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Precedent (Australian Lawyers Alliance) |
CLAIMS FOR PSYCHOLOGICAL INJURY
By Joshua Dale
Mental health conditions suffered by those in the workplace, including psychological injury as a result of employment, are a significant concern for employers Australia-wide. This is not only due to the negative effects of mental illness on employees but also the significant costs incurred by businesses as a result of absences from the workplace. Businesses can also be required to pay compensation or face increased insurance premiums when injury occurs in the workplace.
According to Safe Work Australia, mental health conditions make up 2 per cent of all work-related compensation cases every year, but equate to 5 per cent of the total economic costs of workers compensation schemes Australia-wide.[1]
According to icare NSW, psychological injuries are increasing at an exponential rate and there is a need for reform.[2] However, as uncovered in a recent ALA submission to the NSW Legislative Council Standing Committee on Law and Justice, icare’s data is inconsistent with the data published by the State Insurance Regulatory Authority (SIRA). For example, SIRA’s data suggests that in the 2021–22 financial year the percentage of psychological claims actually decreased from 8.3 per cent to 7.4 per cent of all claims.[3]
The ALA submission goes on to state that:
‘It is the ALA’s view that any suggestion that an increase in psychological claims has caused the decrease in return to work rates should be rejected unless further information is provided to support such a conclusion. Return to work rates have been declining for some time now and to suggest in 2022 that the increase in psychological claims is a key driver would be disingenuous.’[4]
While this article is confined to looking at psychological claims made through the workers compensation scheme in NSW, the case law is relevant more generally across multiple Australian jurisdictions.
EVIDENTIARY REQUIREMENTS FOR PSYCHOLOGICAL INJURY
Psychological injury in the context of a workers compensation claim in NSW typically arises in two broad categories:
1. Frank injury: suffered as a result of being involved in or witnessing a traumatic event such as the death of a colleague.
2. Disease injury: suffered as a result of sustained bullying or harassment over an extended period of time. Alternatively, an aggravation, acceleration, exacerbation or deterioration of a pre-existing condition as a result of workplace factors.
The following workplace scenarios may be considered causes of the worker having suffered a psychological injury:
• being overworked;
• being under-resourced;
• a hostile work environment;
• being ostracised;
• exposure to traumatic events; and
• being unfairly targeted in the workplace.
When considering an injury in the context of a claim, one must first consider the Workers Compensation Act 1987 (NSW) (WC Act). According to s4, ‘injury’:
‘(a) means personal injury arising out of or in the course of employment,
(b) includes a disease injury, which means:
(i) a disease that is contracted by a worker in the course of employment but only if the employment was the main contributing factor to contracting the disease, and
(ii) the aggravation, acceleration, exacerbation or deterioration in the course of employment of any disease, but only if the employment was the main contributing factor to the aggravation, acceleration, exacerbation or deterioration of the disease.’
When considering psychological injury, one must pay particular attention to a worker’s perception of events at work. This was looked at in the decision of McHughes v Brewarrina Local Aboriginal Land Council,[5] where Senior Arbitrator Capel confirmed the position at law:
• Employers take their employees as they find them – that is, the egg shell skull principle applies.
• There must be a perception of real events during the course of employment.
• The worker’s perception about whether the events created an offensive and hostile environment, subject to injury being established, is relevant.
• The events must be real rather than imaginary and it does not matter if an injury was caused because of a flawed perception of events due to a disordered mind.
• There is no requirement that a worker’s perception must pass some qualitative test based on an objective test of reasonableness.
• It is not necessary for a worker’s reaction to be rational, reasonable or proportionate.
Notwithstanding the above, it is still necessary to establish that the psychological effect goes beyond a mere emotional response. It also remains necessary to establish a diagnosable psychiatric condition in order to satisfy the definition of injury.[6]
In practice, a key factor is the worker’s perception of real events rather than an employer’s state of mind. If the events described by the worker are real and the worker perceived them in a particular way, this can assist in demonstrating that the psychological injury arose in the workplace. While the worker does not need to react rationally or reasonably for an injury to have been suffered, it is important to distinguish between events that are real that led to a change in psyche and those that are either untrue or were later rationalised in the context of a claim. This was reinforced in the decision of Attorney General’s Department v K,[7] where Acting President Bill Roche said that:
‘The critical question is whether the event or events complained of occurred in the workplace. If they did occur in the workplace and the worker perceived them as creating an “offensive or hostile working environment”, and a psychological injury has resulted, it is open to find that causation is established. A worker’s reaction to the events will always be subject and will depend upon his or her personality and circumstances. It is not necessary to establish that the worker’s response was “rational, reasonable and proportional”.’[8]
Therefore, a worker is not required to demonstrate that they have been subjected to ‘bullying and harassment’ in the workplace; they are only required to plead a pattern of behaviour, which has led to a psychological injury.
