1 Workers Compensation, Protection of Injured Employees and QComp Briefing Paper Jamie McPherson - Partner Protection of Injured Employees and WH&S THE COMMON LAW At Common Law the employment contract can be affected by the contractual principle of frustration. The Doctrine of Frustration will apply where some independent event leads to an inability of one or other party to a contract being unable to perform their obligations. In such circumstances the contract is said to be frustrated and all parties are released from it. This principle applies to the contract of employment. As such, where an employee becomes unable to perform his or her duties, either fully or partially, the contract can become frustrated. In Marshall v. Harland & Wolff Ltd the Court said that in determining whether an employment contract is frustrated by incapacity, the court or Commission must ask itself this question: Was the employees incapacity, looked at before the purported dismissal, of such a nature, or did it appear likely to continue for such a period, that further performance of his obligations in the future would either be impossible or would be a thing radically different from that undertaken by him and agreed to be accepted by the employer under the contract of employment. The fundamental consideration for employers is whether, as a result of the incapacity, the employee is either partially or fully unable to complete the tasks they were employed to do. This can include situations where the employee is unable to perform as little as 5% of his or her duties. The Common Law position forms the foundation of any capacity based dismissal. However, there must be regard for the various legislative, Award and EBA provisions that now overlay the Common Law contract of employment. The importance of additional considerations e.g. sick leave entitlements was outlined in Finch v. Sayers: the usual understanding in many types of employment today is that prolonged incapacity of an employee does not automatically terminate the employment contract, but, subject to sick leave rights, excuses the employee from work and the employer from the obligation to pay, and gives the employer (and
2 perhaps the employee) the right to terminate the contract. THE INDUSTRIAL RELATIONS ACT (1999) (QLD) The most significant statutory consideration for employers of employees within the Queensland IR system is the Industrial Relations Act (1999) ( the IR Act ). The Common Law position is substantially modified by the IR Act. While the right to terminate due to incapacity is maintained as a valid ground for dismissal, it is subject to certain limitations. The nature of these limitations depends on whether the injury is work-related or non-work related. NOTE In determining whether an injury is work-related, regard must be had to the definition contained in the IR Act. Any injury is work-related if it is determined to be an injury within the meaning of the Workers Compensation and Rehabilitation Act (2003) (Qld) (or any of its predecessors). In particular, employers should not be too swift to dismiss an injury as non-work related where an employee s application for Workers Comp has been rejected. The review and appeal process in the workcover system can take many months to resolve, and employers should ensure that the employee s opportunity to seek review or appeal of the decision has been exhausted before deciding on the status of the injury. (a) Work-related Incapacity (i) Time Limit - Under the IR Act, it is an offence for an employer to dismiss a worker with a work-related injury, solely or mainly because of their incapacity, less than 6 months after they became incapacitated. The effect of this provision is to create a de facto time limit on capacity based dismissals of employees with work-related injuries. In essence, the employer must wait at least 6 months before they can consider dismissal of an employee with a work-related injury causing incapacity. It should be noted that, in the authors experience the QIRC will not necessarily support the practice of dismissal after, eg 6 months and 1 day from the date of the incapacity arising but rather, there needs to be a considered approach by the employer, at or after the 6 month mark, to determine the prospect of the employee returning to full capacity in the foreseeable future. This process is discussed at length below. (ii) The Obligation to Re-Employ - The IR Act also provides that where an employer dismisses an employee due to incapacity arising out of a work-related injury, there is an obligation to re-employ that employee if the employee can produce satisfactory medical certification to demonstrate they have regained full capacity. The employee must provide such certification within 12 months of having lost capacity. In effect, if the employer observes their obligation to wait 6 months, the obligation to re-employ can only arise for 6 months beyond that time. Failure to reemploy in such circumstances gives rise to unfair dismissal rights. Failure to produce a medical certificate declaring full capacity within the time limit eliminates the right to reemployment. (iii) The Replacement Employee Where an employer replaces a recently dismissed employee who was dismissed due to work-related incapacity, the IR Act obliges the employer to advise the replacement employee of the potentially temporary status of their employment and the injured workers right to return. Note there is no provision dealing with the fate of the replacement employee on return of the injured worker.
