Mental Health Leave Of Absence: Employer’s Legal Obligations In Australia

Looking after your team’s mental health isn’t only the right thing to do - it’s also a legal requirement in Australia. Stress, anxiety and other mental health conditions can affect anyone, and the way you manage leave requests has consequences for wellbeing, productivity and compliance.

If you’re asking yourself what a mental health leave of absence means in practice, whether it counts as sick leave, or how to handle longer absences lawfully, you’re in the right place.

In this guide, we break down how mental health leave fits under Australian employment law, your obligations around evidence, privacy and anti-discrimination, and best-practice steps for return-to-work. We’ll also flag common pitfalls (like misunderstanding leave accrual or privacy rules) so you can support your people and protect your business.

What Is A Mental Health Leave Of Absence?

“Mental health leave” generally refers to time away from work because an employee is unwell due to a psychological condition - for example stress, anxiety, depression or burnout.

There isn’t a special category called “mental health leave” in the National Employment Standards (NES). In most cases, employees use their personal/carer’s leave (often called sick leave) if they’re not fit for work due to a mental illness or injury. Some employers also choose to offer extra “wellbeing days” or mental health days as a company benefit, but these are above and beyond the legal minimums and should be set out in your contracts and policies.

Is Mental Health Leave The Same As Sick Leave?

Yes - in most situations, mental health leave is covered by personal/carer’s leave. Under the NES, full-time employees are entitled to paid personal/carer’s leave that accrues progressively based on their ordinary hours, at a rate equivalent to 10 days per year for full-time staff (pro rata for part-time). Accrued but unused personal/carer’s leave carries over year to year.

Casual employees don’t receive paid personal/carer’s leave under the NES, but they can take unpaid leave in certain circumstances or request annual leave if they later convert to permanent status and have accrued entitlements under your policies or an applicable industrial instrument.

It’s important to be precise here:

• Personal/carer’s leave accrues over time - it isn’t an upfront “guarantee” of 10 days on day one.
• Personal/carer’s leave is not paid out on termination (unlike annual leave, which generally is).

If you’re dealing with stress-related absences, it can help to read more about managing stress leave in the workplace.

Your Legal Obligations As An Employer

Managing mental health leave touches a few key areas of Australian law. Here’s what employers need to know.

1) Provide And Track Personal/Carer’s Leave Correctly

Employees (other than casuals) can use accrued personal/carer’s leave when they’re unfit for work due to illness or injury, including mental illness. Pay it at the employee’s base rate for ordinary hours and keep accurate records of accrual and usage.

2) Respect Protection For Temporary Absence

The Fair Work Act protects employees from dismissal because of a temporary absence from work due to illness or injury. Broadly, an absence of up to three months (or multiple absences adding up to three months within 12 months), where the employee has provided evidence, is treated as a temporary absence. Terminating someone in this window can expose you to general protections or discrimination claims, even if you believe they can’t perform their role.

3) Meet Work Health And Safety (WHS) Duties - Including Psychosocial Risks

WHS laws require you to provide a workplace that is safe and without risks to health, which includes mental health. That means identifying and managing psychosocial hazards such as excessive job demands, poor support, bullying or conflict. Having clear policies, training and early-intervention processes is a practical way to meet this duty.

4) Avoid Discrimination And Make Reasonable Adjustments

Federal and state anti-discrimination laws protect employees with a disability - which can include many mental health conditions. You must not treat an employee unfavourably because of their impairment, and you may need to make reasonable adjustments (for example, flexible hours or temporary modified duties) so they can continue working safely, unless this would cause unjustifiable hardship.

5) Handle Health Information Lawfully And Confidentially

Employee health information is highly sensitive. In the private sector, the Privacy Act’s “employee records” exemption can apply to certain personal information about current or former employees when it’s directly related to the employment relationship. Even so, strict confidentiality, secure storage and “need-to-know” access are essential, and many businesses still want a clear framework for handling staff data.

Keep in mind the Privacy Act does apply in other contexts (for example, information about job applicants, contractors, or customer data collected via your website), which is why most businesses maintain a public-facing Privacy Policy alongside internal protocols for staff records.

6) Follow A Fair, Lawful Process If Capacity Becomes An Issue

If an employee’s capacity for work is in question, the process matters. Consider reasonable adjustments, obtain appropriate medical information, consult with the employee and avoid rushing to termination. Before taking any steps to end employment because of medical capacity, it’s wise to understand your risks around unfair dismissal, general protections and disability discrimination. This area is complex - our guide to termination on medical grounds covers the key issues.

Handling Requests And Evidence Lawfully

When someone asks for a mental health day or a longer absence, a supportive and consistent process helps both the employee and your business.

Use Your Usual Sick Leave Process

Treat mental health conditions like any other illness. If the employee is unfit for work, process leave under your standard personal/carer’s leave procedures.

Request “Reasonable Evidence” - Without Overreach

You can request reasonable evidence for personal/carer’s leave, even for short absences. A medical certificate or statutory declaration that the employee is unfit for work is usually enough - you don’t have a right to know the diagnosis.

For detail on what’s reasonable and when you can ask, see the overview of medical certificates for sick leave.

