The High Court recently handed down a decision regarding the proper construction of the words “as a result of” in the context of the management action exclusion in the Commonwealth workers’ compensation legislation.

Background

Ms Peta Martin was employed by the Australian Broadcasting Corporation (ABC) from 2010 to 2012 in Renmark, South Australia. Her initial role was as the producer of a breakfast radio program where she was under the supervision of Mr Bruce Mellett, a presenter and station manager.

Ms Martin had a poor working relationship with Mr Mellett and applied for a range of other positions within the ABC outside of Renmark. While under Mr Mellett’s supervision, she also made allegations that he had engaged in conduct toward her that constituted bullying and harassment—claims that were investigated by the ABC and found to be unsubstantiated.

In 2011, Ms Martin was temporarily appointed to the position of “cross media reporter” based in Renmark but answering to a manager in Hobart. Subsequently, that position was advertised for permanent appointment in 2012. Ms Martin applied for the position and a selection panel consisting of three members, which included Mr Mellett and the manager positioned in Hobart, decided not to select her for the role (the Promotion Decision). When Ms Martin was advised of the outcome by her then manager and informed that she would return to her role as a producer, she “broke down uncontrollably”. Subsequently, Ms Martin was diagnosed with an “adjustment disorder”, which rendered her unfit for work. Ms Martin pursued a claim for compensation under the Safety, Rehabilitation and Compensation Act 1988 (Cth) (Compensation Act).

The Compensation Act requires Comcare to pay compensation in respect of an “injury” where that results in an incapacity for work. However, the Compensation Act contains an exclusion for any “injury” that arises (or is aggravated, where the aggravation is contributed to a significant degree, by their employment):

• “as a result of” reasonable administrative action; and

• where such action is taken in a reasonable manner, (the Reasonable Action Exclusion). 

“Reasonable administrative action” includes anything reasonable done in connection with an employee’s failure to obtain a promotion, reclassification, transfer or benefit, or to retain a benefit, in connection with their employment.1

The initial decisions

Ms Martin lodged a workers’ compensation claim, which was rejected by Comcare. She then appealed Comcare’s decision to the Administrative Appeals Tribunal (Tribunal), arguing that the deterioration of her adjustment disorder arose as a result of the realisation that she would be returning to work for Mr Mellett, whom she alleged had bullied and harassed her, rather than the Promotion Decision. The Tribunal disagreed and determined that the worsening of her condition arose as a result of the Promotion Decision.

The Tribunal found that a number of consequences flowed from Ms Martin’s failure to obtain the promotion, namely that she would be required to return to her substantive position and work directly under Mr Mellett’s supervision, and she would be denied a small pay increase and an opportunity to further develop her skills in cross-media production.

However, the Tribunal found that administrative action was not taken in a reasonable manner because Mr Mellett participated in the Promotion Decision and in the Tribunal’s opinion, a fair- minded observer acquainted with the matter would probably apprehend that Mr Mellett might not bring an impartial mind to his role on the selection panel. Accordingly, the Tribunal found that the Reasonable Action Exclusion did not apply, and found that Comcare was liable to pay compensation Ms Martin.

The first appeal

Comcare appealed the Tribunal’s finding that the Reasonable Action Exclusion did not apply to the Federal Court of Australia. In the appeal, Ms Martin sought to have the Tribunal’s decision affirmed on the basis that the findings showed that her adjustment disorder did not occur as a result of the Promotion Decision.

The Federal Court upheld Comcare’s appeal and remitted the decision to the Tribunal. In doing so, the Federal Court rejected Ms Martin’s argument that her condition was the result of indirect and unintended consequences of the decision not to promote her, as opposed to the Promotion Decision itself.

Ms Martin appealed to the Full Court of the Federal Court (FCAFC), which was required to consider two issues, namely:

• whether the aggravation of her injury was “as a result of” the Promotion Decision; and

• whether the decision not to promote Ms Martin was administrative action taken “in a reasonable manner”.

