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Friday Workplace Briefing

The Truth About the Reasonable Management Defence to Workers’ Compensation Psychological Claims

Andrew Douglas and Kim McLagan dive into the truth about the Reasonable Management Defence to workers’ compensation psychological claims.

They will discuss why, just because the worker is wrong, this doesn’t mean their psychological injury claim won’t be accepted.

To view the full episode and catch up with the week’s latest news and developments please visit this link.


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About the Hosts

Managing Principal - Victoria

Principal Lawyer - Head of Workplace Relations

Episode Transcript

Andrew Douglas: Alright, we’re going to head onto a major topic today.

Kim McLagan: Great topic.

Andrew Douglas: And that’s why I’ve got Kim along. I shoved Nina out. Reasonable management action is one of those discussions which seems to just go all over the place, and it goes all over the place partly because there’s two stages towards reasonable management action. There’s the conduct that is the pre-performance management disciplinary action, and there is… Which is subject to what is called subjective intention of the person who participates. They’ve got an eggshell skull, that is… They bring to life the judgements they make based on what’s going on in their brain and their life.

Kim McLagan: Yeah.

Andrew Douglas: And so long as it’s not delusional, so long as the event did happen and they form that perception, it will be compensable.

Kim McLagan: Yes.

Andrew Douglas: And then you go into an objective test when you are managing someone, that the actions you take are-

Kim McLagan: Reasonable.

Andrew Douglas: Well, two fairnesses really.

Kim McLagan: Yeah.

Andrew Douglas: It was fair that you take the action.

Kim McLagan: Yeah.

Andrew Douglas: And you did it in a fair way which is what reasonable management action is. But unfortunately, Kim, the workers’ compensation tribunals and jurisdictions make decisions which are pretty interesting compared to employment law.

Kim McLagan: You hate workers’ comp, don’t you?

Andrew Douglas: Yep. Well, I’d like them to align with the law every now and again.

Kim McLagan: Well, that would be nice.

Andrew Douglas: Everyday-

Kim McLagan: My job a lot easier.

Andrew Douglas: Yeah, every now and again, if they just thought, “Geez! That’s got nothing to do with employment law. We’re just making shit up, I’d be a lot happier.” But they do. So, if we look at some of the examples we’ll come to your case.

Kim McLagan: Yeah.

Andrew Douglas: In a second that we’re going to talk about. But some of the examples are “If I’m going to stand someone down not to provide them with a support person?”

Kim McLagan: Yeah.

Andrew Douglas: To tell them I’m going to stand them down. Now, just remember ladies and gentlemen. The reason we stand people down is an imminent risk to someone’s health. So, of course, we’d have a support person. But employment law says you don’t have to do that. You go offer them EAP if you want to stand that. You’re going to do an investigation. You got to tell them exactly the scope of the investigation. You’ve got to offer EAP for them. That’s before you get to the things which is required by employment law, okay? So, there’s a whole lot of stuff that workers’ compensation does because it is beneficial legislation around a worker that says that a worker must not be placed in a position, where you create a psychological hazard that’s not controlled.

Kim McLagan: Mm.

Andrew Douglas: So, by telling you, I’m going to stand you down. That definitely creates a psychological hazard. What is the control that I put in place to be satisfied that you were safe? By telling you I’m going to participate in the investigation, I must make full disclosure.

Kim McLagan: Yes.

Andrew Douglas: So, even to say that there’s going to be additionally discussion later on this afternoon about an issue that’s happened which is sexual harassment issue, another case together. I’ve got to tell you exactly what it is. I’ve got to give you documents that show you that. Can I say in each jurisdiction, some are much more document heavy than others? So, in Queensland, you do that in a documentary form every single day of the week. I’d advise you to documentary form everywhere.

Kim McLagan: Every time.

