In NSW, the worker's compensation scheme is a 'no-fault' system. This means an insurer has limited defences at its disposal to decline a worker's compensation claim. In respect of psychological injuries, the insurer has two main defences.
- As with all worker's compensation claims, the first defence is that the injury did not arise out of the course of the worker's employment and that the worker's employment was not a substantial contributing factor.
- The second defence, known as the section 11A defence, is that the worker's injury was wholly and predominantly caused by the reasonable actions of the employer with respect to transfer, demotion, promotion, performance appraisal, discipline, retrenchment or dismissal of workers or provision of employment benefits to workers.
In this blog, we explore the second defence of reasonable actions of the employer.
What is reasonable action in NSW worker's compensation claims for psychological injury?
When considering what is reasonable action, the decision is usually left to a Member of the Personal Injury Commission (PIC) to decide after looking at all the evidence.
A medical practitioner cannot make an assessment that includes an opinion on whether the actions of the employer were reasonable or not. A medical practitioner's opinion is limited to the diagnosis of the injury, capacity to work and whether the injury was a substantial contributing factor to the worker's injury.
It is important to note the test for reasonableness is what's known as an objective test. This means that the PIC needs to determine whether a reasonable person in the employer's position would consider the actions of the employer to be reasonable.
It is not enough that an employer believed that the action that caused the psychological injury was reasonable. It is also not enough that the employer believed that it was compelled to act as it did in the interests of transfer, demotion, promotion, performance appraisal, discipline, retrenchment or dismissal of workers or provision of employment benefits to workers.
There is no one definitive situation that would lead to the PIC determining whether actions of the employer were reasonable or unreasonable.
The basic principle in this respect is that the defence is assessed on the facts, which can differ from case to case. When considering reasonable action, the PIC needs to have regard not only to the end result but to the manner in which it was affected. That is, they need to take into account the whole process of the employer's action that caused the psychological injury.
Examples of reasonable action
Of the actions listed in section 11A, performance appraisal and discipline are commonly used defences by insurers.
Whilst facts differ from case to case, a common example is when a worker is placed on performance improvement plans or is disciplined. When the PIC makes decisions on this issue, they look at the whole process of the performance improvement plans or discipline process and whether this was reasonable. The PIC will often check if employer policies and procedures were followed in these situations to determine whether the employer's actions were in fact reasonable.
The case of Irwin v Director General of School Education (Irwin) is a leading authority on the reasonableness of an employer's action. The court in the matter of Savage v ECO Septic Pty Ltd [2021] NSWPIC 515 quoted the Irwin decision which stated that:
"The test of reasonableness is objective and must weigh the rights of employees against the object of the employment. Whether an action is reasonable should be attended, in all the circumstances, by questions of fairness."
Conclusion
It is important to seek legal advice if your claim for a psychological injury is declined on the basis that the actions of the employer were reasonable.
As indicated, there are limited defences an insurer can rely on when making a decision to reject or decline a worker's compensation claim. If the defence of reasonable action is relied upon by the insurer, we can help get the review process started and get the best possible outcome prior to, or at the PIC.
Hall Payne Lawyers are IRO Lawyers and can apply for ILARS funding. This means that there are no legal fees payable for any advice and assistance we provide in respect of your worker's compensation claim. We can assist with the preparation of a statement and documents in support of your claim, including advice and responses to evidence served by the insurer on behalf of the employer such as investigation reports and witness statements.
We can also assist with investigating a potential claim for lump sum compensation. We can then represent you in a work injury damages claim (common law claim) for past and future economic loss arising out of the negligence of the employer.
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