Medical Incapacity Case Law Development

Case Law Development

The recent case of Sheridan v Pact Group [2026] NZEmpC 51 highlights the importance of employer of allowing an employee a reasonable period of recovery, the importance of using a fair and reasonable process to address concerns with an employee and obtaining and considering up to date medical information before deciding to terminate an employee for medical incapacity.

Background

Ms Sheridan worked in a community home operated by the Pact Group, a charitable trust that provides care services to vulnerable clients, including those who have physical and intellectual disabilities.

One night a resident became agitated and threatened to slit Ms Sheridan’s throat. The police were called but no charges laid. Following this incident, the Pact Group issued a letter to Ms Sheridan raising concerns about her ability to deal with clients and advising that disciplinary action may follow, including termination of employment.

Following receipt of this letter, Ms Sheridan went on a period of sick leave for Post Traumatic Stress Disorder brought on by the workplace incidents. The employer made numerous requests to Ms Sheridan for medical information and informed that an ACC Specialist report would be forthcoming that would detail a return-to-work plan. Instead of waiting for this report, PACT Group went ahead with dismissing Ms. Sheridan on the basis of Medical Incapacity six months after the workplace incident.

Decision

The Employment Court (EC) found that Ms Sheridan’s dismissal for medical incapacity was unjustified.

1. The Employment Court (EC) found the employer moved prematurely to terminate the employee for Medical Incapacity. The employer should have waited until it had received a pending specialist medical report and considered it before making a decision to terminate the employee’s employment.
2. The EC criticised Pact Group for having a “set” or pre-determined view towards terminating the employee due to medical incapacity. The expectation is that the employer should have prioritised rehabilitation and allowing a sufficient period for the employee to recover based on receipt of up-to-date medical information over dismissal planning, particularly when the cause of the absence is due to workplace factors.
3. The EC noted that the employer relied on staffing pressures as a key reason for terminating the employee but had made minimal attempt to secure temporary staff cover.

Key takeaways

• Employers must place emphasis on rehabilitation, particularly when medical incapacity arises from a workplace incident

• Up to date Medical Information must be obtained and considered before proceeding to terminate an employee for medical Incapacity

• While employers are not required to hold a position open for ever, they must consult with the employee and allow a reasonable recovery period

For more information, refer the article and advice under Case Law. For specialist advice in this area, please contact me at michaelp@businesscanterbury.co.nz.