Don't get wet! Avoid opening the floodgates on "reasonable administrative action"

In 2005, Hart v Comcare [2005] FCAFC 16 set the causal standard for defending liability for workers' compensation claims under reasonable administrative action. Hart stands for the authority that, if an employee's injury has multiple causes, then only one of those causes needs to satisfy the exclusionary principle that an employee's injury was suffered "as a result of" reasonable disciplinary action.

This principle also extends to situations where the employee failed to obtain a promotion, transfer or benefit in connection with his or her employment. This principle is taken from section 5A(1) of the Safety, Rehabilitation and Compensation Act 1988 (Cth) (SRC Act).

Under section 5A(1), a compensable injury does not include:

"a disease, injury or aggravation suffered as a result of reasonable administrative action taken in a reasonable manner in respect of the employee's employment". [emphasis added]

The decision of Lim v Comcare [2016] FCA 709, handed down in April 2017 by the Full Bench of the Federal Court, now looks to challenge the established causal link in the application of section 5A(1) to cases where section 5B of the SRC Act also applies.

Under section 5B, an employee's disease will be compensable in circumstances where they can establish that it was "contributed to, to a significant degree, by the employee's employment".

The facts in Lim

Dr Sharon Lim, had worked for the Australian Communications and Media Authority (ACMA) for 16 years. In 2011, Lim submitted a claim for workers' compensation to Comcare under the SRC Act, citing an "adjustment reaction with depressant anxiety". Lim claimed this resulted from bullying and harassment in the workplace.

Comcare rejected Lim's claim on the basis of reasonable administrative action under section 5A(1). Disgruntled, Lim sought review in the Administrative Appeals Tribunal. The Tribunal, however, affirmed Comcare's decision and found that Lim had suffered a psychological condition because of three employment-related factors which constituted reasonable administrative action. These were:

• Lim's working relationship with her supervisor, and specifically, interactions regarding the use of template letters;
• reported "work stress" that was disclosed to her treating General Practitioner; and
• a performance discussion with her supervisor in January 2011.

The appeals

Lim appealed the Tribunal's finding to the Federal Court, but was dismissed by Justice Flick, on the grounds that the Tribunal was correct in asserting that the injury was the result of the January 2011 performance appraisal.

Lim subsequently appealed to the Full Bench of the Federal Court and succeeded. The Full Bench found that the Tribunal failed to properly read the application of the exclusion in section 5A(1) together with section 5B, the test for causation.

Applying Comcare v Martin [2016] HCA 43, the Full Bench found that::

"…what is required to meet the causal connection connoted by the exclusionary phrase in s5A(1) in its application to a disease within s 5A(1)(a) is therefore that the employee would not have suffered that disease, as defined in s 5B(1), if the administrative action had not been taken. That is to say, the causal connection is 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".

The Tribunal's fundamental error was that, unlike in Martin, no finding was made about whether the injury suffered was a direct and foreseeable consequence of the administrative action such that it triggered the injury. The Tribunal only went so far as to say that the performance appraisal contributed to the development of Lim's psychological condition. In other words, the Tribunal needed to be satisfied that Lim would not have suffered an injury (or aggravation of an injury) if the performance appraisal had not been done. The Tribunal did not address this question.

Some have said that Lim sets a new precedent that requires more than just proving "reasonable administrative action" to knock out a claim for compensation. If true, this would mean that a number of previously unsuccessful claims could be revisited. However, this decision isn't a substantial departure from the previous cases of Martin and Hart, and simply clarifies to employers that if they want to take advantage of the exclusionary principle, they must show that the injury was a direct and foreseeable consequence of the reasonable administrative action. If they can't, then the exclusionary principle doesn't apply.

A new decision

The Full Bench has remitted the matter back to the Tribunal for determination in accordance with sections 5A(1) and 5B of the SRC Act. Given that the causal factors identified in Lim's case are employment-related, the exclusion in section 5A(1) can be only be satisfied if the Tribunal finds Lim would not have suffered her adjustment disorder if the performance appraisal had not been done. The Tribunal will need to freshly assess the evidence and make a determination about whether the exclusion applies.

Take-home message

While Lim certainly gives applicants a better grounding in bringing a claim, as it can no longer simply be knocked out by reasonable administrative action alone, employers should not panic about the flood gates opening on old cases.

Why? Employees wishing to ignite old claims by relying on Lim will need to establish that the relevant injury was suffered "in the course of" their employment and that their employer contributed to that injury, to a significant degree. Substantial evidence would be needed to support any such claim, leaving the pool of potentially successful second-time applicants rather limited.

Employers should:

• Establish a practice of keeping contemporaneous documents about management action, including file notes of performance discussions with employees. This will assist employers to establish the causal link between the injury, or aggravation of the injury, and the reasonable administrative action taken - especially where multiple factors might be relevant or hold higher significance;
• Clearly articulate the reasons for taking any sort of administrative or management action, and have a sound reason for doing so.

This will assist employers in defending claims from previously unsuccessful employees, claiming that their employer's management actions unreasonably resulted in the development of a compensable illness or injury.

Related Insights

• Senior employees and managers cry "adverse action!" at every turn