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NSW Workers Compensation – Claims for Psychological Injury

Published on April 5, 2023 by Joshua Dale

This article was originally published in Precedent, a bi-monthly journal published by the Australian Lawyers Alliance, and is reproduced here with permission.

INTRODUCTION

Mental Health conditions suffered by those in the work place, including psychological injury as a result of employment is a significant concern for employers Australia wide. This is not only due to the negative effects of mental illness on employees but in turn the significant costs incurred by businesses due to absence from the work place and generally, the payment of compensation or increased insurance premiums, when injury occurs in the workplace.

According to Safe Work Australia, each year 7200 Australians are compensated for work-related mental health conditions which equates to approximately 6% of all workers compensation claims nationally. These claims result in approximately $543million being paid in workers compensation per annum[1].

Of those making a claim for psychological injury, 42% are men and 58% are females.  60% of claims awarded are to those aged 40 and over. The main causes of serious mental health condition claims, which are defined as an injury resulting in 1 or more weeks off work, are work pressure (21%), work related harassment or bullying (20%) and exposure to workplace or occupational violence (10%)[2].

According to ICARE NSW psychological injuries are increasing at an exponential rate flagging the potential for reform. However, uncovered recently in a submission by the ALA  to the NSW Legislative Council Standing Committee on Law and Justice:

 “The problem with that data [unpublished ICARE data], and the conclusions advanced, is that it appears to be inconsistent with data that is published by SIRA on its website as part of its open data. For example, between 2021-2022 financial year, SIRA data discloses that there was a decrease in overall claims from 99,398 to 82,542 and the number of mental disease claims decreased from 8,313 to 6,110 over the same time. At face value, that would suggest a decrease of the percentage of psychological claims from 8.3 per cent of all claims to 7.4 per cent of all claims.

All the messaging and publicity that has quoted icare on the issue seem to imply that the alleged increase in psychological claims is having a material impact on return to work rates and; therefore, impact the overall costs of the scheme. 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.”[3]

This paper will be confined to looking at mental health claims made through the Workers Compensation Scheme in NSW but equally the case law ought to apply more generally across multiple jurisdictions.

EVIDENTIARY REQUIREMENTS FOR PSYCHOLOGICAL INJURY

Typically psychological injury in the context of a workers compensation claim in NSW arises in two broad categories:

1. Frank Injury – for example, an injury suffered as a result of a being involved in or witnessing a traumatic event such as the death of a colleague.
2. Disease injury – for example, an 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:

i. being over worked;
ii. being under resourced;
iii. a hostile work environment;
iv. being ostracised;
v. exposure to traumatic events;
vi. being unfairly targeted in the workplace.

When considering injury in the context of a claim one must first consider the Workers Compensation Act 1987 (NSW). Section 4 defines injury as:

4   Definition of “injury”

In this Act:

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, and

(c)  does not include (except in the case of a worker employed in or about a mine) a dust disease, as defined by the Workers’ Compensation (Dust Diseases) Act 1942, or the aggravation, acceleration, exacerbation or deterioration of a dust disease, as so defined.”

When considering psychological injury one must pay particular attention to a workers perception of events at work. Somewhat recently this was looked at in the decision of McHughes v Brewarrina Local Aboriginal Land Council[4] where Senior Arbitrator Capel confirmed the position at law:

1. Employers take their employees as they find them i.e. the egg shell skull principle applies;
2. Must be a perception of real events during the course of employment;
3. The Workers perception about whether the events created an offensive and hostile environment, subject to injury being established, is relevant;
4. 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 because of a disordered mind;
5. There is no requirement that a worker’s perception must pass some qualitative test based on an objective test of reasonableness.
6. It is not necessary for a worker’s reaction to be rational, reasonable or proportionate.

Notwithstanding the above, it is still necessary to satisfy that the psychological effect goes beyond a mere emotional response and it remains necessary to establish a diagnosable psychiatric condition in order to satisfy the definition of injury[5].

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. Whilst the Worker does not need to react rationally or reasonably for an injury to have been suffered it is important to distinguish between those events that are real that led to a change in psyche and those that are either untrue or alternatively whether earlier innocuous events are later rationalised in the context of a claim. This is re-enforced in the decision of Attorney Generals Department v K whereby 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.”[6]

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 leads 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[7].

In Golden Swan Investments (Australia) Pty Ltd v Yahiaoui[8] Deputy President Elizabeth Wood heard an appeal that questioned the reasoning at first instance in finding 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 from employment 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.

The Arbitrator at first instance found that when considering whether employment is a substantial contributing factor to an injury it is a question of fact, and is a matter of impression and degree which is to be decided after a consideration of all of the evidence. The Arbitrator said that it was important to note that the employment must be a substantial contributing factor to the injury, not the incapacity, need for treatment, or the permanent loss. The Arbitrator said that it was also important to note that there can be more than one substantial contributing factor to the injury, and the employment need not be “the” substantial contributing factor.