Andrew Douglas: It’s a bit more relaxed than Victoria and New South Wales. But in Queensland, it was the land of cutting down trees, okay? So, when we look at all those things, Kim, as we come to deal with any issue which relates to a person’s misconduct, what are the things we need to do to tick off the workers’ compensation risks?

Kim McLagan: Well, as you’ve said, “Always offer a support person.” Always offer EAP if you have it. Always give adequate notice as to what they’re work walking into. ‘Cause we often see people saying, “Oh, I was ambushed and taken by surprise and I was shocked and horrified.” And all this sort of language. It’s really about being really fair. Oh, we’ll talk about perception, I think.

Andrew Douglas: Yeah. Okay. So look, I think my dad used to say, “You’d be best to your worst.” That was his conversation.

Kim McLagan: Yes.

Andrew Douglas: And often when we’re going into these things. These are red flag employees. We do know who they are. So, we know where we’re going with them. And what we really need to do is go, “Okay, step back.”

Kim McLagan: Yeah.

Andrew Douglas: Plan it.

Kim McLagan: Yeah.

Andrew Douglas: Document it.

Kim McLagan: Yeah.

Andrew Douglas: What am I going to do? I’m going to stand you down, okay. So, I’m going to say to you, “Look Kim, I’ve got to have “a serious conversation about something arose.” This is the nature of the allegation that has been made. I’m going to give it to you so you can have read. I’ll try and probably have someone say to you beforehand, “Look, is there anyone you’d like to be present? The extent that you can, it’s very hard when you’re having that discussion. “But also, here’s the number for EAP. If you’ve got any troubles, let us know. And here’s my mobile number if you’re worrying about it.” They will get down around the initial discussion of “We’re going to go down this path.”

Kim McLagan: Yes.

Andrew Douglas: But always documenting. Give them a letter.

Kim McLagan: Yeah.

Andrew Douglas: Which sets out stuff so you’re replaced along the way. ‘Cause there’s a couple of cases where people were given letters and we’re given that stuff and they still said they were shocked. And even the workers’ comp tribunal said, “Well… But they did everything right.” It’s a process report.

Kim McLagan: Process, yeah.

Andrew Douglas: So, we’ve given them notice of what we’re going to do. Could be an investigation, could be a stand down, could be a disciplinary hearing. What do we do next?

Kim McLagan: What do you mean?

Andrew Douglas: Well, we’ve told them about that. We’ve appointed a time. They turn up in the meeting, what do we do? Yeah, look at this, you’re looking absolutely confused, ha? You should be confused ’cause we’ve told them everything we need.

Kim McLagan: Yes.

Andrew Douglas: We’d be satisfied if they don’t turn up with a support person that “You sure, you want to go ahead with a support person.”

Kim McLagan: Oh, it can be.

Andrew Douglas: “Here’s EAP.” You serve them with a fresh letter of allegations if necessary, within more detail. You take time. You do all those things, okay? So, it’s the first part, the employment law doesn’t require you to do.

Kim McLagan: Hm.

Andrew Douglas: It’s the second part that employment law does require if you are going to terminate, only. Not if you’re going to investigate. Not if you’re going to stand down. Yeah, when Kim’s looking at me with perplexed eyes, which she’s really-

Kim McLagan: ‘Cause I thought you’d already covered off on it.

Andrew Douglas: Yeah, no, no. But the part is you have to repeat it all like again. So, you do it twice…

Kim McLagan: Yes.

Andrew Douglas: In any process you’re dealing with. So if you stand down, investigate and then go to discipline you’re going to end up doing it five times.

Kim McLagan: Yeah.

Andrew Douglas: Okay?

Kim McLagan: Yeah.

Andrew Douglas: Can you please keep detailed contemporaneous notes of everything that you do? All of that is evidence which is admissible of the truth of what you’re doing.

Kim McLagan: Mm-hm.

Andrew Douglas: And so are those documents. So, let’s talk about Podesta as the case that we are going to talk about today. And I’ll let you have a bit of a shot about that. And then I’ll talk about Murat at the end of it.

