emails.
The tone of communication matters. A medical incapacity process should not read like a disciplinary process. The issue is capacity, not blame.
Why this is also a leadership issue
Medical incapacity decisions often expose the quality of a business’s people systems.
Is the position description current?
Do managers understand the role requirements?
Are absence records accurate?
Are conversations documented?
Does the business know how to request medical information appropriately?
Are leaders confident enough to act early, without jumping too far ahead?
When those foundations are missing, the decision becomes harder than it needs to be.
That is why medical incapacity at work should not only be viewed as a termination issue. It is also a role clarity issue, a documentation issue, a leadership issue, a WHS issue and, in many cases, a culture issue.
Businesses that handle these matters well tend to have one thing in common: they slow down at the right points.
They do not ignore the issue. They do not rush to termination. They gather evidence, consult properly and make a decision that is fair to the employee and workable for the business.
Final thought: do not wait until the situation is already at breaking point
If an employee has been absent for an extended period, has recurring restrictions or cannot perform key duties, it is tempting to wait and hope the situation resolves itself.
Sometimes it does.
Often, it does not.
A better approach is to start the conversation earlier, with care and clarity. Ask for the right medical information. Review the role. Consider adjustments. Keep communication open. Document what is happening.
That approach does not guarantee a simple outcome, but it gives the business a stronger foundation for whatever comes next.
Before making a decision about medical incapacity, get advice on the role requirements, medical evidence, reasonable adjustments and consultation process. DreamStoneHR can help you assess the situation carefully, identify the practical risks and build a process that is fair, defensible and commercially grounded.
