The laws covering whether you can be fired while you're off work recovering from a physical or mental illness or injury are complicated. First, it depends whether you are taking leave under the FMLA or similar state leave law, taking other unpaid leave, or collecting workers' compensation temporary disability benefits. Whether or not you are collecting short-term or long-term disability (LTD) insurance benefits doesn't matter – LTD policies offer no protection for your job.
Second, you can always be laid off due to business necessity or fired for performance issues that don't have to do with your disability.
Third, there are some situations in which you can legally be fired even though you're on disability leave, as long as your employer follows the rules under the Americans with Disabilities Act (ADA).
If you are covered by the Family and Medical Leave Act (FMLA), you can take up to 12 weeks of unpaid leave to deal with a physical or mental medical problem (or to take care of a family member's medical issues). Unfortunately, the FMLA does not apply to most employees who work for small businesses—it applies only to employees who work at companies with at least 50 workers (who must work within 75 miles of each other). Also, employees can take FMLA leave only if they worked at least a year for an employer and worked at least 1,250 hours for that employer last year.
Assuming you are eligible for FMLA leave and you correctly requested it, you cannot be fired while on FMLA leave. And when you return from FMLA leave, your employer must give you back your position, or one that is nearly the same—assuming you can still do the job.
Most states have their own laws regarding unpaid leave for medical reasons, and most of these laws provide similar protections as the FMLA. Some state leave laws, however, are more generous than the FMLA. For instance, the California Family Rights Act requires your employer to continue all group benefits while you are out on leave. Check with your state's Department of Labor or an employment law attorney for information on your state's leave policies, especially if you aren't covered by the FMLA.
Even after you have exhausted your 12 weeks of FMLA leave per year, the Americans with Disabilities Act (ADA) can make it difficult for your employer to fire you when you are out on disability leave. Fortunately, the ADA covers more small businesses than the FMLA—those with just 15 or more workers.
Before firing you while you're on disability leave—or not reinstating you to your position after your disability leave ends—your employer has to try to "accommodate" you; that is, make the job suitable for you, given your impairments. Examples of ways an employer could accommodate your disability include granting you more unpaid leave after you've exhausted your FMLA leave, allowing you to work a flexible schedule, or making your workspace more ergonomic.
Your employer must work interactively with you to try to come up with accommodations that would allow you to do your job. (To protect yourself, it's best to request accomodations from your employer in writing.) During discussions with your employer, you may need to compromise on the accommodations you asked for, however, since your employer only has to make accommodations that are reasonable and that won't cause the company "undue hardship." What constitutes undue hardship is based on the cost of the accommodations to your employer and the size of the company.
If you and your employer can't figure out any accommodations that are reasonable and that allow you to do the "essential functions" of your job, your employer can fire you. In other words, despite the best efforts of your employer to accommodate you, if you still can't do the job, you can be fired. (Or if your employer has set up accommodations that allow you to return to work, but you don't return, you can be fired.)
About requesting unpaid leave as an accommodation, keep in mind that it has to be reasonable and not cause undue hardship. Generally, your employer has to allow you to take leave if you are expected to return in a reasonable amount of time and to be able to do the job when you return (with further accommodations, if necessary). For instance, if you are a key employee whose absence can't be covered temporarily by existing or new employees without great cost, or if you ask for a lengthy leave without a definite return date, your employer may be able to claim undue hardship. Here's a good rule of thumb: If the cost or other consequences of allowing you to take additional leave (while saving your position for you) threatens the company's financial stability, your employer will probably be allowed to fire you. For further discussion on this, see Nolo's article on when an accommodation recreates undue hardship.
If you were let go while on disability leave—FMLA or not—speak to a disability or employment lawyer. You may have a claim for wrongful termination under the FMLA or ADA, but before you sue your employer, you need to file a complaint with the Equal Employment Opportunity Commission (EEOC). To find an attorney in your area to talk to, fill out our request for consultation with a disability attorney using the tool above.