Mark Branagan

More Pain for Less Gain? FWC asserts rights to assess medical assessments

Mark Branagan

13 March 2018

Employment Policies

Managing long-term absentees is possibly the most difficult workplace challenge for employers. A recent decision of the Fair Work Commission (FWC) unfortunately maintains an element of uncertainty for business.

When confronted with an employee who has taken a lengthy period of absence that is not covered by workers compensation or that goes beyond accrued leave entitlements, the generally accepted practice is that an employer is entitled to obtain an expert independent medical examination to assess the employee’s capacity to return to work.

If the medical opinion obtained by the employer is that the employee cannot return to work or fulfil the inherent requirements of the role, then the employer may be justified in terminating the employment.  But what happens when the employer’s medical examination conflicts with other evidence produced by the employee?

In the recent case of CSL Limited v Papaioannou[1] (CSL) the Full Bench of the FWC was called upon to resolve this issue. The employee, Mr P, had been employed by CSL for over nine years but had been absent from work for a period of 10 months due to a psychiatric injury. While Mr P had exhausted all his leave entitlements, he was able to maintain his salary through the company’s generous salary continuance insurance scheme. Access to this insurance benefit was an entitlement under CSL’s enterprise agreement and provided for up to two years of ongoing income support.

Because his absence had been so long, CSL commissioned a report from an occupational physician. The physician concluded that Mr P was not fit to return to work, and that his best prognosis was return to work within 12-24 months. When the initial 10 months’ absence was taken into account, this translated into a potential absence of close to three years. However, in contrast, Mr P’s treating psychiatrist concluded that he would be fit to return to work within six months.

Faced with the conflict, CSL preferred the evidence of its occupational physician, and concluded that Mr P could not return to work within the ‘foreseeable future’. After satisfying procedural fairness requirements to advise and consult with Mr P, the company terminated his employment in July 2017. An incidental but significant consequence of the dismissal was that the salary continuance payment under the insurance scheme also ceased upon termination. Mr P was still only 10 months into the two-year coverage period, thereby losing both his job and his income.

Mr P challenged the termination as an unfair dismissal and was initially successful, obtaining an order for reinstatement in November 2017. At first instance, Commissioner Ryan found that the termination was for a valid reason – that is, on the medical grounds. In doing so, Ryan C concluded that the employer was entitled to rely upon its physician’s medical evidence, and that it was not a matter for the FWC to interfere with that decision-making. In coming to this conclusion, the Commissioner followed the 2016 Full Bench decision in Lion Dairy[2]. Despite that finding on valid reason, however, the Commissioner concluded that in all the circumstances the dismissal was harsh – particularly given Mr P’s loss of insurance entitlement/income.

CSL appealed to the Full Bench and was ultimately successful, with an order that the matter be returned for a rehearing before a different Commissioner. There were a number of grounds of appeal but, for current purposes, the Full Bench’s decision is notable for its findings on the issue of resolving conflict between competing medical assessments.

The Full Bench (Ross P, Sams DP and Platt C) closely assessed the central threshold issue of whether there was a ‘valid reason’ for the termination. Mr P argued that there was no valid reason because the employer was not entitled to rely upon a medical report that was disputed by the employee’s evidence.

In response, CSL argued that the FWC was not entitled to ‘look behind’ the medical report preferred by the employer. Both arguments disclosed a ‘tension’ between the decision in Lion Dairy and an earlier 2013 Full Bench decision in Jetstar Airways Ltd v Neeteson-Lemkes[3] (Jetstar).

Jetstar decided that, in cases dealing with the incapacity of an employee, the FWC is required to make its own findings about whether an employee suffered from an incapacity based on medical evidence. Three years later, a Full Bench majority in Lion Dairy decided that, where there is conflicting evidence on such matters as medical assessments, an employer is entitled to make its own decision on an employee’s capacity to work – provided that decision is reasonable. CSL argued that Lion Dairy was authority for the proposition that the FWC is not entitled to look behind the medical reports in analysing whether there is a valid reason for termination.

In considering both submissions, the Full Bench declared that Lion Dairy was wrong and asserted its right to make such determinations on the evidence.  In all the circumstances, the FWC remains entitled to make its own assessment as to whether medical evidence provides the basis for a ‘valid reason’ for termination.

The Full Bench decision in CSL is a useful summary of issues relating to conclusions as to ‘valid reason’ that is often overlooked in unfair dismissal matters. It is common for most unfair dismissal applications to proceed on the basis that the valid reason is a ‘given’ with far greater focus on the procedural fairness or ‘harshness’. However, it is important to remember that – under s387(a) of the Fair Work Act 2009 (FW Act) – whether there is a valid reason is a fundamental aspect of any unfair dismissal claim.

Lessons learned in this case:

  • an employer looking to terminate on the grounds of incapacity arising out of medical conditions must be able to satisfy itself (and ultimately perhaps the FWC) that the medical evidence is sufficient to justify a valid reason;
  • employers need to be balanced and objective when considering medical evidence for capacity cases;
  • even if an employer proposes to terminate on inherent requirement grounds based on medical evidence, there remains a risk that such an assessment may be challenged or overturned by the FWC;
  • if an employee receives or is entitled to receive an extra financial benefit through an internal company policy, enterprise agreement or other workplace arrangement, the loss of this benefit on termination may be relevant if not critical to a finding of ‘harshness’ when considering whether there is an unfair dismissal. This was how the Commissioner found in CML, and this finding was not challenged by the Full Bench; and
  • although the FWC discourages the use of lawyers in unfair dismissal applications, the intervention of the Commission in reviewing expert evidence continues to expose employers to an extremely complex technical legal jurisdiction that requires legal interpretation and assistance. Ironically, this only reinforces the need for legal representation in these matters – which is unfortunate given that the system seeks to be a simple, more accessible user-friendly forum to resolve disputes arising out of termination of employment.

[1] [2018] FWCFB 1005

[2] Lion Dairy & Drinks Milk Ltd v Norman [2016] FWCFB 4218

[3] [2013] FWCFB 9075


Should you have any queries on this topic or with other employment issues, please do not hesitate to contact:

Mark Branagan  |  Partner  |  +61 3 8080 3638  |