I'm sorry to hear your employee is having health issues and I understand concerns over worker's comp issues.
If an employee is unable to perform job duties, then the employer is allowed to terminate that employment.
It depends on the size of your employer, the nature of your job and your disability. First of all, your employer must employ at least five people to be covered by disability laws. Next, you must be qualified to carry out theessential functions of your job and be able to do so with or without areasonable accommodation. You must meet the employer's training and production standards. And you cannot suffer from any condition that puts you or others in significant danger.
Under California law, your employer is required to accommodate your disability if you have a physical or mental impairment that limits one or more major life activities. Reasonable accommodation might involve changing your work schedule, modifying equipment, improving the accessibility of your work area or providing a reader to assist you, among other things.
For the law to require reasonable accommodation, however, the workplace change can't be too difficult or costly relative to the employer's size and resources. In other words, the employer may not be required to provide it because it would create an "undue hardship" on the business.
Article 1, section 8 of the California Constitution provides that a person may not be disqualified from entering or pursuing a business, profession, vocation, or employment because of sex, race, creed, color, or national or ethnic origin
This discusses age discrimination in detail and I am including the most relvantt provision:
Q. Must I retire if I become ill or disabled? A. The law protects you only from being forced to retire because you have reached a certain age. If an illness or disability prevents you from doing your job satisfactorily, the ADEA does not prevent your employer from requiring you to retire, regardless of your age. However, other federal and state laws--including the 1990 Americans with Disabilities Act (ADA)--forbid discrimination against persons with disabilities or handicaps, including those associated with certain illnesses. So, if the ADEA does not cover you in these circumstances, you should consider whether you are being unfairly treated because of disability
So when ever one needs to reduce hours or terminate employment due to inability to perform and they are in a protected category, it is important to have the case well documented. So generally the manager/owner will provide written notice of incidents where the employee was unable to perform their job duties. In smaller businesses it can be very awkward, but it is protocol to protect against a discrimination suit.
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Information provided is for educational purposes only. Consultation with a personal attorney is always recommended so your particular facts may be considered. Thank you and take care.