Clayton Utz Insights

20 December 2012

Full Federal Court upholds worker's compensation for employee mixing business with pleasure

By Shae McCartney and Madison Bone.

Key Points:

Once again, the courts have adopted a broad view of what is part of employment and what goes beyond the boundaries.

The Full Federal Court has affirmed the Federal Court's decision that a Commonwealth employee injured while having sex in a motel room on a work trip is entitled to worker's compensation for the injuries she sustained (Comcare v PVYM [2012] FCAFC 181).

The decision confirms that the line between business and pleasure is not always clearly drawn when employees are on work-ordained business trips. As long as there is a nexus or connection between the injury and the employment (ie. a hotel room organised by the employer), then an injured worker maybe entitled to worker's compensation.

In this case, the employee was required by her employer, a Commonwealth government agency, to travel to a NSW country town for business purposes. The employee stayed at a motel booked by her employer. One evening during the trip, she arranged to meet a male friend who lived in the area, and after dinner the two went back to her motel room and had sexual intercourse. While the employee and the male were engaged in this recreational activity, a glass light fitting above the bed was pulled from its mount and fell on her. The employee sustained injuries to her nose and mouth, and also suffered a psychological injury.

History of the litigation

The employee made a claim for compensation under the Commonwealth Safety, Rehabilitation and Compensation Act 1988 NSW (SRC Act) for the injuries she sustained. Her claim, for both physical and psychological injuries, was initially accepted by Comcare, but was then later revoked following further investigation. The employee sought review of the decision by the Administrative Appeals Tribunal (AAT), which affirmed Comcare's decision, saying that her injuries were not suffered in the course of her employment, and the employer had not expressly or impliedly induced or encouraged her sexual conduct on that night.

The AAT further said the activity was not an "ordinary incident of overnight stay like showering [or] sleeping….". It therefore considered that the sexual activity did not take place during an interval or interlude of her work and consequently did not arise in the course of her employment. Ultimately, the AAT's finding was that there had to be a nexus with both an employer-endorsed place and an employer-endorsed activity in order for an injury to occur in the course of employment.

The Federal Court upheld the employee's appeal, declaring that the injuries suffered were suffered in the course of employment. The fact that she was injured at a place designated by her employer as accommodation she should use was sufficient to sustain the employee's claim. Further, the AAT erred in holding that for the employee to succeed, she had to show that the particular activity she was engaged in when injured was expressly or impliedly induced or encouraged by her employer.

Full Federal Court decision

Comcare filed an appeal against the Federal Court's ruling, saying it wanted to test the federal workers' compensation laws to define the boundaries between private and business activities while workers are away from home on work trips.

The Full Federal Court found that the worker was injured in the course of employment and therefore entitled to compensation. The AAT erred in applying the legal test to determine whether something was "in the course of employment", and once this error was corrected, it was not possible for the AAT to sustain its denial of compensation for the worker.

In coming to this decision, the Full Federal Court considered the High Court decision in Hatzimanolis, and the way in which the principles from that case have been applied. The Full Federal Court cited the key considerations from Hatzimanolis, namely that the main inquiry was to decide whether an injury occurred in an interval during "one overall period or episode of work rather than a series of discrete periods or episodes or work". Then, if an employer has induced or encouraged an employee to spend that interval or interlude in a particular place or in a particular way, an injury incurred at that place or during that activity will be sustained in the course of employment.

The AAT's application of Hatzimanolis was incorrect. The AAT reasoned that if the employee's conduct did not result in an interruption of the interval or interlude, then it necessarily followed that the employee suffered her injuries in the course of employment. However, the AAT said that the employee was engaged in a "private activity", and that once an employee embarks upon a private activity, the interval is interrupted and the activity is no longer in the course of employment.

The Full Federal Court discounted this argument by the AAT, stating that many activities which employees may engage in during a business stay are private; for example, in Comcare v McCallum (1994) 49 FCR 199 an employee who slipped while showering in her hotel room was found to have been injured in the course of her employment.

The Full Federal Court ultimately found that "the relevant nexus or connection to employment was present in this case by virtue of the fact that the [employee's] injuries were suffered while she was in the motel room in which her employer had encouraged her to stay". Further, her injuries were suffered "while she was at a particular place where her employer induced or encouraged her to be during an interval or interlude between an overall period or episode of work".

The Court did clarify that injuries sustained by an employee during an interval or interlude in employment would not be sustained in the course of employment if the employee had engaged in gross misconduct which ultimately resulted in the injuries.

What does this all mean?

Ultimately, the decision has affirmed the principles laid down in Hatzimanolis and reiterated that this is still the leading authority on determining what is "in the course of employment". Once again, the courts have adopted a broad view of what is part of employment and what goes beyond the boundaries. Interestingly, in these cases it is not the actual activity itself resulting in an injury which is considered to determine whether the injuries occurred in the course of employment. Rather, it is the particular circumstances of why the employee was at a particular place and how they came to be participating in such an activity which is the central issue. These considerations will ultimately determine whether the employee is entitled to compensation.

Following the decision, Comcare has stated it is reviewing the judgment and will consider its options over the next 28 days.

For more information, contact...
Email: Shae McCartney, Partner
Tel: +61 7 3292 7306
Disclaimer
Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.
Shae McCartney
Shae McCartney