Kim McLagan: Alright. So Podesta was… Two issues arose in this case. Two disciplinary resource management action or management action issues that arose. And so the issue of the case was whether or not it was carried out reasonably. So, the management action was certainly had to be done, reasonable to be done, because the guy had engaged in misconduct. I’ll come to that, but… So, the first meeting was to address a team of workers who had allegedly threatened a new staff member to say, “We got the last guy sacked. Look out or you’ll be next.” So, the general manager of the council came in, met with the group. But it was perceived by some of them that he was threatening because he adopted an accusatory tone even though people had denied that they are responsible for the note. He still didn’t accept that-

Kim McLagan: And referred doing a murder case. They eventually got their man.

Kim McLagan: Yes. Yeah. He raised his voice. He made an analogy to the Clarendon Claremont, was it?

Andrew Douglas: Claremont.

Kim McLagan: Claremont serial killer about the police investigation and said, “If you don’t look out, none of you’ll have a job because there won’t be any workshop left.” So, that attitude and behaviour of the GM, even though the issue had to be addressed, he didn’t carry it out in a reasonable manner and it was perceived as being threatening. So, claim got up, work-cover claim would get up on that basis alone.

Andrew Douglas: Yep.

Kim McLagan: The second thing they did was they investigated the team leader, Podesta. Not only about the note, but said, “We want to interview you about other inappropriate conduct.” But what they interviewed him about was previous conduct that had never been addressed previously-

Andrew Douglas: Or put to him previously.

Kim McLagan: Or put to him previously. And they just referred to it as an inappropriate conduct. He locked up for the investigation and he was hit with allegations about inappropriate conduct towards a former employee and allegations that tantamounted to theft. So again, shock, horror, I didn’t know any about this. Wasn’t given fair warning. So, his claim got up on that as well. Whereas if they just had to taken the really simple steps that you talked about. First, you never raise your voice, you never slam fish, you never show any aggression in a disciplinary-

Andrew Douglas: And you don’t bring up stuff to try and damage a person, just deal with the issue.

Kim McLagan: Yeah.

Andrew Douglas: I think, what the judge in this case or tribunal member got is this was a fix, this was a fix up. And here they’re worried about someone stealing stuff and, not stealing stuff, about threatening someone.

Kim McLagan: Yeah.

Andrew Douglas: And next thing, they’re raising these allegations with so much and it’s a way of fitting it up. So, it’s done for a collateral purpose. It’s done to put pressure upon this guy and it’s inappropriate. Employment law would struggle with it, but it wouldn’t say it was unlawful. But workers’ compensation quite clearly does.

Kim McLagan: Yeah.

Andrew Douglas: Look the other other part is… When we talk about Murat, which is another recent case which is where a guy who suffered from a psychotic illness. There’s sort of two parts along the performance track. There is that part which says, “Okay, this is what the person does for a job and how you interact. And then there is the performance disciplinary process for investigative process that sits over here.” At the first stage, the way you treat me or the way I talk to you has got nothing to do with performance management, okay? Can you just go and get that for me? is not a performance issue. It’s a direction that’s given us. Inappropriate and it’s not the way I should say. But if I’m suffering from, if I’m a vulnerable and gentle person and I feel threatened by that. My subjective understanding, that is the basis for an acceptance of a claim. And they got bit muddled in the case, just Podesta case, in what we’re talking about. But in Murat’s case, this guy suffered from delusions and so some of the events just didn’t occur at all.

Kim McLagan: Yeah.

Andrew Douglas: As a result, that his claim was rejected. But it was a very clever and detailed judgement , identifying importance of subjective tests. So I just put that warning out there when we’re talking about reasonable management action. Don’t conflate it into non-performance issues. Does that make sense?

Kim McLagan: Yeah.

