Case Law: AXE v QVM [2025] NZERA 689: A costly reminder that sick leave is not optional

A recent Employment Relations Authority (ERA) decision reminds us that sick leave is a statutory entitlement, not a matter of employer discretion. Getting this wrong can expose employers to significant liability, including findings of constructive dismissal and compensatory awards.

Background

AXE worked for QVM in an engineering workshop for approximately three years. His employment agreement provided for a 40-hour working week with no requirement to be on call or available outside ordinary hours. In practice,  employees were routinely expected to work closer to 50 hours per week.

Concerns were raised by the employer regarding AXE’s attendance and use of sick leave. However, these concerns were not addressed through any formal performance management or disciplinary process.

Instead, QVM took an informal approach where sick leave would be reviewed and potentially declined based on subjective criteria such as an employee’s history, perceived trustworthiness, and “merit”, even where medical certificates had been provided.

The Employer’s Approach to Sick Leave

In early 2024, QVM began declining AXE’s sick leave despite being given valid medical certificates. The employer acted on the basis that sick leave was discretionary and could be refused where management was not satisfied the leave was justified.

When AXE challenged the employer, the situation escalated, with heated communications around cost to the business and a physical confrontation.

The matter was not formally investigated. Instead, AXE was directed to take annual leave. He subsequently resigned, citing breach of his employment entitlements. The employer then unilaterally shortened his notice period, resulting in a further finding of unjustified dismissal.

The ERA’s Findings

The ERA had little difficulty finding that QVM did not act as a fair and reasonable employer.

Key findings included:

• Sick leave entitlements under the Holidays Act 2003 are statutory and cannot be withheld providing the relevant criteria are met.
• Policies or practices that require employees to justify or challenge refusals of sick leave are inconsistent with statutory minimum entitlements.
• Concerns regarding attendance must be addressed through appropriate performance management or disciplinary processes, not by undermining statutory rights.
• The conduct of the director, including hostile and physical behaviour, and the failure to investigate were not actions of a fair and reasonable employer

The ERA also found that AXE was entitled to standby allowances in respect of time spent on an on‑call roster, notwithstanding the absence of express contractual provisions.

Outcome

The Authority awarded remedies of more than $27,000, including:

• $16,000 in compensation for hurt and humiliation,
• $10,339 for lost wages and unpaid sick leave; and
• $1,600 in unpaid standby allowances.

No contributory fault was attributed to AXE.

Key Takeaways for Employers

This case highlights several important principles for employers:

• Sick leave is a statutory entitlement
  Once eligibility requirements are met, sick leave must be paid in accordance with the Holidays Act 2003.
• Policies must align with legislation
  Internal policies and practices cannot override minimum statutory entitlements.
• Process is essential
  Concerns regarding attendance or sick leave use must be addressed through fair and lawful processes.

Employers are entitled to request proof of illness or injury and information about when the employee is able to return to work. However, employers should be mindful of the limits on what information can be requested. Where ongoing absence becomes an issue, a medical incapacity process should be adopted.

Conclusion

The decision reinforces that statutory entitlements such as sick leave must be applied consistently and lawfully. Informal or discretionary approaches to minimum employment rights carry significant legal risk for employers.



Employers should ensure that their policies and practices align with legal obligations. Where concerns arise, these should be addressed through appropriate processes rather than ad hoc decision-making.

Failure to lawfully manage entitlements may result in what would otherwise be manageable workplace issues, escalating into costly employment disputes.

Disclaimer: We remind you that while this article provides commentary on employment law, health and safety and immigration topics, it should not be used as a substitute for legal or professional advice for specific situations. Please seek legal advice from your lawyer for any questions specific to your workplace.