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Dismissal based on capacity held to be valid, not discriminatory

Victoria Quayle ||

It’s often difficult for an employer to decide whether it’s appropriate to dismiss an employee based on their inability to perform their role. This is especially so where potential issues of discrimination exist.

The Fair Work Commission (FWC) has recently examined this issue in the unfair dismissal matter of Sarah Davis v Aldi Stores (A Limited Partnership) [2022] FWC 2387.


By way of background:

  • Sarah Davis (employee) was employed by Aldi Stores (A Limited Partnership) (employer) since November 2018 as a Store Manager;
  • In November 2019, the employee suffered a family tragedy resulting in her husband’s death while she was pregnant with her third child, and the employee was diagnosed with PTSD as a result;
  • On 5 April 2021, while the employee was at work while a man collapsed in the store, triggering the employee’s PTSD;
  • The employee then provided a medical certificate to the employer and remained absent;
  • On 27 September 2021, the employer met with the employee to request that a Psychological Assessment of Capacity be undertaken;
  • On 22 December 2021, a meeting was held with the employee to discuss her capacity to continue her employment in light of the assessment completed by assessing therapist, as well as the worker’s own GP and psychologist;
  • On 2 January 2022, the employee provided proposals to the employer to continue her employment, including but not limited to:
    • “at least one assistant manager [and] possibly 2 and at least 2’ store manager trainees (SMTs) be engaged at the store”; and
    • that she returns to work “2/3 days per week to build specials” and/or “to do an alcohol delivery top up” from 7 February 2022 with a review of this arrangement after 3 months; and
    • that she engages in “any recruitment required in [the] Mildura or Berri”

Ultimately, the employer determined that the employee did not have the capacity to perform the inherent requirements of her role and confirmed the termination of her employment with immediate effect.

Arguments of the parties

The employee’s primary argument that she was unfairly dismissed was that the reason for her dismissal was not valid as it breached the Disability Discrimination Act 1992 (Cth) (DD Act).

In particular, the employee contended that under the DD Act, the employer had an obligation to make adjustments for her as she had a disability (PTSD) but failed to comply with this obligation.

However, the employer contended that an exemption to this obligation applied under the DD Act where the employee cannot perform the inherent requirements of her role, and therefore her dismissal based on a valid reason.


The FWC, in referring to section 21A(1)(b) of the DD Act, stated that discriminatory actions will not amount to discrimination if the aggrieved person cannot fulfil the inherent requirements of the work, even if reasonable adjustments are made.

Further, the FWC highlighted that the key consideration as to whether an employee has the capacity to perform the inherent requirements of their role is to be based on a consideration of the actual substantive position or role and “not modified, restricted duties or temporary alternative position”.

Ultimately, the FWC was satisfied that the employer took steps to consider the employee’s proposed adjustments, but nonetheless still agreed that the employee did not have the capacity to fulfil the inherent requirements of her role, principally noting the risk to her mental health if she were to return to work.

Therefore, the dismissal was not unfair and the employee’s claim was dismissed.

Key takeaways

When employers are faced with the prospect of terminating employment due based on an employee’s capacity to perform the inherent requirements of their role, they need to:

  1. engage in procedural fairness, including meeting the employee to discuss the issues at hand with respect to performing the inherent requirements of their role;
  2. carefully consider the inherent requirements of the substantive role;
  3. if the employee has a disability, consider whether any reasonable adjustments can be made to allow the employee to perform the substantive role.

Further, it is still of critical importance for an employer to consider reasonable adjustments because if these allow an employee to perform the inherent requirements their substantive role, a failure to provide such adjustments could result in a breach of the DD Act, and unfair dismissal or general protections laws under Fair Work Act 2009 (Cth) if the employee is dismissed. This may have the effect of exposing employers to legal liability.

If you would like to seek advice in relation to dealing with an employee’s capacity to perform the inherent requirements of their role, please do not hesitate to contact us.

Mrs Sarah Davis v Aldi Stores (A Limited Partnership) [2022] FWC 2387 (20 September 2022)


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