Protect Privacy And Limit Access

Keep medical information confidential, store it securely and limit access to staff who genuinely need to know. Don’t share details with a broader team or include diagnoses in routine HR correspondence. If you handle applicant or customer data, ensure your Privacy Policy and internal processes reflect what you collect and why.

Communicate Early And Often

Regular, respectful check-ins can reduce uncertainty and support recovery. Ask the employee what they need, explain how leave and pay will work, and let them know what evidence is required. A short email summary after conversations helps keep everyone on the same page.

Consider Medical Clearance Or Fitness-For-Work Assessments

In some cases - especially after longer absences, or where there are genuine safety concerns - it’s reasonable to request a fitness-for-work report or medical clearance that deals with functional capacity and any restrictions (not diagnoses). This should be proportionate and genuinely connected to the inherent requirements of the role. Read more about when you can ask for medical clearance to return to work.

Managing Extended Absences, Return-To-Work And Adjustments

Longer mental health leaves require planning. A collaborative, staged approach helps people return safely and reduces legal risk.

Paid, Unpaid And Annual Leave Options

After paid personal/carer’s leave is exhausted, employees might take annual leave (by agreement) or unpaid leave, depending on your policies and any applicable award or enterprise agreement. For an overview of how unpaid leave works and when approval is required, see unpaid leave.

Return-To-Work Plans

For extended absences, a written return-to-work plan can set expectations and reduce misunderstanding. Good plans usually cover:

• Any workplace adjustments (temporary or ongoing)
• Staged hours or duties (for example, two days a week at first, then building up)
• Support measures (quiet workspace, buddy systems, check-ins)
• Review points and how adjustments will be reassessed

Focus on the inherent requirements of the role, what the employee can do, and how to bridge any gaps with reasonable adjustments.

Reasonable Adjustments In Practice

Adjustments should be practical for your business and effective for the employee. Common examples include flexible start/finish times, temporary changes to workload, different supervision arrangements, or moving high-demand tasks to later in the day. If an adjustment would cause unjustifiable hardship (for example, it’s prohibitively expensive or undermines essential operations), document your analysis and consider alternatives.

Performance And Conduct Concerns

If there are performance or conduct issues, tread carefully. Separate genuine conduct issues from capacity concerns and make sure employees have a fair chance to respond, with reasonable adjustments considered. Keep good records - contemporaneous notes, emails and copies of certificates are your best friend if a dispute arises later.

When Capacity May No Longer Be Tenable

If, after consultation, evidence and reasonable adjustments, the employee still cannot perform the inherent requirements of the role, termination may be lawful - but this is a last resort. Check the temporary absence protections, ensure procedural fairness, consider redeployment, and get advice before making a final decision. Our guide to termination on medical grounds outlines the key steps and risks.

Policies, Contracts And Records: Get Your Documents Right

Clear documents make mental health leave easier to manage and help you stay compliant.

Employment Contracts

Your Employment Contract should set out personal/carer’s leave entitlements, how accrual works, evidence requirements and how to apply for leave. If you offer extra wellbeing days or mental health benefits, include the eligibility criteria and process.

Workplace Policies And Staff Handbook

A well-structured staff handbook gives managers confidence and sets expectations for staff. Include sick leave procedures, respectful workplace standards, WHS obligations (including psychosocial safety), and privacy/confidentiality rules for health information. If you don’t have these in place, Sprintlaw’s Staff Handbook and Workplace Policy packages are designed to be tailored to your business.

Privacy And Data Handling Protocols

Alongside the employee records exemption, you still need robust internal protocols for handling sensitive health information. For external collections (like customer data, or job applicants applying via your website), ensure you have a compliant Privacy Policy and that your practices match what you say.

Record-Keeping And Evidence

Keep accurate records of leave accrual and usage, copies of medical certificates or statutory declarations, and notes of discussions about adjustments or return-to-work. Retain only what you need, restrict access, and store it securely.

Training For Managers

Even the best policies won’t help if managers don’t know how to use them. Train leaders to: respond to requests sensitively, ask for evidence appropriately, keep information confidential, assess reasonable adjustments, and spot psychosocial risks early.

What Not To Do

• Don’t ask for a diagnosis or unnecessary medical details - you need functional information, not labels.
• Don’t disclose someone’s health status to colleagues without consent.
• Don’t treat mental health differently to physical health when assessing leave or adjustments.
• Don’t ignore temporary absence protections or skip consultation before making decisions about employment.

Key Takeaways

• Mental health leave is usually taken as personal/carer’s leave, which accrues over time and is not paid out on termination.
• Employees are protected against dismissal because of a temporary absence due to illness or injury, so handle extended absences with care and a fair process.
• WHS duties include managing psychosocial risks; proactive policies, training and early intervention reduce legal risk and support recovery.
• Anti-discrimination law requires reasonable adjustments where practicable so employees can perform the inherent requirements of their role.
• Request reasonable evidence for sick leave and consider medical clearance where appropriate, while protecting privacy and limiting access to health information.
• Get your foundations right with an up-to-date Employment Contract, clear policies in a Staff Handbook, and a public-facing Privacy Policy for external data collections.

If you’d like a consultation on managing a mental health leave of absence or setting up the right policies for your workplace, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.