If the injury definition is satisfied, the next step is to consider whether employment was ‘a substantial contributing factor’ to the injury in the case of a frank injury or ‘the main contributing factor’ in the case of a disease injury.[9]
Substantial contributing factor
In Golden Swan Investments (Australia) Pty Ltd v Yahiaoui[10] (Yahiaoui), Deputy President Elizabeth Wood heard an appeal that questioned the reasoning at first instance of the finding of an injury on the available medical evidence. The worker was employed in a hospitality role and progressed to the position of team leader in approximately December 2015. He resigned on 25 June 2016. The worker alleged that he was harassed and bullied by his managers and colleagues throughout his employment and that he suffered a major depressive disorder as a result.
At first instance, the Arbitrator found that ‘whether employment is a substantial contributing factor to an injury is a question of fact, and is a matter of impression and degree, which is to be decided after a consideration of all the evidence’. The Arbitrator went on to note that the employment must be a substantial contributing factor to the injury – not the incapacity, need for treatment, or the permanent loss: ‘there can be more than one substantial contributing factor to the injury, and the employment need not be “the” substantial contributing factor.’[11]
On appeal, while the Deputy President generally confirmed the Arbitrator’s reasoning, she also confirmed that the test is, as described by Basten JA in State Transit Authority of New South Wales v Fritzi Chemler,[12] whether the worker perceived the workplace as creating an offensive or hostile working environment. She went on to find that it was clear that the Arbitrator’s process of fact finding was incorrect, noting there was a misstatement of law and the credibility issues raised about the worker’s version of events had not been adequately addressed.[13]
The importance of factual findings was again highlighted in Shoalhaven City Council v Booth,[14] where Acting Deputy President Larry King SC heard a case regarding a complaint made about a worker concerning a conversation he had with a female colleague in which he had suggested that she could do better than her boyfriend. The worker was notified of the complaint at two separate meetings by two managers, where he was noted to be visibly upset but was not offered a support person. There was no question that the meetings fell into the category of ‘discipline’ within the context of the worker’s employment. The question before the Workers Compensation Commission (the Commission) was whether the actions taken were reasonable or unreasonable.
The worker was successful before Arbitrator Dalley at first instance, and on appeal the Acting Deputy President affirmed that decision. He stated that while minds might differ about the reasonableness of what took place, when a decision-maker takes into account all of the circumstances of a case, it follows that any conclusion drawn must be fairly open and where no evaluation of the reasoning process displaces the conclusion drawn, then the decision should stand.[15] The Acting Deputy President did add that in making that finding he informed himself in accordance with the directions in Raulston v Toll Pty Ltd,[16] where it was stated that a finding of fact cannot be disturbed ‘unless other probabilities so outweigh’ the finding of the Member ‘that it can be said that his [or her] conclusion was wrong’.[17]
While factual construction is paramount in a Member’s reasoning, it is important to remember that when considering frank injuries, employment will be a substantial contributing factor to an injury if its contribution was ‘real and of substance’.[18] In other words, it is equally important that consideration of the law and the factual scenarios are balanced, otherwise a decision-maker will fall into error, as occurred in Yahiaoui.
Main contributing factor
On the other hand, the question of whether or not employment is the main contributing factor (required in a disease injury case) is more onerous and will likely be determined on careful consideration of the evidence before a decision-maker. In Basham v State of New South Wales (Riverina Institute of TAFE),[19] Arbitrator Scarcella confirmed that the worker bears the onus of proving injury and stated:
‘As I understand it, when referring to applying “common sense”, Kirby, P in Kooragang was not suggesting that it be applied “at large” or that issues were to be determined by “common sense” alone but by a careful analysis of the evidence. Therefore, the legislation must be interpreted by reference to the terms of the statute and its context in a fashion that best effects its purpose ... This does not mean that the common-sense approach has no place in the application of the legislation to the facts of the case.’[20]
Therefore, the evidentiary requirements are not only common-sense-based but also require particular consideration of the elements of the legislation.
