The Compliance Test for Ill Health Incapacity: A Four Stage Inquiry - Labournet

In South Africa, dismissals for incapacity due to ill health require employers to follow a fair, evidence-based process to avoid unfair labour practice findings at the Commission for Conciliation, Mediation and Arbitration (CCMA) or Labour Court. The structured four-stage inquiry provides a framework, as highlighted in key precedents such as Standard Bank of South Africa v CCMA & Others 4 BLLR 356 (LC), ensuring substantive and procedural fairness under the Labour Relations Act (LRA).

Schedule 8 of the LRA, the Code of Good Practice: Dismissal, treats incapacity due to ill health as a legitimate ground for termination when an employee’s condition prevents fulfilment of essential job functions, either temporarily or permanently. Unlike misconduct dismissals, which target culpable behaviour, incapacity inquiries focus on the employee’s physical or mental inability to perform, necessitating medical evidence and reasonable accommodation efforts under Section 6 of the Employment Equity Act (EEA). Employers must investigate the nature of the illness, likely prognosis, duration and frequency of absence, and impact on the workplace, while considering alternatives to dismissal, such as temporary lay-offs or role adjustments, to demonstrate fairness.

The LRA’s Section 188 mandates that any dismissal be both procedurally fair – through consultation and hearings – and substantively fair, meaning that the incapacity must genuinely render continued employment untenable. While prolonged absences without prospects of recovery can justify termination, employers bear the onus of proof in disputes. CCMA guidelines emphasise empathy, documentation, and impartiality, warning against hasty decisions that overlook equity obligations for disabled employees.

Four-Stage Inquiry Explained

The four-stage inquiry, derived from public sector protocols such as those in the Department of Public Service and Administration (DPSA) Guide and adapted for private employers, structures incapacity investigations to mirror Schedule 8 requirements. This process promotes consistency, reduces litigation risks, and aligns with judicial expectations for thoroughness.

Stage one involves an initial investigation, where HR gathers preliminary medical evidence, such as doctors’ certificates, specialist reports, or occupational health assessments detailing the condition, expected recovery timeline, treatment plans, and work restrictions. Note that employers should request employee consent for independent evaluations to verify claims and avoid reliance on self-reported data.

In stage two, the focus shifts to assessing the incapacity’s impact on job performance. Evaluate core duties against the prognosis by determining whether the role’s physical or cognitive demands are incompatible with the individual’s state of health. Quantify the effects of absences on business operations, distinguishing short-term from permanent incapacity, and determine how business may be disrupted if the employee’s condition is likely to be long-term.

Stage three requires exploring reasonable accommodation, which is a cornerstone of EEA compliance. Options include modified duties, flexible hours, ergonomic aids, phased returns, or lateral transfers to vacant positions. Document genuine attempts to accommodate the employee, as courts demand evidence of feasibility studies before deeming dismissal appropriate. The obligation to accommodate is not absolute and must be balanced against the employer’s circumstances. However, claims of undue hardship require clear evidence, and no rigid standard exists; each case depends on its facts.

Stage four culminates in a formal incapacity hearing, chaired by an impartial facilitator, where the employee presents evidence, cross-examines experts, and is represented by a union representative or colleague. The chairperson weighs all inputs, issues written reasons, and decides whether alternatives may be impracticable in determining whether dismissal is appropriate.

Substantive fairness hinges on proportionality: Minor roles may tolerate longer absences than executive positions. Permanent incapacity requires unequivocal prognosis; temporary cases demand periodic reviews. EEA Section 15 obliges accommodations unless they impose undue hardship, proven via financial or operational evidence. Discrimination claims arise if processes disproportionately affect protected groups, necessitating demographic audits.

The Standard Bank Case

Standard Bank of SA v Commission for Conciliation, Mediation & Arbitration & Others (2008) 29 ILJ 1239 (LC) involved a bank employee who, after 15 years of service as a travelling home loan consultant, sustained severe injuries in a motor accident. Her role required extensive travel and client interaction, but following the accident, her physical condition prevented her from continuing in this capacity. She was temporarily assigned lighter administrative duties before ultimately being dismissed for incapacity.

The CCMA initially found the dismissal unfair and awarded six months’ compensation. On review, the Labour Court examined the bank’s conduct during the two-year period between the accident and dismissal. While the bank appeared patient and accommodating on the surface, the court found significant shortcomings in its efforts to reasonably accommodate the employee.