Andrew Douglas: The day-to-day running of the business is subjective test when you’re doing performance management. This way, Kim’s talking about how to do it correctly. It is an objective test…

Kim McLagan: Hm.

Andrew Douglas: …based on the evidence that you have. So, if you don’t keep contemporaneous written notes, if you don’t write letters, you don’t do that sort of stuff, it’s he said, she says.

Kim McLagan: Mm.

Andrew Douglas: And it will fail because it’s beneficial legislation on the word of the employee law on accepted. That all make sense?

Kim McLagan: Yep.

Andrew Douglas: Good. Good. We’re under the problem.

Kim McLagan: Just a name.

Andrew Douglas: You’ve only got a few minutes late, Kim.

Kim McLagan: Okay.

Andrew Douglas: I’m feeling better there. Not a bad word is stuck from your lips. It’s incredible, isn’t it?

Kim McLagan: You know how much I love doing these.

Andrew Douglas: Okay, let’s have the problem up for it. Here, we go.

Kim McLagan: Right. Let’s see if they got picked up, your spelling errors, Andrew.

Andrew Douglas: Oh, thank you very much for that.

Kim McLagan: Mick struggled with Noelene. Noelene had a disability causing her to drag her left leg and was unable to lift more than 20kg. The disability arose from a Motor Vehicle Accident. She also had a head injury causing frontal lobe damage, which impaired her impulse control and temper.

Her role was not client-facing. It was a packaging and picking role in the warehouse and she used automated lifts. There was never a need to lift over 20 kilos. A neuropsychologist, a neurosurgeon had said she was fit for work, but needed a gentle supervision and space to think before dealing with an issue. And this allowed her to reign in her impulses and emotions.

Mick ran a tight ship. They were a contractor for major shops and supermarkets. His side of the business was picking and packing. The other side was logistics. The logistics side drove the picking and packaging side and it involved delivery obligations and substantial capital and wages for waiting.

The stats in the business showed that Noelene was running it around 82% efficiency. Most but one other employee who was less efficient and badly behaved ran it over 94%. Mick decided to limit Noelene’s work to one aisle. Didn’t pick it up.

Andrew Douglas: My new granddaughter is called Isla, spelt I-S-L-A and I’m afraid, it just gets me every time.

Kim McLagan: Yeah, okay.

Andrew Douglas: Yeah, okay. I’ll put my hand up.

Kim McLagan: I’ll accept that as an excuse, I can’t. Anyway, Mick decided to limit her work to one aisle doing the volume small work. Why, because it would improve output and some of the objects were over 20 kilos, and if she didn’t need to lift, she couldn’t. Or she didn’t actually she couldn’t.

It also reduces conflict with her because when he directed her to do other work, it often fell into heated conflict. He didn’t tell Noelene what he was doing. He just reprogrammed her computer to ensure her tickets. What was required of her, limited her to one aisle.

Andrew Douglas: Misspelt aisle. I did it again twice.

Kim McLagan: Halfway through the day, she approached Mick and asked why she was only doing one aisle of high volume work. Mick said, “Because you are so slow and inefficient, and your injuries limit what you do quickly. So I limited you to here to make you more efficient.” Noelene blew up and called him… Who discriminates against her. And she resigned walking from the floor and going home. Her husband rang three hours later and withdrew the resignation.

Andrew Douglas: Okay, so roughly into the questions. Was Noelene unable to withdraw her resignation and would it be a deemed termination at her will?

Kim McLagan: She could withdraw if… So, the law is under section 114 of… Yeah, did I get that right? No?

Andrew Douglas: Making it up, I think

Kim McLagan: Can’t remember, anyway, there’s a section in the Fair Work Act. If resignation is given in the heat of the moment, it can be withdrawn.

Andrew Douglas: Yep.

