A director of a childcare centre was involved in an altercation with a colleague that led to an investigation into her leadership and her subsequent transfer, demotion and a requirement that she participate in a development and mentoring program. She claimed compensation from her employer for a psychological injury allegedly sustained in the course of her employment duties. Was the employee injured as a result of the original altercation or her employer's reasonable actions in disciplining her? What evidence, if any, was the employer required to adduce to prove it was the latter under the circumstances? This case examines the intricacies of the causation issue under s11A of the Workers Compensation Act 1987.

Author: Chad Farah Judgment Date: 12 July 2018 Citation: Mascaro v Inner West Council [2018] NSWWCCPD 29 Jurisdiction: Presidential Decision

Principles

  1. Medical evidence may not be required to determine the issue of causation under s11A(1) of the Workers Compensation Act 1987, if all the relevant contributing factors to the injury fall within the definition of that section.
  2. Irrespective of the title of any workplace program undertaken by a worker, whether it can be categorised as 'discipline' under s11A(1) will depend on the nature and purpose of that program with reference to the reasons behind its implementation.
  3. A factual finding that the employer's actions were reasonable within the meaning of s11A(1) is a matter for the Arbitrator's opinion and judgment and cannot be interfered with on appeal so long as the finding itself was reasonable on the available evidence.
  4. The Workers Compensation Commission has no jurisdiction to make findings in respect of matters that are not pleaded. Nor are parties entitled to advance novel cases on appeal that were not reflected in the original pleadings.
  5. Applications to extend the time to appeal must be determined in the context of the proceedings as a whole and, in respect of whether prejudice will occur if the application is denied, on the merits of that appeal.

Background

The Worker was employed by the Respondent as a childcare worker in 1989 and was subsequently made a director of childcare centres in 1991. Following an altercation with a colleague on 12 September 2014 and an ensuing investigation into her leadership, she was transferred to a different role in the organisation and demoted from her directorial position.

Then in November 2014, the Worker was formally counselled and placed on a Professional Development and Mentoring Program due to substantiated allegations of unacceptable behaviour including not adhering to staff/children ratios and being rude to staff.

A meeting was held with the employer on 16 March 2015 which was attended by the Worker and a support person. She was informed that her participation in the program was to continue. The Worker was reportedly upset by this and attended on her General Practitioner the next day who issued her with a Certificate of Capacity in respect of an alleged psychological injury.

Liability was denied by the insurer on grounds that the Worker did not suffer ‘injury’ within the meaning of the Workers Compensation Act 1987 Act, but also pursuant to s11A(1) of that Act, in the alternative.

Relevantly, section 11A(1) states:

‘No compensation is payable under this Act in respect of an injury that is a psychological injury if the injury was wholly or predominantly caused by reasonable action taken or proposed to be taken by or on behalf of the employer with respect to transfer, demotion, promotion, performance appraisal, discipline, retrenchment or dismissal of workers or provision of employment benefits to workers (emphasis added).’

Arbitration Hearing

The matter proceeded to an Arbitration hearing in the Workers Compensation Commission where Arbitrator Perrignon found overwhelming evidence that the Worker suffered from a Major Depressive Disorder.

It was found that there were several causes for this condition. In the beginning there was the altercation on 12 September 2014. However, in the Arbitrator’s view, the ‘more numerous’ causes were the adverse findings following the employer’s investigation, the Worker’s requirement to undergo mentoring and the communication in the meeting on 16 March 2015. The Arbitrator found that those latter and more influential causes constituted ‘discipline’ within the meaning of s11A(1) of the 1987 Act.1

The Arbitrator went on to find that the actions of the employer in respect of that discipline were objectively reasonable with reference to Irwin v Director-General of School Education.2

Consequently, the Arbitrator entered an award in favour of the employer.

Presidential Appeal

The Worker appealed, albeit outside the prescribed limitation period of 28 days,3 based on several grounds that can be grouped as follows:

  1. The Arbitrator’s error in not articulating nor applying the correct test of causation under s11A(1);
  2. The Arbitrator’s error in not taking into account relevant evidence in determining the whole or predominant cause of the Worker’s injury;
  3. The Arbitrator’s error in incorrectly categorising the employer’s relevant actions as ‘discipline’; and
  4. The Arbitrator’s error in finding that the employer’s actions were reasonable.

