Under workers compensation legislation, the “reasonable action” defence is one often relied upon by insurers against claims of work-related psychological injury.
The parameters of the “reasonable action” defence differ to some extent across the Australian states and territories. In some states, such as Queensland, Victoria, South Australia and Tasmania, the definition of “reasonable action” is quite broad and can encompass a wide range of actions by the employer. However, in other states, including New South Wales, the definition is quite prescriptive.
Section 11A(1) of the Workers Compensation Act 1987 (NSW) states:
No compensation is payable under this Act in respect of an injury that is a psychological injury if the injury was wholly or predominantly caused by reasonable action taken or proposed to be taken by or on behalf of the employer with respect to transfer, demotion, promotion, performance appraisal, discipline, retrenchment or dismissal of workers or provision of employment benefits to workers.
The difficulty of such a prescriptive definition arises when the action (or proposed action) does not clearly fall into one of the categories listed above, even though it may seem otherwise reasonable. This quandary was discussed in a recent decision of the Workers Compensation Commission of New South Wales (WCC) (Karen Dinning v Westpac Banking Corporation  NSWWCC 49).
In this matter, a worker claimed that she sustained a psychological injury (a generalised anxiety order) as a result of action taken by her employer in attempting to address issues with her workplace email style. The worker claimed that she had been subjected to micromanagement, intimidation, humiliation and unfair targeting by her employer, which included:
- a meeting in which one of the worker’s emails was projected onto an overhead screen and she was questioned on the spot about why she had written it in point form;
- another two-hour meeting in which her manager printed out all of her emails and spoke to her in an aggressive tone, including saying that that she did want to hear the worker’s side of the story;
- her manager not looking at her responses but still advising her that they needed to be amended; and
- being advised that someone would have to sit with the worker at work, that she was “a square peg in a round hole” and they did not know what to do with her.
The employer denied that it had ever acted in a bullying or harassing manner towards the worker or that the meetings were ever aggressive. It sought to rely on the “reasonable action” defence to deny liability for the psychological injury and claimed that the meetings were reasonable action taken in respect to performance appraisal.
It argued that the meetings were the result of discovering that the worker’s emails to others, including stakeholders, were confusing, contained incorrect responses and/or were late. The employer argued that the meetings were catch ups and an attempt to understand the issues with the worker’s performance before further action was required.
The WCC rejected the employer’s argument and had particular regard to the manner in which “performance appraisal” has been defined in previous case law. It regarded a performance appraisal as “a limited discrete process with a recognised procedure that both the applicant and the respondent understood would amount to performance appraisal”.
In the WCC’s view, this had not occurred. Instead, the employer had engaged in a “vague, continuing, informal process” seeking to address specific problems with emails as they arose.
The WCC went further to state that even if this was performance appraisal, the employer had not provided any evidence of policies and procedures that were in place relating to performance appraisal, which would have allowed the worker to understand that she was the subject of such a process.
The employer’s defence therefore failed and the WCC made orders that the worker’s medical expenses should be paid.
Lessons for employers
Employers should be aware that the definition of “reasonable action” differs across states and territories. As can be seen in this particular case, the definition under NSW legislation is quite prescriptive.
The WCC has indicated that the presence of, and compliance with, policies and procedures will go a long way to successfully relying on the ‘performance management’ aspect of this defence.
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