Kim McLagan: So if someone resigns, the employer doesn’t have-

Andrew Douglas: Yeah, let me me do it this way. Kim and I enter into an argument, Kim just cracks it. And she just storms out, harder for Kim, because she doesn’t suffer from… She may suffer a bit of… But doesn’t suffer frontal lobe issues. But even then, if that was retracted within 24 hour period and there was the heat of the moment in it. Then that would’ve been a lawful retraction here, because of her mental state. There’s absolutely no doubt, but there’s not a resignation that could be enforced as a termination of the will of her. So, she would’ve a basis if they said, “No, you are terminated.”

Kim McLagan: Yeah.

Andrew Douglas: You did it to bring an unfair dismissal claim, a termination of the middle of the organisation.

Kim McLagan: Thank you.

Andrew Douglas: Two. If Noelene brought a workers’ compensation claim, would she succeed here?

Kim McLagan: Absolutely.

Andrew Douglas: I think you meant to say more than that. We’ve still got another four minutes left. You can say more.

Kim McLagan: Okay. The actions of Mick were not reasonable, by limiting her. He didn’t give her any forewarning.

Andrew Douglas: Yeah.

Kim McLagan: Absolutely.

Andrew Douglas: Remember, this isn’t even a reasonable management action issue. Because there was no performance management.

Kim McLagan: Oh, that’s true.

Andrew Douglas: Yeah. It’s argued the last pick may have been performance management, and it wasn’t a fair thing to do. He didn’t have the conversation. So, it just wasn’t a fair thing to do full stop. But this is really her perspective on what occurred, and what she saw is her role being diminished without any discussion. And she felt isolated, alone and hurt. She never climbs along, she had an injury, really?

Kim McLagan: Yeah, that’s right.

Andrew Douglas: That’s true. So, were there psychological hazards and who would be prosecuted? Well, there is an abundance of psychological hazards. So, it is the nature of workflows. So remember if you go in and you look at two elements, which is how work is delegated and organisational justice treating someone in this manner because they’ve got a disability is a lack of social justice failing. And secondly, reducing someone’s work without consultation is a psychological hazard, particularly to a limited area. On top of all of that, the failure to do it in a way around a disciplinary process means it’s three major psychological hazards. So, who could be prosecuted? Well, depend on the nature of the injury, okay? You’re not going to get a prosecution for being unhappy. But if it did damage it to a stage he’s developed psychological injury, then it would be both, Mick and the organisation who would be liable. Mick would be liable because he was the actor. He was the person who did it. He was the person with agency. And secondly, in all pieces of safety legislation there is attribution provision, 143 in Victoria, which says the actions of an individual and the actions of the company. So, yeah, and now, was there discrimination and could Noelene bring a general protections claim for discrimination?

Kim McLagan: Yeah, she was definitely treated adversely on account of her injury or disability, sorry, not injury.

Andrew Douglas: Yep. So yes, both on the state and federal legislation, if you put her against a comparator, if you’re looking at a federal legislation, a person without a disability, was she treated differently, significantly. Did she have a performance issue? Yes, it should have been dealt with. Does that make sense? And if it is… relates to her disability then you could go through a process of saying “What are the reasonable adjustments that can be made if we can’t make those?” You could deal with under an inherent requirements arguments. But at the moment, the difference is relatively small between her and others. One, and secondly, it was all done in a way without any consultation or discussion or seeking to make adjustments. And as a result, of absolutely discrimination and really adverse action, because the reverse onus that sits upon the employer and Mick in this case, they would have to show that they did this for a reason that didn’t relate to the disability. And Mick’s own language says it did. He’s nailed, isn’t he? So, there’s some difficulty. So it was good, Kim, and we really got through, I think remarkably well. I’ve had to put words, swearing words in to try and catch you. I’m sorry about that. We’re going to see you at the same time next week. And thanks very much for coming along, Kim. It was lovely.

Kim McLagan: Good to being here.

Andrew Douglas: And remember, thumbs up please. Cheers. Bye-bye.

Kim McLagan: Bye everyone.

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