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We are commonly asked whether an employer can dismiss an employee who is away on ACC and unable to perform their duties.

The short answer is yes, however, the dismissal of an employee on medical grounds is not a simple process, and whether it is justifiable will depend on the facts of each case. In other words, it is possible, but it does require very careful thought and handling.

Medical incapacity

It is well accepted that an employer does not need to hold an injured employee’s role open indefinitely, and that there can come a point at which an employer “can fairly cry halt” on the employment relationship. The process that an employer must follow before ‘crying halt’ is known as a process for medical incapacity.

A medical incapacity process relates directly to an employee’s inability to work and an employer’s need to assess if, and when, they can return to their duties. It also relates to a businesses’ ability to sustain their absence. For example, if an employee has been away from work with an injury for months and has not provided a return date, it may be appropriate to commence a medical incapacity process. However, it is unlikely to be appropriate to commence a process with an employee who is already on a return to work plan and has an upcoming return to work date.

As with any employment process, it is vital that an employer follows a fair and reasonable process. In particular, an employer must provide an injured employee with a reasonable timeframe to recover (what is considered reasonable will depend on the facts of each case). An employer must also notify an employee of the possibility of dismissal from the outset of the process, seek their feedback throughout, and carry out a full and fair investigation into their true medical position. That involves basing any decision making on the relevant job position/description and up to date medical information and/or specialist opinions.

In some circumstances, it may be appropriate for an employer to communicate directly with an employee’s medical professional and ACC case manager (provided they have received consent to do so). It may also be appropriate for an employer to ask an employee to put forward specific questions to a medical professional, or to request an employee meet with a different one. Both parties must be responsive and communicative with one another, and any request made by an employer must be reasonable and directly relate to an employee’s return to work. An employer should also bear any costs associated with its requests.

Accident Compensation Act 2001

An employer must also be careful to meet their obligations under the Accident Compensation Act 2001. This involves taking all practicable steps to assist an employee with their vocational rehabilitation, regardless of whether or not the injury occurred at work. This means that an employer must genuinely consider and offer workplace alternatives where possible rather than dismissal. For example, an employer may be able to accommodate light duties or reduced hours. Importantly, however, there is no obligation on an employer to accept an employee on light duties or reduced hours forever (if at all) or to create an entirely new role to accommodate an employee.

There is also a common misconception that an employer cannot dismiss an employee if they are receiving regular compensation from ACC. That is not the case, and if an employee is dismissed from their employment whilst receiving weekly compensation from ACC (provided they were working at the time that they had the injury), they will continue to receive it for as long as they are unfit to work.


Ultimately, a medical incapacity process is about balancing fairness to an employee against the needs of an employer’s business. Only after such considerations are made, and a proper process followed, should an employer consider dismissal for medical incapacity.

In any event, these processes are sensitive and can take weeks or even months. They are also likely to be scrutinised closely by any court, so we recommend that legal advice is sought from the outset. If you have any questions about the above or are looking to embark on such a process, please get in touch with our employment team who would be happy to assist.

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