Can You Terminate an Employee While They’re on Leave?

A question we’re often asked is whether an employer can lawfully terminate an employee while they’re on annual leave, sick leave, or not at work for any reason. Employers (and workers) are now particularly confused given the recent “right to disconnect” laws.

There’s no rule under the Fair Work Act 2009 (Cth) that prevents an employer from terminating an employee while they’re on leave. Employment doesn’t pause during leave — the employment relationship, including rights to terminate it, continues as normal.

Where the Risk Lies

The real danger isn’t the timing itself, but the reason behind it. Termination becomes unlawful where it’s connected to a protected attribute or activity, such as:

  • Adverse action under the general protections provisions — dismissing someone because they exercised a workplace right (like taking personal/carer’s leave) can expose an employer to a general protections claim.
  • Discrimination — terminating someone because they’re on parental leave, or leave connected to illness or disability, may breach anti-discrimination laws.
  • Unfair dismissal — the termination must still be genuine, with a valid reason and a fair process, regardless of when it occurs.

Right to Disconnect

An added complication is an employee’s ‘right to disconnect’ outside of work hours and during periods of leave.

The ‘right to disconnect’ laws make it unlawful for an employer to terminate someone because they don’t respond outside of work hours. What hasn’t been decided is whether or not issuing a termination, or a ‘show cause’ notice to an employee might result in the termination being deemed unfair, harsh or unjust.

There are a number of cases working through the courts on this topic, and we’re watching them closely for an answer. Until then, being on leave doesn’t make a problematic employee untouchable, but it does mean the situation must be managed very carefully.

If you’re needing to terminate an employee on leave, or you’re an employee facing termination, contact our employment team for advice on your rights.