In relation to the first point, the FCAFC found that the Tribunal had misconstrued the meaning of the phrase “as a result of” and that there was no evidence that Ms Martin’s return to work under the supervision of Mr Mellett was the inevitable outcome of the Promotion Decision, particularly having regard to the size of the ABC’s enterprise and Ms Martin’s earlier allegations against Mr Mellett (meaning the ABC might have decided to relocate her elsewhere).

It was found that there was a need for the Tribunal to take a “common sense” view of causation, and the mere fact that the Promotion Decision was “chronologically precedent” to the aggravation of her injury did not mean that there was a causal relationship between the two. The Court also suggested that it may have been intervening administrative action, such as a further decision that Ms Martin would return to work under Mr Mellett’s supervision, which was the cause of the adjustment disorder. In other words, the FCAFC concluded that Ms Martin’s injury did not arise as a result of the Promotion Decision.

Having found that the Tribunal had failed to adopt the correct approach to causation, the FCAFC allowed Ms Martin’s appeal and remitted the matter to the Tribunal to be reheard and determined according to law.

The High Court decision

Comcare obtained special leave to appeal the decision of the FCAFC to the High Court of Australia, where it argued that the Tribunal was “correct in law to conclude on the facts that it found the causal connection was met”. 1 Comcare argued that the FCAFC adopted an incorrect view of the causal connection required to satisfy the Reasonable Action Exclusion under the Compensation Act.

The High Court unanimously upheld Comcare’s appeal, stating that the consideration of whether Ms Martin’s return to her initial position was an inevitable consequence of the Promotion Decision distracted from the critical finding of the Tribunal that “returning to her substantive position was a direct and foreseeable consequence in Ms Martin’s mind”. 2 In that respect, the Court stated that, “The deterioration of her mental condition was triggered by what she perceived to be a consequence of the decision”. There was no basis for the FCAFC to question that finding.

The High Court then considered whether Ms Martin’s injury was suffered “as a result of” the Promotion Decision. The High Court had regard to the purpose of the exclusion as being to ensure that a wide range of legitimate human resources actions, when undertaken reasonably, do not give rise to an entitlement to compensation. In this statutory context, the Court held that the psychological effect of the Promotion Decision on Ms Martin was irrelevant—the statutory purpose of the exclusion would be defeated if the operation of the exclusion was dependent on the subjective psychological drivers of the employee’s reaction.

The Court rejected the FCAFC’s characterisation of a “common sense” notion of causation, and held that the words “as a result of” require that the worker would not have suffered that disease (as that term is defined) if the administrative action had not been taken.3

In relation to the exclusionary provision under the Compensation Act, the Court concluded:4

The causal connection giving rise to the exclusion from the definition of injury is met where the disease suffered… is an aggravation of a mental condition suffered by the employee in reaction to a failure to obtain promotion, including in reaction to a perceived consequence of that failure to obtain promotion. The nature of the perceived consequence—whether personal or  professional, direct or indirect, real or imagined—is beside the point.”

The Court said: “the reasoning of the Tribunal was correct in law on the findings of fact which it made”. 5

Accordingly, the High Court remitted the decision to the Tribunal to be made according to law. The effect of the decision was to essentially restore the orders at first instance.

Bottom line for employers

• Under the Commonwealth workers’ compensation legislation, the definition of “injury” excludes a disease suffered as a result of reasonable administrative action taken in a reasonable manner in respect of the employee’s employment. This is similar to the exclusions for compensation for workplace injuries in other states and territories.

• Exclusionary provisions within workers’ compensation legislation are intended to ensure that employers can take a range of reasonable actions without the risk of paying compensation. Any perceived consequence by the worker of that action—whether personal or professional— is arguably irrelevant. 

Key points

• The High Court has confirmed the extent of the provision relating to what constitutes a disease, injury, or aggravation of an injury suffered as a result of reasonable administrative action taken in a reasonable manner.

• The required causal connection will be met if, without the taking of the administrative action, the employee would not have suffered the ailment or aggravation that was contributed to, to a significant degree, by the employee’s employment.