Q. We have an employee who has recently lodged a successful workers compensation claim with our insurance company. However, because of a downturn in our business, a number of positions will become redundant at the end of next month, including the position currently occupied by the employee who is on workers compensation.  
Can the company terminate an employee who is receiving workers compensation on the grounds their position has become redundant?  

A. While there are a number of statutory obligations imposed on an employer which protect an injured employee from dismissal, including unfair dismissal and general protections under the Fair Work Act, state or territory workers compensation law, discrimination law and disability discrimination law. 

Generally, these protections do not apply if an employee’s dismissal is a genuine redundancy. However, if the dismissal is challenged, the employer would need to demonstrate that the criteria used to select the employee for redundancy was not biased against the employee because of their absence due to injury. Provided the selection criteria for redundancy are objective (for example, based on factors such as skills, experience, training and performance of each individual), then an employee’s incapacity is irrelevant to their selection for redundancy. 
The Fair Work Act defines when a dismissal is considered a genuine redundancy. 

 

Genuine redundancy under the Fair Work Act 

“Redundancy” can be described as the situation where an employer no longer requires employees to carry out work of a particular kind or to carry out work of a particular kind at the same location. Redundancy refers to a job becoming redundant and not an employee becoming redundant. The Fair Work Act (s.389) defines a ‘genuine redundancy’ to mean if: 

  • the person’s employer no longer required the person’s job to be performed by anyone because of changes in the operational requirements of the employer’s enterprise; and 

  • the employer has complied with any obligation in a modern award or enterprise agreement that applied to the employment to consult about the redundancy, and 

  • it is not reasonable to redeploy the employee at the time of termination. 

 
In C v Construction Glazing Pty Ltd [2015] FWC 1008, the Fair Work Commission confirmed that an employee receiving workers’ compensation payments may be dismissed on redundancy grounds where these requirements are met.

 

General Protection Risks 

Under the Fair Work Act (s.352), if the grounds for selecting an employee for redundancy are due to an employee’s work-related injury or illness, the employer could be regarded as taking adverse action against the employee under the general protections provisions of the Fair Work Act. 

This prohibits the dismissal of an employee on grounds that are considered discriminatory and the Fair Work Act specifically refers to the prohibition of a termination on the grounds of an employee’s temporary absence from work due to illness or injury.  

Under general protections:

  • The employee does not need to prove discrimination

  • The employer must prove the injury/absence was not a reason at all for the dismissal


State/territory workers compensation law 

Many State and Territory workers compensation laws prohibit the termination of an employee’s employment by the employer within a specified period of time where the sole or primary reason for the dismissal is because of the employee’s absence on workers compensation. 

The ‘specified period’ can range from 6 months (under New South Wales law), 48 weeks (under Victorian law), to 12 months (under Queensland law), or indefinitely (under South Australian law where the employer employs 10 or more employees). 
 
Reference should therefore be made to the relevant state or territory workers compensation law to determine whether the employer can terminate the employee when the position becomes redundant. 

 

Discrimination and disability obligations 

Protections exist under both the Disability Discrimination Act 1992 [Cth] and the Fair Work Act which require an employer to investigate making any reasonable adjustments that may be able to be made to accommodate a person’s disability. An employee must be capable of performing the inherent requirements of the job. It is not unlawful where a person’s disability prevents them from performing the inherent requirements of the job. 

Where an employee has an ongoing inability to perform the inherent requirements of a job, and no reasonable alternatives for redeployment or job modification exist, termination may be justified. 

Redeployment must be considered across the employer’s enterprise, not just the immediate work area.

 

Bottom line 

An employee on workers’ compensation can be made redundant, but only where:

  • the redundancy is genuine

  • selection criteria are objective and injury‑neutral

  • consultation obligations are met

  • redeployment has been properly considered

  • the dismissal does not breach workers’ compensation or discrimination laws

Because of the layered legal protections and the reverse onus under general protections, redundancies involving injured employees should be approached with caution and, where possible, legal advice.