Whilst this was generally confirmed to be correct, the Deputy President, confirmed that the test is, as described by Basten JA in State Transit Authority of New South Wales v Fritzi Chemler[9], whether the worker perceived the workplace as creating an offensive or hostile working environment before going on to find that it was clear that the Arbitrator’s process of fact finding miscarried noting there was a misstatement of law by the Arbitrator and otherwise did not adequately address the credit issues raised about the worker’s version of events.

The importance of factual findings was again highlighted in Shoalhaven City Council v Booth[10] where Acting Deputy President Larry King SC heard a case concerning a complaint made about the worker concerning a conversation he had with a female colleague where he suggested that she could do better than her boyfriend. The worker was notified about the complaint through two separate meetings by two managers where he was noted to be visibly upset and not offered a support person. There was no question that the meetings fell into the category of discipline within the context of the workers employment. The question before the commission was whether the actions taken were reasonable or unreasonable.

The worker was successful before Arbitrator Dalley at first instance and on appeal to the Acting Deputy President affirmed that decision, confirming that the appeal must fail because the original decision makers decision was a factual one where a view was taken that events occurred. The Acting Deputy President affirmed that whilst minds might differ about the reasonableness of what took place when a decision maker considers and takes into account all of the circumstances of a case and where it follows that any conclusion drawn was fairly open and where no evaluation of the reasoning process displaces the evaluation then the decision should stand[11]. The Acting Deputy President did however state that in making that finding he informed himself in accordance with the directions in Raulston v Toll Pty Ltd[12] where it says a finding of fact cannot be disturbed unless other probabilities so outweigh that chosen by the Member that it can be said that his or her conclusion was wrong.

Whilst factual construction is paramount in a Member’s reasoning it is important to remember that when considering frank incidents, employment will be a substantial contributing factor to an injury if its contribution was “real and of substance.”[13]. In other words it is equally important that consideration of the law and weighing up the factual scenarios presented in a case are balanced otherwise a decision maker will fall into error, as was the case in Yahiaoui, addressed above.

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 rather than some definition of those words. Summarised more recently, Arbitrator Scarcella (as he then was) in the decision of Basham v State of New South Wales (Riverina Institute of TAFE)[14] confirmed that the worker bears the onus of proving injury and made clear that:

“131. 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. Such a concept is not new. Sections 4(b), 9A and 11A of the 1987 Act contain specific requirements and the provisions need to be interpreted using standard principles of interpretation. This does not mean that the common-sense approach has no place in the application of the legislation to the facts of the case.”

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[15] Arbitrator Homan (as she then was) heard a case where the worker alleged psychological injury arising from a number of events over a two year period with the respondent. The worker did not allege any one event caused her injury but that it arose as a result of the culmination of all workplace events over the period of time alleged. 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 that there were real events in the workplace and whilst some of the events were accepted to have not occurred this did not break the causal nexus and that the evidence was consistent in indicating that the accumulation of numerous events at work over time caused the injury[16]. The Member went further to suggest that the failure to report workplace stressors until 2016 (some two years after the events were said to have first begun occurring) was consistent with the way case was advanced, namely that it was an accumulation of events leading up to a final interaction in 2016 that caused her injury and on the basis that the workers perception of real events over an extended 2 year period was causative the Member was satisfied it was the main contributing factor[17].

The concept of causation is paramount in establishing an entitlement to compensation particularly in circumstances where a worker might have suffered or had been suffering psychological trauma or injury as a result of factors outside of the workplace.

In the context of considering this question one must first consider the term “employment” in order to establish the elements of that environment and then apply a factual common sense approach to determining whether or not 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 a worker ought be exposed to something in the course of their employment, be it a nature of the conditions or obligations of that employment that the worker would otherwise not have been exposed to[18]. This requires a careful consideration of the actual events, including what the worker was doing in their employment and how those tasks contributed to their injury[19]

The question that then arises in this context is whether or not the injury arises out of or in the course of employment. In the case of AP v NSW Police Force[20] 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[21]. In other words, careful consideration needs to be had of the circumstances experienced within the context of employment and how that led to a particular injury arising. 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 ensure there was a psychological effect[22].

When a claim for psychological injury is made, generally speaking, the main areas of dispute fall within the ambit of sections 4 (injury), section 9A (whether employment was a substantial or main contributing factor) and section 11A (defence available to an employer where injury arises from reasonable actions) of the Workers Compensation Act 1987 (NSW).

Section 4 and 9A largely arise out of the factual basis upon which a claim arises and the evidence that is obtained with respect to injury, usually in the form of medical or medico-legal evidence. The ambit of these sections have already been discussed in this paper and therefore will not be repeated here. The onus is on the worker to establish these aspects of any claim.

