What Hap­pens When An Employ­ee Runs Out Of Sick Leave?

A legal expert answers seven common questions about sick leave and medical certificates, such as what to do if you suspect a medical certificate has been fabricated or if an employee takes sick leave right after being denied an annual leave request.

When it comes to managing employees' sick leave requests, HR practitioners can often find themselves walking a fine line from a legal and ethical standpoint.

What often feels like a relatively straightforward absence can quickly spiral into questions about evidence, capacity, privacy and fairness – often leaving HR and employers unsure as to what action they can take.

To unpack the grey areas, HRM spoke with Michael Byrnes, partner at Swaab, about how HR practitioners can navigate complex sick-leave scenarios – from dubious medical certificates and long-term illness to conflicting medical evidence and potential termination.

1. What should I do if an employee runs out of paid sick leave but is still unwell?

When an employee runs out of paid sick leave, employers should give them the option to use any accrued annual leave so they can continue to be paid while recovering.

However, this must be the employee's decision, not the employer's, says Byrnes.

"What an employer cannot do is unilaterally make the decision to put the employee on annual leave," says Byrnes. "It needs to be at the employee's election. I've seen circumstances where employers have assumed the employee will want to take annual leave and done so without consulting them. That can be a breach of the Fair Work Act."

This could result in the employee being eligible to recover that period of annual leave, he adds.

If both sick leave and annual leave have been exhausted, the absence becomes unpaid. There's no strict 'cap";on how long unpaid sick leave can last, but employers need to be mindful of protections around temporary absence due to illness.

"An employee cannot be terminated for a temporary absence due to illness or injury that lasts up to three months, or longer if the employee still has accrued paid sick leave," says Byrnes. "Beyond that point, termination may only be considered if medical evidence shows the employee has lost the capacity to perform their role for the foreseeable future." (See point 6 for more details).

2. Can I question or reject a medical certificate that looks suspicious?

Employers need to tread very carefully here, says Byrnes. A valid medical certificate from a registered practitioner is considered sufficient evidence that an employee was unfit for work.

"It's not really open to an employer to second-guess a doctor's opinion," says Byrnes. "If it's a genuine certificate from a doctor, that's generally enough to convince a reasonable person that the employee was entitled to sick leave."

However, if there's clear evidence that a certificate is fabricated or doctored, employers can raise their concerns, but only if they have a "proper basis" to do so.

"If the certificate looks obviously wrong – say, the doctor doesn't exist, or there are spelling mistakes inconsistent with a medical professional – you can raise this with the employee," he says. "But employers should never contact the doctor directly. Without the employee's consent, the doctor won't engage with an employer."

"Instead, you should go back to the employee and say, 'We respect your right to take sick leave, but we have some concerns about this document and here's why.'"

He emphasises that clear evidence would be needed in this instance and that employers should tread very carefully in this instance to avoid breaching general protections under the Fair Work Act by denying an employee their right to take sick leave.

3. Are there circumstances where a medical certificate wouldn't be enough to justify a long period of sick leave?

For extended absences, a standard certificate may not be sufficient. In those situations, an employer can reasonably request more detailed evidence.

"If it's an extended period – say, a month or more – a more detailed certificate might be warranted to show that the employee needs that much time away," says Byrnes. "Employers just need to ensure they're not doing anything inconsistent with the employee's right to take sick leave."

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4. What happens if an employee takes sick leave immediately after being denied annual leave or disciplinary action?

This scenario is a common source of frustration for HR, says Byrnes.

"We know that on occasion employees do use sick leave strategically – they 'chuck a sickie'," he says. "But if they've provided a medical certificate, you must accept it at face value."

That said, if there's clear evidence that the sick leave is being abused, disciplinary action may be justified.

However, employers can't assume that simply being out of the house means an employee is not sick.

"Some employers mistakenly believe that if an employee takes a sick day, they need to be in a fetal position in a darkened room all day, and that if they venture outside, it must be some kind of scam. But that's not the test.

"Sick leave just means the employee is too unwell to attend work or perform their usual duties that day. It doesn't mean they can't go up the road for lunch, do some shopping, or carry out limited activities.

"Of course, if someone was denied annual leave to go to a music festival, for example, then calls in sick and is later seen at that same event, that would be a very different matter and can warrant investigation. But an employee being seen outside their home, on its own, isn't enough to conclude the sick leave was dishonest."

5. What if the employee refuses to provide medical evidence at all?

If an employee doesn't provide reasonable evidence when requested, the employer is entitled not to pay for that absence, says Byrnes.

"The Fair Work Act contemplates that employees must provide reasonable evidence to satisfy a reasonable person that they were genuinely entitled to take the leave."

Refusal to provide evidence, in itself, doesn't automatically become a disciplinary issue, he says. It just means the leave is unpaid.

However, if this becomes a regular occurrence, where the employee keeps taking days off without evidence and it starts to look like they're using sick leave as a matter of convenience rather than for genuine illness, then it can become a disciplinary matter about attendance and reliability, he says.

6. If an employee has been off sick for months, when can I consider ending their employment?

Termination for incapacity must always be based on robust medical evidence. Even after the three-month temporary absence period, employers should not act hastily.

"Some employers believe that on the 91st day that they can then safely terminate the employee. That's not right. All it means is that the protection against termination for temporary absence may no longer automatically apply.

"It doesn't mean the employer has actually established grounds to terminate. You still need to be able to show that the employee has lost capacity to perform the inherent requirements of their substantive role, based on medical evidence. That usually takes longer."

There are situations where an employee might make a recovery following the three-month absence period coming to an end, he adds, such as if they have a surgery scheduled, or the medication they've been prescribed is taking a certain period of time to work.

"It might just be that at the time of the independent medical examination, the employee is part way through a period of recovery, and that in another two or three months they may well be in a position to return.

"In that case, it would be premature to terminate their employment on the basis of incapacity, because the medical evidence shows they could reasonably be expected to return in the foreseeable future."

When determining timing, he advises erring on the side of caution.

"There's conflicting authority on whether the three months for the temporary absence protection runs concurrently or after any accrued paid sick leave," he says. "The safest approach is to wait at least three months after the paid sick leave has been exhausted."

7. How should I handle conflicting medical opinions (e.g. employee's GP vs independent medical assessor)?

Conflicting medical evidence can be challenging, particularly if termination on incapacity grounds is being considered. In these cases, the quality and relevance of the evidence matter most, says Byrnes.

"As a general proposition, specialist medical evidence will be preferred over that of a GP," he says. "An independent medical assessment that directly addresses the employee's capacity to perform the inherent requirements of their role carries more weight than a general diagnosis."

To ensure the evidence stands up under scrutiny, he says employers should consider:

1. Is the assessor is genuinely independent?
2. Is the assessor is appropriately qualified for the medical condition?
3. Is the assessment is linked to the inherent requirements of the role?
4. Have the right questions been asked, including whether the employee will likely regain capacity in the foreseeable future?

"If, after asking these questions, [an employees' long-term capacity is still called into question], the employer may have grounds to consider termination on incapacity," he says. "But that's typically only after a long period and after protections in relation to temporary absence due to illness or injury have expired and after other considerations around capacity to return to work, as outlined above, have been adequately considered."

Sick-leave management sits at the intersection of compassion, compliance and business continuity. While most absences are straightforward, the complex cases, such as long-term illnesses or conflicting evidence, can complicate matters.

Byrnes says the best protection is process and documentation.

"Follow the Act, keep clear records and always make decisions on evidence, not assumptions."

For further information please contact:

Michael Byrnes, Partner
Phone: + 61 2 9233 5544
Email: mjb@swaab.com.au

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.