For example, in Todic v State of NSW,[21] Arbitrator Homan heard a case where the worker alleged psychological injury arising from a number of events over a two-year period. The worker did not allege that any one event caused her injury but claimed that it arose as a result of the culmination of all workplace events over a period of time. The question before the Commission was whether the events occurred and/or whether they were otherwise innocuous events not capable of attracting workers compensation.
The Member found that the events in question were real events in the workplace. While some of the events were accepted to have not occurred, this did not break the causal nexus as the evidence was consistent in indicating that the accumulation of numerous events at work over time caused the injury.[22] The Member further suggested that the failure to report the workplace stressors until 2016 (some two years after the events were said to have begun) was consistent with the way the case was advanced, namely that it was an accumulation of events leading up to a final interaction in 2016 that caused the worker’s injury. On the basis that the worker’s perception of real events over a two-year period was causative, the Member was satisfied that it was the main contributing factor of the injury.[23]
INJURY ‘ARISING OUT OF OR IN THE COURSE OF EMPLOYMENT’
The concept of causation is paramount in establishing an entitlement to compensation, particularly in circumstances where a worker suffered or was suffering psychological trauma or injury as a result of factors outside of the workplace.
In the context of considering this question, the term ‘employment’ must first be considered in order to establish the required elements, then a factual, common-sense approach can be applied to determine whether or not the injury occurred in the course of that employment.
There are, however, specific considerations that need to be taken into account when considering causation, including that it was necessary for a worker to be exposed to something in the course of their employment because of the nature of the conditions or obligations of that employment.[24] This requires careful consideration of the actual events, including what the worker was doing in their employment and how those tasks contributed to their injury.[25]
The question is then whether or not the injury arose out of or in the course of employment. In the case of AP v NSW Police Force,[26] Deputy President Roche determined that the phrase ‘arising out of’ involves a causative element, whereas the phrase ‘in the course of’ involves a temporal element that needs to be rationalised by taking a common-sense approach.[27] In other words, there needs to be careful consideration of the circumstances experienced within the context of employment and how that led to a particular injury. In a practical sense, this means taking full and proper instructions of the events that occurred and corroborating those events where possible, in direct consultation with medical evidence, in order to establish that there was a psychological effect.[28]
COMMON DISPUTES ARISING IN THE CLAIMS PROCESS
When a claim for psychological injury is made, generally speaking, the main areas of dispute fall within the ambit of s4 (injury), s9A (whether employment was a substantial or main contributing factor) and s11A (defence available to an employer where the injury arises from reasonable actions) of the WC Act.
Sections 4 and 9A largely arise out of the factual basis upon which a claim arises and the evidence is obtained with respect to injury, usually in the form of medical or medico-legal evidence. The ambit of these sections is discussed above. The onus is on the worker to establish these aspects of any claim.
Conversely, s11A of the WC Act allows an employer, usually through their workers compensation insurer, to lead evidence of a reasonable action associated with ‘transfer, demotion, promotion, performance appraisal, discipline, retrenchment or dismissal of workers or provision of employment benefits to workers’.[29]
It is important to note that the employer bears the onus of proof in establishing this defence. This means that the employer will need evidence that clearly demonstrates that their actions were reasonable when dealing with an employee. This defence would only be available to an employer in circumstances where the reasonable action taken was the whole or predominant cause of an injury.
Too often, employers, usually through their insurers, will lead evidence that reasonable action was taken in the course of employment within the ambit of s11A but then fail to adduce evidence that is capable of showing the causal connection between those reasonable actions and the injury itself. In this regard, it is absolutely necessary for employers or insurers to establish that the reasonable actions predominantly caused the injury as opposed to other actions that fall outside the categories set out in s11A, or the defence will fail.
Section 11A defence case examples
While there are a number of cases addressing s11A, a good practical example is Northern NSW Local Health Network v Heggie.[30] The worker was employed as a Security Officer at Tweed Hospital and was involved in subduing a mentally ill patient. It was alleged that the worker was physically and verbally aggressive during this interaction with the patient and he was suspended on full pay pending an investigation.
The worker claimed that he suffered a psychological injury as a result of his suspension. The ‘reasonable action’ or s11A defence was raised by the employer. Acting Justice of Appeal Sackville set out a number of factors to consider, including:
• That a broad view be taken when considering action taken with respect to discipline.
• That the injury be wholly or predominantly caused by the reasonable action taken or proposed to be taken by an employer.
• The employer bears the onus with respect to the notion of whether the actions were reasonable.