On appeal, Acting President Snell found that the Arbitrator did not clearly articulate the correct test of causation under s11A(1), particularly with respect to the definition of the word ‘predominantly’. The Acting President pointed out that the accepted definition of the term is ‘mainly or principally caused’.4 However, the Acting President went on to find that this failure to clearly articulate the test had no material effect on the outcome because the Arbitrator applied the test correctly for reasons to follow.

One of the matters argued by the Worker on appeal was that the findings of the ‘whole or predominant’ cause under s11A(1) were not supported by ‘sufficiently persuasive medical opinion’ and that, absent this, there ought to have been a finding that the altercation on 12 September 2014 was equally if not mainly to blame for the Worker's injury.

The Acting President pointed out that the altercation on 12 September 2014 was not originally pleaded as a specific cause of the Worker’s injury. Rather, the case was run on the basis of a ‘disease’ injury and the pleadings did not incorporate the altercation that took place on 12 September 2014 until the appeal submissions.

Because it was never open to the Arbitrator to find that an injury occurred on 12 September 2014, it was determined that the incident that occurred on that date could not have been a competing stressor for the purposes of s11A(1). The Acting President said at paragraph 100:

‘…Frequently resolution of the s 11A(1) causation issue will require medical evidence, as it will involve matters outside common knowledge and experience. However, the evidence needed for an employer to discharge its onus on this issue will depend on the facts and circumstances of the individual case. The presence (or lack) of multiple potential causative factors, not all of which attract the protection of s 11A(1), is likely to be relevant.’

Similarly, the Acting President found that there was originally no allegation that the Worker’s ability to participate in the mentoring program was affected by her psychological state until this argument was advanced in the appeal proceedings. That novel submission also failed.

The Worker also attempted to argue on appeal that the ‘mentoring’ aspect of the program, as it was titled, cannot be interpreted as ‘discipline’. The Acting President disagreed with reference to the entirety of the employer’s conduct from a factual point of view,5 and said that the implementation of the program was ‘plainly as a result of the outcome of the disciplinary process.’

Lastly, in relation to the submission that the employer’s actions were not reasonable, the Acting President said at paragraph 142:

‘…it is necessary that Ms Mascaro identify “error in making the evaluative judgment as to reasonableness ... factual error of the kind described by Barwick CJ in Whiteley Muir & Zwanenberg Ltd v Kerr [(1966) 39 ALJR 505 at 506 (cited with approval by Brennan CJ, Toohey, McHugh, Gummow and Kirby JJ in Zuvela v Cosmarnan Concrete Pty Ltd [1996] HCA 140; 140 ALR 227)]”. This she has not done: Raulston v Toll Pty Ltd. The factual finding on this issue involved elements of fact, degree, opinion or judgment. It would not be appealable error if I was of the view that a different outcome was preferable. I accept the submission of the Council, that the Arbitrator’s findings of fact relevant to ‘reasonableness’ were available on the evidence…’

The appeal ultimately failed on its merits. For this reason, it was also found that there would be no prejudice to the Worker if the application to extend the time to appeal was not granted and that application was refused.

Why this case is important

Following the decision in Hamad,6 insurers have become reluctant to include the s11A(1) defence in s74 Notices without medical evidence specifically stating that the 'whole or predominant' cause of the injury were the employer's specific 'actions' as itemised in that section. This has led to delays in the determination of liability and, in instances where medical evidence could not be obtained in time, the premature acceptance of that liability.

While this approach is correct, it must be remembered that medical evidence is not required to address this question if all the relevant causes of the injury that are alleged by the Worker fall under s11A(1) from a factual point of view.

Put simply, there is no need to determine which of the s11A(1) actions was the whole or predominant cause from a medical point of view; so long as there were no other competing, work-related stressors that are of relevance. Obtaining a detailed statement from the Worker about their specific allegations at the early stages of the claim is therefore extremely important.

This case also highlights the importance of clear communication between employers and workers about the purpose of, and reason for, any performance management plan that is implemented. Ambiguity may lead to a finding that the program did not constitute 'discipline' but rather that it was a general component of employment, and this may defeat the s11A(1) defence.

Finally, this case is another reminder of the importance of pleading cases correctly from the beginning and the need for Respondents to meet no more than the case actually pleaded.