The Court identified a number of key failures on the part of the bank in dealing with the matter:

The bank did not obtain an occupational therapy report, despite recommendations from medical experts. Such a report could have guided appropriate accommodations.

It failed to provide basic adjustments, such as a headset for telephonic work, a suitable chair, or workstation modifications.

The bank refused to allow the employee access to its computer systems and did not consider alternatives such as a half-day position.

It neglected to apply relevant provisions of the LRA, the EEA, and its own corporate health guidelines.

The Court emphasised that the fairness of incapacity dismissals involving disability is rooted in the Constitution, which guarantees rights to equality, dignity, fair labour practices, and freedom of occupation. These principles are reinforced by international human rights instruments and comparative jurisprudence from jurisdictions such as Australia, Canada, Germany, the UK, and the US.

The Court found that the bank had failed to conduct a proper incapacity investigation (using the four-stage process), disregarded expert recommendations, and did not engage in meaningful consultation. Its actions effectively encouraged the employee to resign, and when that failed, it dismissed her. The Court held that the bank had a heightened duty to accommodate because the injury occurred on duty. By failing to discharge this duty and neglecting the prescribed process, the bank acted in bad faith and discriminated against the employee.

For financially sound institutions, proving unjustifiable hardship is challenging, and the bank did not raise this defence. Ultimately, the Court concluded that the bank had set the employee up for failure. This dismissal was deemed to be both substantively and procedurally unfair.

Additional Cases and Trends

Various other judgements have addressed the use of the four-stage inquiry in dealing with incapacity cases.

In IMATU obo October v Witzenberg Municipality (2012) 33 ILJ 2981 (LC), a municipal worker suffered from a long-term back injury. The employer followed the four stages diligently, obtaining orthopaedic reports (stage one), assessing incompatibility with manual labour (stage two), testing light duties and physiotherapy (stage three), and holding a transparent hearing (Stage four). Despite the employee’s claims of bias, the Labour Court upheld the fairness of the dismissal, emphasising the need for impartial chairpersons, comprehensive records, and employee engagement to prevent perceptions of predetermination.

Ubuntu Education Fund v Paulsen 11 BLLR 1252 (LAC) applied incapacity principles to health-related under-performance during probation. The educator’s mental health issues impaired teaching efficacy. Stages one and two confirmed diagnosis and job mismatch, stage three explored counselling and adjustments, and stage four’s probation review led to termination. The Labour Appeal Court clarified that even during probation, employers must investigate incapacity fairly, not conflate it with misconduct, and provide clear feedback – a lesson for handling subtle “invisible” illnesses such as depression.

Other rulings build on these foundations. In Aveng Grinaker-LTA v CCMA 32 ILJ 2993 (LC), the court stressed stage three accommodations for HIV-positive employees, mandating cost-benefit analysis before dismissal. Recent post-COVID CCMA trends scrutinise mental health claims more rigorously, as in Myambo v Automotive Industry Development Centre, where failure to update prognosis invalidated the inquiry. The 2023 South African Society of Occupational Medicine (SASOM) Guideline on Medically Incapacitated Workers advocates multidisciplinary panels for complex cases, aligning with four-stage documentation.

Procedural Best Practices

Employers should heed the following:

Integrate the four stages into incapacity policies, and train HR personnel on medical confidentiality under the Protection of Personal Information Act.

Initiate inquiries early with counselling sessions, track absences via integrated systems, and use templates for reports.

Post-inquiry, offer severance enhancements and outplacement support to mitigate reputational harm.

Avoid common pitfalls such as inadequate stage one verification or skipping stage three, often leading to CCMA reinstatement awards averaging six months’ remuneration.

Conclusion

Employers are well within their rights to terminate an employee for genuine incapacity due to ill-health, but they must adhere to substantive and procedural fairness principles when effecting such dismissals. Each case must be determined on its own merits, proper evidence must be collected and medical professionals consulted with, accommodations must be properly considered, and proceedings should be well documented. Always ensure that dismissal is considered only as a last resort, and take heed of considerations such as protections for employees with disabilities.

The Compliance Test for Ill Health Incapacity: A Four Stage Inquiry