• The test of reasonableness remains objective based on the facts of a particular case and the task of a decision-maker includes consideration of the actions taken in the context of causing injury.[31]
And, perhaps most importantly, his Honour found in relation to reasonable disciplinary action that:
‘... Ordinarily, the reasonableness of a person's actions is assessed by reference to the circumstances known to that person at the time, taking into account relevant information that the person could have obtained had he or she made reasonable inquiries or exercised reasonable care. The language does not readily lend itself to an interpretation which would allow disciplinary action ... to be characterised as not reasonable because of circumstances or events that could not have been known at the time the employer took the action with respect to discipline.’[32]
Therefore, in determining what is ‘reasonable’, any decision-maker will apply an objective test. Ultimately, however, what is ‘reasonable’ in one case may be wholly unreasonable in another. The test is therefore a question of fact to be weighed in each individual case and is not one expressly of law.
More recently, current Deputy President Wood of the NSW Personal Injury Commission has explored the question of s11A in a number of appeal cases.
In Webb v State of New South Wales,[33] Deputy President Wood heard an appeal from a worker who suffered psychological injury arising out of a meeting with his employer to discuss a complaint that would give rise to reportable conduct under child protection legislation. An investigation followed and the worker was exonerated. The worker was unsuccessful at first instance before Arbitrator Sweeney, following a finding that the meeting which caused injury was in the context of ‘discipline’ and therefore within the scope of s11A of the WC Act.
On appeal the Deputy President overturned the decision, indicating that the factual circumstances did not give rise to discipline because the worker was exonerated. In other words, the worker had not done anything wrong in the context of employment. In applying relevant case law, the Deputy President found that discipline must stem from action taken in respect of a worker’s conduct or performance in the workplace or arising out of employment. Discipline can include offering support and training to improve performance or communicating adverse findings as to conduct in employment, including actions implementing adverse consequences for inappropriate behaviour in the workplace.[34] In finding in favour of the worker, the Deputy President found that the actions taken in this case were not in response to work practices and were not actions taken with respect to discipline. And while the actions were ‘reasonable’, the defence was not made out as the actions did not fall within the scope of s11A.[35] This is a clear factual distinction to make and highlights the importance of carefully considering the circumstances in which the injury occurs.
The Deputy President again considered the prospect of an s11A defence in Westpac Banking Corp v Mani.[36] In this case, the worker was employed by the appellant as a customer experience manager, which involved investigating customer complaints, liaising with complainants and resolving issues raised. The worker underwent heart surgery and took some time off work before gradually returning in February 2017. On returning to work, the worker was involved in a number of meetings with his team leader between 1 October 2017 and 22 January 2018, aimed at addressing performance issues. The worker complained to management about the meetings on two occasions. At a meeting on 7 February 2018, the worker was handed a warning letter as his performance had not improved in accordance with his employer’s expectations. Following this he consulted his doctor and made a claim for compensation. At first instance, the Arbitrator found that the worker had suffered a psychological injury but he was not entitled to compensation because the injury was wholly or predominantly caused by reasonable action pursuant to s11A.
The worker’s appeal was dismissed. The Deputy President confirmed that any decision-maker must consider the reasonableness of the action that caused injury in addition to whether the action fell within the scope of s11A. Therefore, the reasonableness of the disciplinary action taken by an employer must be assessed and, in order to do so, any decision-maker must undertake careful consideration of the facts and the circumstances giving rise to the disciplinary action.[37]
In Secretary, Department of Education v BB,[38] Deputy President Wood heard an appeal arising out of a worker claiming weekly compensation, s60 expenses, and compensation for 17 per cent WPI under s66 of the WC Act for a psychological injury with a deemed date of 23 May 2017. The employer disputed that the injury was wholly or predominantly caused by reasonable action taken with respect to performance appraisal, discipline and transfer.
This matter was heard on 6 September 2019 and a Member found in favour of the employer. The worker successfully appealed, and the matter was remitted to another Member for re-determination.
Senior Member Bamber heard the matter on 7 November 2020 and issued a certificate of determination in favour of the worker. She referred to the decision in Hamad[39] and found that while it was difficult to identify the causes of the injury, and while the witnesses had different perspectives about key incidents, the incidents nevertheless still occurred, notwithstanding the fact that the worker did not seek medical treatment.
The employer appealed on a number of grounds including that the Senior Member had erred in law by finding that it failed to make out a defence under s11A by rejecting the opinion of the insurer’s medico-legal.
