The Authority warns against using health limitations in redundancy selection

In this case, the Employment Relations Authority (Authority) found that Civtec Ltd unjustifiably dismissed Mr Balachandariyar after it improperly relied on his medical limitations and temporary injury during a redundancy selection process. Civtec also unjustifiably disadvantaged Mr Balachandariyar as it failed to adequately support his rehabilitation following a workplace wrist injury.

At the heart of the case was the employer’s decision to mark Mr Balachandariyar down against several selection criterion during a redundancy selection process because of his bronchial asthma and temporary wrist injury that he sustained at work.

The facts

Mr Balachandariyar commenced employment with Civtec as a fibre technician in January 2023. He suffered from bronchial asthma and maintained that he had disclosed this during the recruitment process and subsequently on several occasions. The condition limited his ability to work in dusty environments, including underfloor and ceiling spaces. For approximately 11 months Civtec accommodated those limitations without issue.

In April 2024, Mr Balachandariyar injured his wrist at work. He was referred to physiotherapy and later hand therapy. Medical professionals imposed restrictions on lifting, twisting, gripping, crawling, ladder work and other tasks. Although Civtec received detailed information about these restrictions, the Authority found insufficient evidence that Civtec implemented a structured plan to ensure compliance with them.

Following operational changes in May 2024, Civtec expected Mr Balachandariyar to perform underfloor and ceiling work. He again raised concerns about his asthma. Civtec obtained medical information and investigated whether masks could allow him to safely perform those duties. The employee cooperated with the process and attended medical appointments, but Civtec failed to complete the Occupational Health referral and mask assessment process before later relying on his inability to perform those duties during the redundancy selection process.

In September 2024, Civtec undertook a genuine restructure due to reduced work and proposed reducing its workforce from 92 employees to 68. Existing roles were disestablished and employees were scored against selection criteria for positions in the new structure. Mr Balachandariyar received a score that was too low to secure a role, and his employment was terminated for redundancy in October 2024.

The criteria

Criteria 9: Physical ability to perform the role

Mr Balachandariyar received 0/3 because Civtec considered him unable to perform underfloor, ceiling and asphalt-related work due to asthma.

The Authority held this was unreasonable because:

• Civtec had not completed the process of determining whether masks or other accommodations would allow him to perform those duties;
• the employer itself had failed to progress the Occupational Health referral;
• the employee had done everything required of him.

The Authority stated that an employer cannot penalise an employee for limitations caused by a medical condition before reasonably assessing whether those limitations can be accommodated.

Criteria 8: Completing key functional tasks

Mr Balachandariyar was scored down because Civtec considered him unable to perform certain duties and because of his asthma and wrist injury.

The Authority found this unreasonable because:

• Civtec improperly relied on asthma-related limitations without first determining whether accommodation measures would work;
• Civtec improperly relied on a temporary wrist injury that was close to resolution;
• assessments should have been forward-looking and based on capacity after recovery.

The Authority found that considering the temporary wrist injury in this criterion was unfair and unjustified. 

Criteria 3 – Attendance

Mr Balachandariyar also lost marks due to unpaid sick leave.

The Authority found that if the absences were associated with his workplace injury, they should not have been counted against him because:

• selection criteria should assess future suitability;
• temporary injury-related absences should not operate as a penalty during a redundancy competition.

Findings

The Authority found the redundancy process was substantively flawed and the dismissal unjustified because:

• Civtec improperly marked down the employee based on asthma-related limitations before completing accommodation assessments;
• Civtec improperly considered a temporary wrist injury;
• Civtec unfairly relied on injury-related attendance concerns.

The Authority concluded that the redundancy selection process had effectively become: “a de facto medical incapacity process” rather than a genuine assessment of suitability for the new structure. 

The Authority observed that if Civtec genuinely believed the employee’s health conditions prevented him from performing the role long term, it should have addressed those concerns through a proper medical incapacity process rather than indirectly through redundancy scoring.

The Authority found that if the disputed criteria had been fairly assessed, Mr Balachandariyar would likely have achieved a score sufficient to secure one of the available positions.

Civtec had also unjustifiably disadvantaged Mr Balachandariyar by failing to adequately manage and accommodate his workplace injury and rehabilitation process.

The Authority acknowledged that Civtec took some positive steps:

• funding treatment;
• arranging physiotherapy;
• arranging hand therapy;
• paying for time spent attending appointments.

However, the Authority found these efforts were insufficient.

Civtec:

• failed to consult with Mr Balachandariyar about a rehabilitation plan;
• failed to establish clear work restrictions and ongoing monitoring;
• failed to ensure physiotherapy recommendations were followed;
• allowed him to continue performing tasks involving twisting and similar movements contrary to medical advice;
• delayed modifying duties despite clear recommendations from health professionals.

The evidence suggested that the employee largely protected himself through his own initiative rather than through systems implemented by Civtec.

The employer had to pay $37,534 to the employee: $23,000 in compensation for humiliation, loss of dignity, and injury to feelings of the employee and $14,534 of lost wages.  

Key takeaways

An employer must follow the proper process when dealing with employees who may be unable to perform their role because of illness, injury, or disability.

• Employers should not mark down employees in a redundancy selection process because of a medical condition, disability, or injury where reasonable accommodations have not been properly explored.
• Selection assessments should be forward-looking and take account of likely recovery and future capability rather than temporary limitations.
• Employers should actively engage with employees regarding return-to-work plans, workplace accommodations, and rehabilitation measures.

The central lesson from this decision is clear: employers cannot use a redundancy process to effectively assess or penalise employees for health-related limitations without first considering and implementing reasonable accommodations.

Where medical issues genuinely affect an employee’s long-term ability to perform the role, those concerns must be addressed through an appropriate capability or medical incapacity process, not indirectly through redundancy scoring.

Medical incapacity process

The process for medical incapacity is fundamentally different to a restructure, and is assessed against its own legal framework.

When considering a dismissal for medical incapacity, the Authority will assess whether the employer’s actions were those of a fair and reasonable employer in all the circumstances at the time the dismissal occurred.

While an employer is not bound to hold a job open indefinitely for an employee who is unable to attend work due to illness or injury, they are required to follow a fair and reasonable process before terminating an employment agreement on the grounds of medical incapacity.

An employer must:

• give an employee a reasonable opportunity to recover;
• understand a reasonable inquiry into the prognosis for a return to work;
• seek and obtain relevant medical information;
• consult with the employee and genuinely consider their views, explanations and any additional information they wish to provide; and
• consider whether any reasonable accommodations, alternative duties, or workplace adjustments are available and practicable.

The employer must also consider its own operational and business needs, including what can reasonably be accommodated and for how long. Ultimately, the employer must balance its legitimate business interests against the employee’s interest in maintaining their employment.

A dismissal for medical incapacity is more likely to be justified where the employer has undertaken a thorough and fair process, considered all relevant medical and operational factors, and given the employee a meaningful opportunity to participate before any decision is made.

Need support? If you would like assistance with any restructuring or medical incapacity process please get in touch with our team. Email admin@cmalaw.co.nz or phone 03 211 0153.

Disclaimer: This update provides commentary on employment law, health and safety and immigration topics, it should not be used as a substitute for legal or professional advice for specific situations. Please seek legal advice from your lawyer for any questions specific to your workplace.