Dismissal upheld due to medical incapacity

The Fair Work Commission recently upheld an employer's decision to terminate a ferry customer service operator's employment, finding that her medical incapacity prevented her from performing the inherent requirements of her role.

Dismissal decisions based on an employee's medical incapacity are fraught with legal risks for employers. In the recent case of Daunis v Rivercity Ferries Pty Ltd [2026] FWC 740, the Fair Work Commission (FWC) emphasised the importance of employers conducting thorough, evidence‑based assessments of an employee's capacity to perform the inherent requirements of their role before proceeding with termination.

The case highlights that where medical evidence shows an employee is unable to safely perform these requirements, and operational constraints make accommodations unfeasible, dismissal on the grounds of incapacity may be a valid reason for termination.

Facts

In Daunis v Rivercity Ferries Pty Ltd, the employee had worked as a customer service operator for Brisbane's river ferries since 2008. The employee suffered from deep vein thrombosis and a genetic clotting disorder, which caused recurrent health issues and frequent absences from work due to hospitalisation and ongoing medical treatment.

In the 12 months leading up to the employee's dismissal, she was absent from work on paid and unpaid leave for 114 days. The employee's prolonged absences raised concerns with her employer about her capacity to perform duties inherent to her job. As a result, the employer directed her to attend an independent medical examination (IME) on three occasions between March and May 2025.

In the months before the employee's dismissal, the employer received various medical evidence assessing her prospective fitness to return to work in light of her medical conditions. The evidence was inconsistent: some certificates stated the employee was fit to work, others recommended an extended period of leave, and the IME report indicated that she was unfit for full duties but might be able to return with temporary modifications and surgery.

The employer argued that, due to the nature of the employee's work on the ferry which involved long periods of standing on a moving vessel, reasonable adjustments for reduced hours or duties were impractical. The employer also considered the IME's recommendation for the employee to work reduced hours upon her return as unduly burdensome for other staff, who would need to cover the hours she was unable to work. It was in this context that the employer issued two show cause letters to the employee and ultimately terminated her employment on 1 July 2025 due to incapacity.

In late November 2025, the employer received a post-termination letter from a vascular and endovascular surgeon certifying that the employee was cleared to return to full time duties without restrictions following recent surgery. The employer argued that this information was immaterial to the decision to terminate the employee's employment, as it was not available to them at the time of the dismissal.

Valid reason for dismissal

Under the Fair Work Act 2009 (Cth), a person is unfairly dismissed if the FWC is satisfied, among other things, that the dismissal was 'harsh, unjust or unreasonable'. This assessment considers various factors, including whether the employer had a valid reason for dismissal related to the person's capacity or conduct.

In the present case, the employee submitted that the employer did not have a valid reason for termination because the employee would have been able to carry out the full requirements of her role in the foreseeable future following surgery.

The FWC rejected this, finding that the employee lacked the capacity to perform the inherent requirements of her role at the time of dismissal, as supported by the medical evidence available at the time. The FWC noted that the IME report did not conclusively establish that the employee could return to full duties in the foreseeable future, as it was based on assumptions about the success of surgery.

The FWC accepted that the employer was unable to provide reasonable adjustments for the employee because the nature of the role and roster system made such accommodations impractical and unreasonable. Consequently, the Commission found that the employer had a valid reason for dismissal.

Procedural fairness

Regarding procedural fairness, the FWC found that the employer's dismissal process was not procedurally unfair because:

• the employee was adequately notified of the reason for her dismissal both at the time and beforehand
• the employee was subject to an extensive show cause process and afforded an adequate opportunity to respond
• the employee's responses to the show cause letters were properly considered before the termination decision was made
• the employer did not unreasonably deny the employee a support person during the show cause process.

The FWC was therefore satisfied that the employee's dismissal was not harsh, unjust or unreasonable and the application was dismissed.

Key takeaways for employers

• For termination based on an employee's medical incapacity, employers must have a valid reason related to an employee's capacity, supported by contemporaneous medical evidence, to justify dismissal.
• Employers should exercise caution in making dismissal decisions where there is inconsistent or contradictory medical evidence.
• Employers should consider reasonable adjustments for employees with impairments, but operational impracticalities, feasibility and the nature of the role may limit what adjustments are reasonable.
• Employers should document all steps taken – including medical assessments, communications with employees, and attempts to accommodate reasonable adjustments – to demonstrate a fair process.

If you have any questions regarding the issues mentioned in this article or would like assistance in relation to an unfair dismissal matter, please contact our workplace relations and safety team.

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This publication is for information only and is not legal advice. You should obtain advice that is specific to your circumstances and not rely on this publication as legal advice. If there are any issues you would like us to advise you on arising from this publication, please contact Cooper Grace Ward Lawyers.