Terminating an Employee on Medical Grounds

Introduction

Can companies terminate an employee for falling ill and becoming unfit for work? They can, but a proper process should be followed to avoid such termination being determined as unjust or unfair. This is known as a “medical board out” or termination on medical grounds.

In MHS Aviation Sdn.Bhd V Zainol Akmar Bin Haji Mohd Noor [2001] ILJU 48, the claimant, a pilot, was diagnosed with acute inferior and posterior myocardial infarction. Based on a medical report which ruled that the claimant should have no flying duties for six to nine months before reassessment of his flying status again, the company decided that the claimant had a serious medical condition which was likely to be permanent. Its basis for terminating the claimant’s employment was frustration – that the employment contract, through a supervening event caused by no fault of either party has been rendered impossible to perform or radically different from what was contracted for.

The Court ruled that the doctrine of frustration did not apply as health issues are probabilities of a contingent nature and are not something totally unexpected to happen outside the contract. The claimant’s complaint for unfair dismissal was allowed and he was reinstated to his former post with backwages to be paid. 

While there is no fixed statutory framework for companies to follow and each medical board out should be looked at on a case-by-case basis, this article seeks to highlight the importance of implementing proper guidelines and the relevant considerations in dealing with potential medical board outs before terminating employees on medical grounds. 

Practical steps for Companies to consider

While companies must deal with such situations with sympathy, understanding and compassion, the competing interests between the employer’s need for work to be done against the employee’s need for time to recover must be balanced. The essential question posed when dealing with such cases is whether the employer can be expected to wait any longer and if so, how much longer?

Before terminating on medical grounds, some factors to be considered by companies include but are not limited to i) nature of illness; ii) likely length of absence/reoccurence; iii) need for employer to replace or do the work the employee was engaged to do; iv) nature of employee’s job; and v) impact of the employee’s absence on the business.

Some practical steps companies can take in improving the manner in which they deal with potential medical board outs are as below.

1) Drafting and implementing a medical board out policy or guideline.

Most employment contracts, handbooks and policies in Malaysia, especially where SMEs are concerned, do not provide for a proper internal procedure to be followed in the event an employee falls critically ill nor do they contemplate possible medical board outs. This usually leads to the engagement of employment law specialists and lawyers for advice post-event.

Worse yet, some companies who feel such legal consultation unnecessary may issue such termination on the spot or feel that they have no choice but to retain an employee who is medically unable to carry out their work, resulting in prolonged losses and avoidable liabilities.

Eitherway, prevention is always better than cure and companies should clearly provide for internal mechanisms where employees fall critically ill. This gives clarity to both management and employees as to what is to happen should a worker suffer a terrible fate. Further, if it ever comes to the Court’s attention, at least the company would be able to argue that it had reasonably taken appropriate steps in dealing with an employee’s illness. Notwithstanding this, merely having an internal process does not mean that any dismissal was done fairly as the Courts will still inquire if such termination was just, having regard to all circumstances.

2) Consulting with the relevant employee.

Part of the internal mechanism in place when dealing with such cases should include consultation with the employee. This has been stressed in case law so as to inform the company as to the employee’s true medical position and to make the employee aware of the difficulties faced by the company due to the absence.

Such consultation is useful communication between both parties during a mutually difficult time. For example, if an employee decides, upon having a critical illness, that he or she does not intend to continue employment, a mutual separation scheme could be executed to benefit both parties. The company would not need to constantly deal with a possible reoccurence of the illness or absence, and the employee does not need to deal with the stress and pressures of trying to competently discharge his duties while dealing with health issues.

Alternatively, can the employee be reassigned to another position at the company? Would the employee be willing to accept a new job-scope? If yes, both parties should, before the company decides to dismiss the employee, consider a reassignment even if it involves a reduction of salary. These matters can only be investigated through proper consultation with the employee.

One of the issues in MHS Aviation Sdn Bhd (supra) was that the company had made no enquiries and issued the termination notice solely based on the medical report, on the assumption that the illness was permanent in nature. The duty to enquire, to show sympathy and understanding is on the company, and failure to do so will further prove unfairness.

3) Investigating and procuring sufficient available medical evidence and advice. 

How will the disease or illness affect the employee in carrying out their duties? Is it likely to be permanent? How can the company continue to support the employee during employment?

Any reaction taken by the company in response to an employee being rendered medically unfit for work should be based on cogent medical evidence and advice. Although it may seem troublesome, companies ought to take the time and effort to properly understand the employee’s medical condition and how it can adapt to the new circumstances.

In Linda Lui Chooi Kim v MSL Travel Sdn Bhd [2014] 2 ILJ 471, the Court found that the sole reason for the claimant’s dismissal was that the claimant was diagnosed with cancer, which led the company to assume that the claimant was no longer fit to perform her job. The company here did not investigate the claimant’s illness nor how it affected her work performance. As a result, the Court found that the claimant was unfairly dismissed and awarded compensation in lieu of reinstatement along with backwages.

Conclusion

These steps and factors should be taken into consideration by companies so that they can implement the best practices in dealing with potential medical board outs.

At the end of the day, the Court will scrutinise, having regard to all circumstances and steps taken by the company, whether such termination was just and fair. This approach ensures that people facing unfortunate illnesses and diseases are not discriminated against or unfairly dismissed.