The High Court has recently clarified the application of the reasonable administrative action exclusion for workers’ compensation claims under the Safety, Rehabilitation and Compensation Act 1988 (Cth) (SRCA).
The SCRA excludes liability to compensate an employee for an injury or condition suffered as a result of reasonable administrative action taken in a reasonable manner. Reasonable administrative action includes reasonable performance appraisals, disciplinary action and actions done in connection with an employee’s failure to obtain a promotion or benefit, or to retain a benefit.
In Comcare v Martin  HCA 43, the High Court examined the causal connection required between the condition suffered and the reasonable administrative action.
Ms Martin worked as a producer for the ABC. She did not have a good working relationship with her supervisor Mr Mellett, who she believed bullied and harassed her.
Ms Martin was appointed on a temporary basis to act in a more senior position under a different supervisor. She then applied for permanent appointment to this position, her main reason being to avoid having to return to work under Mr Mellett.
When Ms Martin was informed that her application was unsuccessful, she broke down and was diagnosed as suffering from an adjustment disorder that rendered her unfit for work.
Ms Martin’s claim for compensation was rejected by the insurer Comcare and went through the Administrative Appeals Tribunal, the Federal Court and the Full Federal Court up to the High Court.
By the time the matter reached the High Court, it was not in dispute that:
- Ms Martin had suffered a mental condition which was contributed to, to a significant degree, by her employment; and
- the decision not to appoint Ms Martin to the more senior position was reasonable administrative action taken in a reasonable way.
The key issue for determination by the High Court was whether the causal connection required to meet the exclusion was satisfied – in other words, was her condition suffered “as a result of” the reasonable administrative action.
Causal connection required for reasonable administrative action
The Tribunal had made a finding of fact that Ms Martin’s condition was triggered by her realisation that the decision not to appoint her meant that she would be returning to her substantive position under the supervision of Mr Mellett. Any disappointment at the loss of opportunity to advance her career was found to be immaterial.
On the basis of those findings, Ms Martin sought to distinguish the decision not to appoint her from the consequence of that decision in her mind, and argued that her condition was not “as a result of” the reasonable administrative action.
The High Court did not accept that argument and found that the casual connection was satisfied.
The key takeaways from the High Court’s decision are:
- The administrative action need not be the sole cause. There may be multiple causes, some of which may relate to other aspects of the employee’s employment.
- What is required is that the employee would not have suffered a condition that has the required connection to employment (in this case, contribution to a significant degree) if the administrative action had not been taken.
- The causal connection will be met where the condition is suffered in reaction to a failure to obtain promotion, including in reaction to a perceived consequence of that failure. The nature of the perceived consequence, whether personal or professional, direct or indirect, or real or imagined, is irrelevant.
- Questions of causation must be determined by reference to the statutory text and context in a way that best gives effect to the statutory purpose. The Court said its reading was consistent with the purpose of the exclusion, which is to prevent claims being used to obstruct legitimate management action. That purpose would be defeated if the application of the exclusion was dependent on the subjective psychological drivers of the employee’s reaction.
What does this mean for employers
The decision is an important reassurance for employers that workers’ compensation claims won’t obstruct reasonable management action taken in a reasonable way, and this extends to the perceived consequences of that action in the employee’s mind.
While the SCRA is a workers’ compensation scheme for Commonwealth employees, there is a similar exclusion for psychiatric injuries caused by reasonable management action in each of the State and Territory workers’ compensation schemes.
Those exclusions will be applied based on their specific drafting. However, given their purpose, they are likely to also be applied as capturing an employee’s reaction to a perceived consequence of reasonable management action.