Navigating the Grey Area: Can you Suspend an Employee Without Pay if they are Unfit for Work?

The Federal Circuit and Family Court of Australia has recently ruled that Telstra did not discriminate against an employee by telling her she was not permitted to attend for work and directed her to take personal leave after medical reports indicated that she was unfit to perform her duties due to hearing loss. However, in doing so this constituted an unreasonable direction to suspend her from work without pay, and therefore Telstra breached the employment contract which resulted in the Court awarding the employee damages representing a proportionate loss of income, plus $30,000 in general damages.

Background

Ms Valerie Martin worked at Telstra from 1989 until 10 May 2021, serving as a call centre Customer Service Operator (ECSO) since 2000. In this role, she was responsible for answering and handling triple-zero emergency calls.

Telstra required ECSOs to undergo an audiometry test every 2 years to determine whether the ESCOs’ hearing fell within the hearing thresholds specified by Telstra’s policy.  In a routine audiometry test conducted in August 2012, it was found that Ms Martin did not satisfy the threshold requirements because she had mild to moderate high frequency loss of hearing, but Ms Martin was able to perform the role of an ECSO with a special headset. Subsequent tests were performed in 2014 and 2016, which confirmed Ms Martin’s hearing loss, but Telstra considered Ms Martin fit to perform her role with a special headset.

In December 2017, Telstra contended that Ms Martin’s performance declined – she began mishandling calls and not complying with certain key performance indicators relevant to her role. She was placed on multiple performance support plans in 2018 and 2019 and was issued two written warnings for unsatisfactory performance in 2019.

In September 2019, Ms Martin underwent another routine audiometry test and again did not satisfy the threshold requirements.  On this occasion, Ms Martin was referred to an independent medical practitioner who found that Ms Martin was unfit to perform her role as an ECSO. Ms Martin’s manager informed her of the results and that she was not “was not permitted to attend for work”, and to take personal leave until further information about her condition was known and her fitness for work was medically confirmed.

Ms Martin objected to this and Telstra later decided to provide Ms Martin with paid discretionary compassionate leave for about 3 months, and after that made no further payments to Ms Martin until June 2020 (although Telstra later agreed to back-pay Ms Martin on a without admissions basis).

In June 2020, Ms. Martin was cleared to return to work by a different medical practitioner. Despite this, Ms. Martin did not return to work and provided medical certificates from her treating practitioner stating she was unfit for work until mid-2021.

Court Claims

Ms Martin lodged proceedings in the Federal Circuit and Family Court of Australia against Telstra, on the basis that:

1. Telstra breached its own enterprise agreement and the Fair Work Act 2009 (Cth) (FW Act) by directing Ms Martin to take sick leave when she was allegedly not sick and by not paying her for certain periods from 2020;
2. Telstra breached three implied terms in Ms Martin’s contract of employment (being the duty to co-operate, duty to act in good faith, and to only give lawful and reasonable direction). By directing Ms Martin not to attend work until she was cleared to perform ECSO work, Telstra repudiated its obligations under its employment contract with Ms Martin; and
3. Telstra unlawful discriminated against Ms Martin in breach of the Disability Discrimination Act 1992 (Cth) (DD Act) on the basis of her hearing disability.

Ms Martin sought damages for the above breaches, as well as for a psychiatric injury she sustained due to Telstra’s conduct.

Findings

The Court held that Telstra’s conduct did not breach the DD Act, as any action it took was due to its assessment of Ms Martin’s ability to perform the role, not her disability. The Court also did not accept that Telstra had breached its enterprise agreement or the FW Act because it was not required to pay wages to Ms Martin if she did not actually work.

However, Telstra was found to have breached its contractual obligations by suspending Ms Martin’s employment without pay, which amounted to repudiation of her employment contract. The Court held specifically that there is an implied duty not to repudiate in every contract, and, by suspending Ms Martin’s employment without pay (for which there is no right to do at common law), Telstra repudiated its contractual obligations. Accordingly, Ms Martin was entitled to damages.

The Court considered that there was a 15% likelihood that Ms Martin would have remained employed from September 2019 to May 2023, and awarded her proportionate loss of income for that period, along with $30,000 in general damages.

Ultimately, this decision highlights that while directing an employee to take leave due to medical unfitness may not be unlawful discrimination under the DD Act if the direction is based on the employee’s capacity to perform the role, it may still breach the employment contract if it constitutes a suspension without pay.

As noted above, at common law, an employer has no right to suspend an employee without pay, and any direction to do so may be considered unlawful, even where an employee may not have capacity to perform the role due to illness or injury.

At HR Legal, we provide clear guidance and support on employment law matters. If you have any questions on workplace discrimination or managing employees who may be unfit for work, please contact us!

Case: Martin v Telstra Corporation Ltd (No 2) [2024] FedCFamC2G 1174 (8 November 2024)

Share:

This article was produced by HR Legal. It is intended to provide general information only in summary format on legal issues. It does not constitute legal advice, and should not be relied on as such.