Terminating An Employee On Workers Compensation NSW

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The purpose of workers’ compensation is to provide valuable protection to workers and employers in the event of a workplace-related injury and/or accident. But what happens when you’re considering terminating an employee on workers compensation in NSW? Owen Hodge’s employment lawyers can help you to navigate this complex area of employment law.

Laws regulating workers’ compensation in Australia outline that a worker is entitled to compensation for any personal injury, disease, or an aggravation of an injury or disease, occurring during the course of employment.

Terminating an employee on workers compensation NSW

NSW workers compensation legislation

The main purpose of workers compensation legislation is to facilitate an employee’s return to work after a workplace-related injury or illness. The laws concerning workers compensation are different in each state and territory. The employer’s obligations are set out under the relevant state or territory’s legislation.

The main pieces of legislation regulating workers compensation in the Commonwealth and New South Wales (NSW) are:



Can an employee be terminated while on workers compensation?

Dismissing or terminating an employee on workers compensation in NSW may be a breach of law. Most of the legislation throughout Australia prohibits an employer from dismissing an employee who is absent on workers’ compensation until after a specified time period has passed.

Learn more: 

As per Section 352 of the Fair Work Act 2009 and regulation 3.01 of the Fair Work Regulations 2009, an employer must not dismiss an employee because the employee is temporarily absent from work due to an illness or injury of a prescribed kind.

A ‘prescribed kind of illness or injury’ exists if the employee provides a medical certificate for the illness or injury, or a statutory declaration about the illness or injury, within 24 hours after commencement of a reasonable absence period.

Absent for more than three months

An injured employee who is absent for more than three months is not protected from dismissal under these provisions because an absence of more than three months is not considered reasonable. It therefore does not fall within the remit of a ‘prescribed kind of illness or injury’.

So, how about terminating an employee on workers compensation (NSW) if the injured employee has been absent for more than three months? The employee may still be protected from termination under a specified state or territory workers compensation legislation if the reason for the employee’s dismissal is primarily due to his or her absence on workers compensation.

Redundancy while on workers compensation NSW

If an employee is made redundant while on workers compensation, the employer still needs to comply with the appropriate legislation and provide notice. The employer will also have to pay out entitlements, including redundancy pay (if applicable).

Related information: Executive redundancy 

The main legislation governing termination of an employee on workers compensation in NSW is the Workers Compensation Act 1987 (the Act).

As per Section 248 of the Act, an employer is guilty of an offence if the employer terminated an injured worker because the worker was not fit for employment as a result of the injury and such dismissal happened during the relevant period of 6 months after the worker first became unfit for employment. (The exceptions to this are cases stipulated under sub-section 248(2)(b),(c) &(d)).

How an employee can be reinstated following a dismissal

Section 241 of the Act further empowers an injured worker to make an application for reinstatement to his/her employer in the event of his/her dismissal from work. If the employer fails to reinstate the worker in his/her employment, the worker may apply to the Industrial Relations Commission for reinstatement.

For the purpose of reinstatement, it is normally presumed that an injured worker was dismissed because he or she was unfit for employment as a result of the injury received. This presumption can be overturned if the employer can satisfy the Industrial Relations Commission that the injury was not a ‘substantial and operative cause’ of such dismissal. However, a Reinstatement Order may not be passed if the reinstatement application to the employer was made more than 2 years after the dismissal.

Learn more: workplace rights

Speak to Owen Hodge Lawyers

Employers considering terminating an employee on workers compensation (NSW) should take extreme caution. We recommend seeking professional advice to gain clarity as to how an employee is protected under the prevailing dismissal laws of a state. Our team at Owen Hodge are expert workers compensation lawyers in Sydney and can answer any questions you have about terminating an injured employee in NSW.

For more information, contact one of our expert Sydney compensation lawyers today.


Owen Hodge is here to help

If your employment has been terminated while you were on workers compensation and you want to take legal action, speak to the employment law team at Owen Hodge today.

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Frequently asked questions

Yes, an employee can resign while they’re on workers compensation. They:

  • Can use their workers compensation as their notice period
  • Need to ensure they give the correct notice period (this should be outlined in their employment contract)

Under the Workers Compensation Act of NSW, weekly payments of compensation will cease after 5 years unless your level of whole person impairment is greater than 20% and you are assessed by the insurer as having no work capacity and are likely to continue to have no work capacity.

Yes, a termination of employment does not prevent you from claiming workers compensation. To understand your entitlements, please speak to the personal injury lawyers at Owen Hodge.