Yes, you can be terminated while on workers compensation in New South Wales — but only in limited, very specific circumstances.
Take note: Under Section 248 of the Workers Compensation Act 1987, it is illegal for an employer to dismiss you if:
- Your injury was a main reason for the dismissal; and
- It has been less than 6 months since you first became unfit for work,
After that initial period, termination may still be unlawful if the injury or the workers compensation claim played any part in the decision.
But employers can dismiss injured workers for lawful, unrelated reasons — for example, genuine redundancy or serious misconduct.
If an employer hires someone to replace you within two years of your dismissal, they must first inform that person that you may be entitled to reinstatement.
We understand that being in this situation can be confronting, which is why knowing where the line is drawn is so important. In this article, we outline when termination is lawful, when it may be unlawful, and the rights and protections available if your job is at risk.
When Is Termination Allowed?
An employer in NSW may lawfully terminate you while you are on workers compensation if the reason for the dismissal has nothing to do with the injury or claim. Common lawful grounds include:
- Genuine redundancy;
- Serious misconduct;
- Poor performance that predates the injury;
- The natural end of a fixed-term or seasonal contract; and
- Business closure or major restructuring.
The key test is this: would you still have been dismissed if you had never been injured or made a workers compensation claim? If the answer is yes, the dismissal is generally lawful.
If the answer is no, the dismissal becomes far more suspect and may breach the Fair Work Act, workers compensation legislation, or federal discrimination laws.
Even with a valid reason, employers must still follow correct processes, such as:
- Proper warnings where required;
- Fair disciplinary procedures;
- Consultation for redundancies; and
- Appropriate notice or payment in lieu.
A termination can still be “unfair” if proper procedure is ignored.
When Is Termination Unlawful?
A dismissal is unlawful if the injury or the workers compensation claim is the substantial or dominant reason for the termination. Examples include:
- Dismissing you because your injury prevents you from doing all your usual duties;
- Terminating you to avoid the cost of modified duties;
- Sacking you soon after you lodge a claim;
- Pressuring you to resign because of your ongoing restrictions; and
- Assuming you will not recover and terminating you as a “lost cause.”
Under the Fair Work Act, dismissing someone because they exercised a workplace right, such as making a workers compensation claim, is considered an adverse action and is unlawful. Penalties can be significant.
Discrimination Protections
If your injury results in a disability — whether temporary or permanent — federal discrimination laws may also apply. The Disability Discrimination Act 1992 makes it unlawful to treat an employee differently because of disability, including a work-related injury.
Before terminating your employment, your employer must:
- Consider reasonable adjustments;
- Explore alternative suitable duties; and
- Avoid assumptions about your capacity.
If the employer fails to genuinely explore these options, the termination may amount to discrimination. Reasonable adjustments can include modified duties, assistive equipment, reallocation of minor tasks, or flexible hours. These obligations are taken seriously by courts and tribunals.
Redundancy While on Workers Compensation
Being on workers compensation does not prevent genuine redundancy. Redundancy relates to the role, not the person. However, the redundancy must be authentic and not used as a cover to remove an injured worker.
Warning signs of a non-genuine redundancy include:
- Your duties are still being performed by someone else after you leave;
- New staff being hired into a role similar to yours;
- No consultation despite it being required under a modern award or enterprise agreement; and
- Your role allegedly “disappearing” only after your injury.
If the redundancy is genuine, you are still entitled to all normal redundancy entitlements, including notice, redundancy pay, and consultation. Being on workers compensation must not disadvantage you in any selection process if multiple roles are being cut.
Does Termination Stop My Workers Compensation?
A common misconception is that termination ends your workers compensation benefits. It does not.
You may still receive:
- Weekly compensation (as long as you meet work capacity thresholds);
- Reasonable medical and treatment expenses;
- Rehabilitation and recovery support; and
- Lump sum compensation for permanent impairment (when the statutory criteria is met).
Weekly payments continue based on your assessed work capacity. If you have no current capacity, you may receive benefits at a higher rate. If you have partial capacity, the insurer may assess your ability to work elsewhere, but your dismissal does not cut off your rights.
The insurer also continues to pay for reasonable medical treatment, therapy, specialist appointments, and rehabilitation services.
What Do I Do If I’ve Been Dismissed While on Workers Compensation
1. Request written reasons for your dismissal
Under Section 117 of the Fair Work Act, your employer must give you a written statement of the reasons for termination. This is crucial evidence. Ask for it immediately.3,
2. Gather all relevant documents
Collect:
- Emails, text messages, and letters about your injury or claim;
- Warnings or performance reviews;
- Medical certificates and capacity certificates;
- Your employment contract and position description; and
- Any consultation documents for redundancy.
A clear timeline strengthens your position dramatically.
3. Seek legal advice promptly
| Type of Claim | Time Limit |
| Unfair Dismissal | 21 days, starting the day following your dismissal |
| General Protections / Adverse Action | 21 days if seeking reinstatement; up to 6 years for court proceedings |
| Discrimination Claims | 12 months to lodge a complaint with Anti-Discrimination NSW |
Possible Outcomes and Remedies
If your dismissal is found to be unlawful or unfair, several remedies may be available.
Unfair dismissal remedies
The Fair Work Commission may order:
- reinstatement to your role (with continuity of service)
- back pay
- compensation (capped at six months’ pay).
Reinstatement is the primary remedy where feasible.
Adverse action remedies
Adverse action claims often provide stronger outcomes, including:
- uncapped compensation
- reinstatement
- penalties against the employer.
Courts take adverse action very seriously because it protects core workplace rights.
Discrimination remedies
If discrimination is established, you may be awarded:
- Compensation for economic loss;
- Compensation for emotional distress and humiliation; and
- Orders requiring the employer to change practices.
Many matters are settled confidentially, often with compensation, references, and agreed terms that protect future employment prospects.
Employer Obligations Toward Injured Workers
Before terminating employment, employers must show they have met their obligations, including:
- Participating in your return-to-work plan;
- Offering suitable duties consistent with medical advice;
- Considering reasonable adjustments;
- Assessing whether alternate roles are available; and
- Avoiding unsafe or demeaning modified duties.
If an employer gives up on you too early or fails to genuinely explore return-to-work options, termination may be unlawful.
Conclusion
While it is legally possible to be terminated while on workers compensation in NSW, employers must have a genuine, lawful reason that has nothing to do with your injury or claim. Strong protections exist to prevent injured workers from being unfairly targeted, and strict legal tests apply to ensure dismissals are legitimate.
If you’ve been dismissed while on workers compensation, act quickly, gather evidence, and get expert legal advice. Your workers compensation rights continue even after termination, and you may have powerful claims available under employment, compensation, and discrimination laws.
Here to Help
If you’ve been injured at work, or are facing uncertainty about your job while recovering, our expert Workers Compensation Lawyers Sydney and Workers Compensation Lawyers Cabramatta are here to make sure your rights are protected, so you can concentrate on healing without added stress.
- No upfront costs, no financial risk.
- We get your claim moving immediately.
- Speak to your solicitor whenever you need.
- Interpreter services and multilingual lawyers available
- Know exactly what’s happening at each stage.
- Maximise your entitlements
We’re here to guide you every step of the way and help you get the full entitlements you deserve. Get in touch with us today.