Conversely, section 11A of the Workers Compensation Act 1987 (NSW) allows an employer, usually through their workers compensation insurer, to lead evidence of reasonable action associated with “transfer, demotion, promotion, performance appraisal, discipline, retrenchment or dismissal of workers or provision of employment benefits to workers”[23].

It is important to note that the employer bears the onus of proof in establishing this defence. That means that the employer will need to have evidence that clearly demonstrates that their actions were reasonable when dealing with an employee. When considering this evidence consideration must be given to the cause of the injury. Namely, 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 and not some other factor.

Too often, employers, usually through their insurers, will lead evidence that reasonable action was taken in the course of employment within the ambit of section 11A but then fail to adduce evidence capable of showing the causal connection between those reasonable actions and the injury itself. In this regard, it is absolutely necessary for employers/ insurers to establish that the reasonable actions predominantly caused the injury as opposed to other actions that fall outside the categories of set out is section 11A. In other words, the reasonable actions within the ambit of section 11A must have mainly and principally caused the injury and without evidence satisfying this, the defence will ultimately fail.  

Whilst there are a number of cases addressing the question of section 11A a good practical example is the case of Northern NSW Local Health Network v Heggie[24]. Mr Heggie was employed as a Security Officer at the 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 and he was suspended on full pay pending an investigation.

Heggie claimed that he suffered a psychological injury as a result of his suspension. The ‘reasonable action’ or section 11A defence was raised by the employer. His honour Sackville AJA set out a number of factors to consider including:

1. That a broad view be taken when considering action taken with respect to discipline;
2. That the injury be wholly or predominantly caused by the reasonable action taken or proposed to be taken by an employer;
3. The employer bears the onus with respect to the notion of whether actions were reasonable;
4. 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[25].

And, perhaps most importantly his honour found that:

“[61]…. The statutory language directs attention to whether the psychological injury was caused by reasonable disciplinary action taken or proposed to be taken by the employer. 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 (or action of any other kind identified in s 11A(1)) 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.”[26]

Therefore, in determining what is “reasonable” any decision maker will apply an objective test. Ultimately however, what “reasonable” is 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.

In recent years 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[27] 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 received that would give rise to reportable contact under child protection legislation. An investigation followed whereby 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 1987 Act.

On appeal the Deputy President overturned the decision of Arbitrator Sweeney 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[28]. 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 whilst reasonable actions the defence was not made out as the actions did not fall within the scope of section 11A[29] which is a clear factual distinction to make and highlights the importance of carefully considering the circumstances in which injury occurs.

The Deputy President again considered the prospect of a s11A defence in Westpac Banking Corp v Mani[30]. In this case, the Respondent was employed by the appellant as a Customer Experience Manager, which involved investigating customer complaints, liaising with complainants and resolving issues raised.  The Respondent 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 between 1 October 2017 and 22 January 2018 aimed at addressing performance issues with his team leader. The worker complained about the meetings on two occasions. At a meeting on 7 February 2018, the respondent worker was handed a warning letter as his performance had not improved in accordance with his employers expectations. Following this he consulted his doctor and made a claim for compensation. The Arbitrator at first instance found that the appellant had suffered a psychological injury but that he was not entitled to compensation as the injury was wholly or predominantly caused by reasonable action pursuant to section 11A.

The Appellant worker brought an appeal which was dismissed. In doing so the Deputy President confirmed that any decision maker must consider the reasonableness of the action that caused injury in addition to whether the action taken fell within the scope of section 11A. 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 a careful consideration of the facts of the matter and, importantly, the circumstances giving rise to the disciplinary action in order to consider the reasonableness of the action taken[31].

Most recently in Secretary, Department of Education v BB[32] Deputy President Wood heard an appeal arising out of a worker claiming weekly compensation, section 60 expenses and compensation for 17% WPI under section 66 of the Workers Compensation Act 1987 (NSW) for a psychological injury with a deemed date of 23 May 2017. The appellant disputed that the injury was wholly or predominantly caused by reasonable action taken with respect to performance appraisal, discipline, and transfer. In other words, a section 11A defence was raised.

This matter was heard by a Member on 6 September 2019 in favour of the appellant. 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[33] and found that whilst it was difficult to identify the causes of the injury, and that witnesses had different perspectives about key incidents, the incidents nevertheless, still occurred, notwithstanding the fact that the worker did not seek medical treatment.

The Appellant appealed on a number of grounds including that the Senior Member erred in law by finding that it failed to make out a defence under section 11A by rejecting the opinion of insurer’s medico-legal on the basis that he failed to properly consider the evidence.

