Disability or incapacity? The critical distinction for employers seeking to dismiss 

Key Issues

• Distinguishing between a dismissal based on disability and a dismissal based on incapacity to perform the inherent requirements of a role; 
• The importance of the decision-maker’s evidence and state of mind in defending general protections and discrimination claims; 
• What the courts will consider when determining whether the decision to terminate was motivated by a prohibited reason. 

 

A recent decision of the Federal Circuit and Family Court provides a useful reminder that there is a distinction between dismissing an employee because they have a disability, and dismissing them because they cannot perform the inherent requirements of their role. The decision reinforces that employers can legitimately terminate an employee if they reasonably believe that they are no longer able to perform the inherent requirements of the position. It reminds employers to ensure that they carefully document their rationale for terminations, and it is best practice to obtain medical evidence to support an incapacity finding, to avoid having to defend claims that the decision was in any way related to an exercise of workplace rights. 

An employee was verbally abused by a franchisee during a store audit, went home, and never returned to work due to the psychological injuries he sustained as a result of the incident. Fifteen weeks and many medical certificates later, his employer lawfully dismissed him. In Hilber v APCO Service Stations Pty Ltd [2026] FedCFamC2G 1871, the Federal Circuit and Family Court rejected claims that an employee’s dismissal amounted to unlawful disability discrimination or adverse action after he ceased work due to psychological injuries and was repeatedly certified as having no capacity for work. The Court accepted that the employer’s sole reason for terminating employment was its genuine belief that the employee could not perform the inherent requirements of his role for the foreseeable future. 

Factual background 

Simon Hilber had worked as a Corporate Food Trainer for APCO Service Stations Pty Ltd since April 2023. In December 2024, Mr Hilber was involved in a confrontation with an APCO franchisee during a site audit at Wodonga. Mr Hilber alleged that the franchisee verbally abused him and criticised his and a colleague’s work, and that the incident caused him significant psychological distress. Shortly thereafter, Mr Hilber stopped coming into work and began receiving treatment for anxiety, depression, and trauma-related injuries. Throughout this period, Mr Hilber provided a series of medical certificates stating that he had no capacity for work. Mr Hilber lodged a WorkCover claim that was rejected in January 2025. 

Over the following three months, Olivia Bates (APCO’s People and Culture Manager) kept in regular contact with Mr Hilber via text messages. Ms Bates checked on Mr Hilber’s welfare, offered him access to the employee assistance programme, as well as help returning to work on light duties with no store contact or help with an exit. On 5 February 2025, Mr Hilber wrote that he did not feel he could come back to work and that APCO had “destroyed” him, and that Ms Bates’ offers to help with his resignation were proof that APCO wanted him to leave. 

On 14 March 2025, Ms Bates sent a letter proposing termination because Mr Hilber could not meet the inherent requirements of his role and invited a response by 21 March. Mr Hilber’s solicitors replied on 20 March, but APCO’s spam filter blocked the email as phishing. Having not heard back from Mr Hilber, Ms Bates waited a further week out of goodwill, and then dismissed Mr Hilber on 28 March 2025. That afternoon, APCO’s IT team released Mr Hilber’s lawyers’ letter; however, APCO did not revisit its dismissal decision. Mr Hilber’s WorkCover claim was accepted in August 2025. 

Findings of the Federal Circuit and Family Court 

General Protections Claim 

Judge Johns of the Federal Circuit and Family Court dismissed Mr Hilber’s general protections claim that APCO took adverse action against him because he exercised a workplace right to lodge and pursue a workers’ compensation claim arising from his psychological injury. Under s 361 of the Fair Work Act 2009 (Cth) (‘Fair Work Act’), a reverse onus applies, such that the onus was on the employer to prove that the decision to terminate was not related to the exercise of any workplace rights. 

As APCO’s dismissal decision was made solely by Ms Bates, it was her evidence that Judge Johns took into account. In particular, his Honour accepted that the decision-maker’s sole reason for dismissing Mr Hilber was because he could not return to APCO and perform his role for the foreseeable future. Mr Hilber’s earlier complaint about the incident to another APCO manager and his solicitors’ letter could not have motivated Ms Bates’ decision, because she did not know about either. Ms Bates had known about Mr Hilber’s WorkCover claim since December, but the Court reasoned that if it had motivated Ms Bates, she could have terminated Mr Hilber’s employment sooner. 

Disability Discrimination Claim 

Mr Hilber’s disability discrimination claim under s 351 of the Fair Work Act also failed. Under s 351(1), an employer is prohibited from taking adverse action against an employee because of a physical or mental disability. However, s 351(2)(b) provides that the prohibition does not apply if the action is taken because of the inherent requirements of the employee’s position. 

Applying Western Union Business Solutions (Australia) Pty Ltd v Robinson [2019] FCAFC 181, the Court treated Mr Hilber’s inability to attend work as a consequence of his psychological condition rather than the condition itself, and in the alternative found the dismissal was effected because of the inherent requirements of the position, being the ability to attend work and physically carry out the duties of the Corporate Food Trainer role. While the Court accepted that APCO had not obtained medical reports or assessed Mr Hilber’s capacity against the role or otherwise planned his return to work, his Honour described those steps as more cautious and thorough, but not required. 

Key Takeaways and Cautions for HR and In-House Counsel

First, the decision-maker’s state of mind is the most important evidence in a dismissal case. Ms Bates was the only identified decision-maker in Mr Hilber’s termination, and their contemporaneous messages demonstrated Ms Bates’ kind concern for Mr Hilber’s welfare. In addition to maintaining contact with Mr Hilber, Ms Bates provided him with an opportunity to respond through a show-cause process before making a final decision. Ms Bates’ adherence to procedural steps as well as her kindness bolstered her credibility and was proof of an unbiased motivation for dismissal. 

Second, many employers assume that once an employee develops a disability or injury, any termination decision becomes legally precarious. However, Hilber demonstrates that an employer is not prevented from terminating employment where an employee actually lacks the capacity to perform their prescribed role. The law prohibits an employer from taking adverse action against an employee because of the disability itself, not because the employee is no longer capable of fulfilling the requirements and duties they were employed to undertake. 

Third, although medical evidence was not required to support the dismissal in this decision, it provides a stark reminder to employers that having a clear paper trail of the decision-making process, and medical evidence where possible, will assist employers in defending any potential claims that they may face.