Deputy President Wood found that there was no error in the Senior Member’s evaluation and that her reasons were logical. It was obligatory for the Senior Member to evaluate whether the matters relied upon by the employer were causative matters that fell within the context of performance appraisal, discipline or transfer and whether they were the predominant cause of the injury. In addition, if a decision-maker rejects medical evidence, provided they give proper reasons as to why (which engage with a proper analysis of the facts) their statutory duty has been discharged.[40] In making this finding, the Deputy President noted that in Roncevich v Repatriation Commission Kirby J said that courts should ‘avoid an overly pernickety examination of the reasons’ and that ‘[t]he focus of attention is on the substance of the decision and whether it has addressed the “real issue” presented by the contest between the parties’.[41]
What is consistent across these three decisions of the Deputy President is how the facts of each case are paramount in determining the applicability of s11A defences and the evidence that is led in support of them. When preparing applications, it is therefore imperative that practitioners carefully examine all the circumstances that may give rise to injury, particularly those that occur outside of the context of ‘transfer, demotion, promotion, performance appraisal, discipline, retrenchment or dismissal’ and/or the reasonableness of any actions of an employer where the action taken falls within the scope of s11A.
CONCLUSION
Psychological injury in the workplace is by no means a new or emerging concept. Workers and employers need to be live to changes in the workplace that might give rise to the risk of injury and guard against them by implementing meaningful measures and policies that foster a safe work environment.
Further, law makers need to carefully consider any legislative changes to ensure that those who are psychologically injured in the workplace are properly protected, noting that they represent by no means the majority of claims funded under the NSW scheme.
Joshua Dale is Partner, Carroll & O’Dea Lawyers. He is an Accredited Specialist in Personal Injury Law and NSW President of the Australian Lawyers Alliance. EMAIL JDale@codea.com.au.
[1] Data collected by Safe Work Australia, Cost of injury and illness by type (2012–13) <https://www.safeworkaustralia.gov.au/data-and-research/work-related-injuries/cost-injury-and-illness-type>.
[2] icare NSW, icare insights – psychological claims update (11 November 2019) <https://www.icare.nsw.gov.au/news-and-stories/2019/icare-insights-psychological-claims-update#gref>.
[3] S Butcher, 2022 Review of the Workers Compensation Scheme, Submission to the NSW Legislative Council Standing Committee on Law and Justice (8 August 2022) <https://www.lawyersalliance.com.au/documents/item/2295>.
[4] Ibid.
[5] [2018] NSWWCC 209.
[6] See Stewart v NSW Police Service [1998] NSWCCR 57; and Commonwealth of Australia v Smith [2005] NSWCA 478.
[8] Ibid, 54.
[9] Workers Compensation Act 1987 (NSW) (WC Act), s9A.
[10] [2019] NSWWCCPD 40 (Yahiaoui).
[11] Ibid, 111.
[13] Yahiaoui, above note 10, 153–58.
[15] Ibid, 43.
[17] Ibid, [19].
[18] Badawi v Nexon Asia Pacific Pty Ltd t/as Commander Australia Pty Ltd [2009] NSWCA 324.
[19] [2019] NSWWCC 124.
[20] Ibid, 131.
[21] [2019] NSWWCC 325.
[22] Ibid, 121.
[23] Ibid, 123 and 124.
[24] Thom v Sinclair [1917] AC 127; applied in Smith v Australian Woollen Mills Ltd [1933] HCA 60 and Favelle Mort Ltd v Murray [1976] HCA 13.
[25] AP v NSW Police Force [2013] NSWWCCPD 11, 28.
[27] Nunan v Cockatoo Island Docks & Engineering Co Ltd [1941] NSWStRp 23; (1941) 41 SR (NSW) 119; Badawi v Nexon Asia Pacific Pty Ltd t/as Commander Australia Pty Ltd [2009] NSWCA 324.
[28] Yates v South Kirkby Collieries Ltd [1910] UKLawRpKQB 123; [1910] 2 KB 538; Anderson Meat Packing Co Pty Ltd v Giacomantonio [1973] 47 WCR 3.
[29] WC Act, above note 9, s11A(1).
[31] Northern NSW Local Health Network v Heggie [2013] NSWCA 255, 59 (Sackville AJA).
[32] Ibid, 61.
[34] Ibid, 141.
[35] Ibid, 142 and 148.
[37] Ibid, 167 and 168.
[38] [2021] NSWPICPD 21 (BB).
[39] Hamad v Q Catering Limited [2017] NSWWCCPD 6 (15 March 2017).
[40] BB, above note 38, 181–2.
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URL: http://www.austlii.edu.au/au/journals/PrecedentAULA/2022/63.html