Deputy President Wood determined the appeal and found that there was no error regarding the Senior Member’s evaluation and her reasons were logical. It was obligatory for the Senior Member to evaluate whether the matters relied upon by the appellant were causative matters that fell within the context of performance appraisal, discipline or transfer were the predominant cause of the injury. In addition, in rejecting medical evidence, provided proper reasons are given as to why, which engage with a proper analysis of the facts, this discharges a decision makers statutory duty. In making this finding the Deputy President noted that in Roncevich v Repatriation Commission[34], Kirby J said that the 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.”

What is consistent across these three decisions of the Deputy President is how paramount the facts of each individual case is in the determining the applicability of section 11A defences and the evidence that is led in support of them. In the preparation of 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 of worker” and/or the reasonableness of any actions of an employer where action taken falls within the scope of section 11A.

DUTY OF CARE ISSUES AIRISNG IN THE CONTEXT OF WORKPLACE INJURIES

There can be no dispute that many workplaces are increasingly becoming more and more stressful. Possibly this is due to the digital age where everything is instantaneous and employees are largely accessible at all hours of the day and/or increased pressures and exposure to illness associated with public health events, such as the recent Covid-19 pandemic. This is not a new concept in 2022 by any means but it is no doubt one that has led to an increased level of stress and expectation in the workplace.

Employers must be live to these changes and foster environments that are safe and most importantly environments that recognise the risk and prevalence of psychological injury.

When one considers the question of a duty of care in workers compensation cases this is generally within the context of a claim in negligence against an employer. The High Court of Australia has been asked on a number of occasions to consider the question of psychological injury in the context of workplace injuries and the duties employers owe to their employees. The often cited case of Tame v New South Wales[35] is perhaps the starting point whereby the court through their honours Gummow and Kirby JJ distinguished between physical and psychological injuries whereby four general principles were established to attempt to limit the situations in which compensation is recoverable for pure psychiatric injury.

“These are (i) that psychiatric harm is less objectively observable than physical injury and is therefore more likely to be trivial or fabricated and is more captive to shifting medical theories and conflicting expert evidence, (ii) that litigation in respect of purely psychiatric harm is likely to operate as an unconscious disincentive to rehabilitation, (iii) that permitting full recovery for purely psychiatric harm risks indeterminate liability and greatly increases the class of persons who may recover, and (iv) that liability for purely psychiatric harm may impose an unreasonable or disproportionate burden on defendants.”[36]

In a later decision of Gifford v Strang Stevedoring Pty Ltd[37] the High Court, in consideration of the decision of Tame v New South Wales commented further by finding that the personal susceptibility of a worker (i.e. egg shell skull rule) provides an additional level of foreseeability for consideration by an employer but this must still balanced against a test of reasonableness that takes into account both the interests of injured workers and the burdens of their defendant employers[38].

Therefore, the High Court has indeed focussed its attention on determining what “reasonableness” requires. Ultimately the facts of each case will determine the liability of an employer for any psychological injury suffered by an injured worker. In the case of Appeal in Nationwide News Pty Ltd v Naidu; ISS Security Pty Ltd v Naidu[39] the court of appeal did clarify that whilst previous authority does establish that unreasonable workplace stress can cause compensable injury it does not necessarily lead to the conclusion that the risk of injury always requires a response for the purposes of attributing legal responsibility [40]. The court made it clear that one of the fundamental elements to establishing liability remains that the degree of probability that the risk of psychiatric injury may occur must be assessed against the reasonable foreseeability test of a risk that is not far fetched and fanciful[41].

As a practical example in recent years as to the type of psychological injury that could be heard successfully, Sills v State of NSW [42] was a court of appeal case where a NSW Police Officer alleged that she had been exposed to multiple traumatic incidents throughout her employment and suffered psychological/psychiatric injury as a result. A police medical officer and psychologist had recommended counselling. The worker claimed a non-delegable duty was owed in respect of foreseeable risk of injury. At first instance the worker was unsuccessful where it was found not unreasonable for the NSW Police to do nothing. The worker successfully appealed with the court finding that the NSW Police knew she was suffering from PTSD and her involvement with the police force on general duties was likely to make it worse. A breach of duty of case was found and damages followed.

Finally, as a practical consideration for any practitioners considering a damages action for an injury arising out of the course of employment, it should be remembered that where psychological injuries are concerned these can sometimes give rise to a wide variety of claims outside the area of personal injury that may give rise to compensation and damages including arising out of employment/ anti-discrimination legislation which will have an effect on a workers ability to recover damages. Practitioners ought to be reminded of sections 149 and 151A of the 1987 act that effectively operates to prevent recovery for damages under the workers compensation scheme in circumstances where damages have been obtained elsewhere against the employer[43].

CONCLUSION

Psychological injury in the workplace is by no means a new or emerging concept and has drawn judicial attention for decades and will continue to do so. Workers and Employers will need to continue to be live to the existence of 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 change, if that is on their agenda, to ensure that those that are psychologically injured in the workplace are properly protected noting 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.