3 (b) Non- Work Related Incapacity The IR Act provides for a prohibition for dismissal on the grounds of temporary absence. This is one of the specifically invalid grounds for dismissal. Whilst the temporary absence dismissal prohibition can apply to dismissal of employees with work-related incapacity, it is the only legislative provision applying to employee s whose incapacity is not related to a work-related injury. (i) 3 Months -The IR Regulations provide a definition of temporary absence. It is defined as any period of less than 3 months of unpaid leave in a 12 month period. By implication, an employer must not dismiss an employee due to their non-work related incapacity until after the expiration of 3 months of unpaid leave in a 12 month period. (ii) Paid leave- The regulations provide that the 3 months must be unpaid leave. Accordingly, the calculation of the 3 months cannot start until after an employee has exhausted accrued sick leave. Similarly, employers should be cautious about allowing the use of annual leave to supplement sick leave entitlements. The definition refers only to unpaid leave without specifying the status of the leave. It would be safe to assume that any paid leave would be taken into account, and would delay the commencement of the calculation of the 3 month period. (iii) Reduced Capacity - Where an employee is only partially incapacitated (with a non-work related injury/illness) and therefore is not utilising leave, it is not possible to calculate the 3 months period. If the employee remains at work, albeit in a limited capacity, an employer should allow a reasonable recovery period eg 6 months, and then revert to the Common Law standard referred to. OBLIGATIONS TO REHABILITATE OR REDEPLOY Prior to considering dismissal of an injured worker an employer should always ensure that they have complied with their obligations to rehabilitate injured workers. These obligations are contained in the Workers Compensation and Rehabilitation Act Note, these only apply to employees with work-related injuries. If an employer has taken no steps to assist in the rehabilitation of an injured worker the dismissed employee may have grounds to challenge the fairness of the dismissal. Rehabilitation programs are usually regulated by Workcover in consultation with the employer and employee. In some cases it involves finding light duties for an injured employee however, in circumstances where there are no suitable duties for an injured worker, an employer will typically be released from their obligations. Employers and employees should always be guided by Workcover as to the extent of their obligations. Similarly, an employer also needs to consider redeployment of an injured worker. An employer is not required to create a new position for an injured employee, but if the employee can be redeployed without any cost or inconvenience to the employer, redeployment should be considered as an alternative to dismissal. The position to which an injured worker is redeployed should be suitable and take into account the nature of the injury, any limitations caused by the injury, and the employee s standing generally. Whether an injured employee can or should be rehabilitated or re-deployed will depend on the facts in each case.
4 DISCRIMINATION When managing ill or injured workers, employers need to be mindful of the provisions of the Queensland Anti-Discrimination Act. That Act prohibits discrimination on the grounds of impairment which is defined as:... the partial loss of a persons bodily functions the malfunction of a persons body or.a condition, illness or disease that impairs a persons thought process, perception of reality, emotions or judgment or that results in disturbed behaviour. While managing or even dismissing an injured or ill employee may constitute a breach of the Act, employers can generally rely on a number of exemptions available under that Act. The Act contains exemptions from the prohibitions where: 1. The discrimination relates to restrictions based on genuine occupational requirement; 2. Failure to permit the discrimination would result in unjustifiable hardship; 3. The discrimination is necessary to protect the Health & Safety of people in the work place; 4. The discrimination is necessary to comply with, or is expressly authorised by another Act or Court order. THE PROCEDURE FOR DISMISSAL Before an employer attempts to dismiss an employee on the basis of incapacity they must first identify whether they are dealing with a work-related injury or not, and observe the appropriate statutory restrictions as set out above. The next step is to establish the medical evidence. Whether a person is fit for their employment (either physically or mentally) is not a conclusion that the vast majority of employers can reach without taking advice. It is primarily a medical opinion and as such, no employer should ever consider dismissing an employee on the grounds of incapacity unless they have obtained sufficient medical evidence. (a) Obtaining Medical evidence generally Medical evidence is sourced in a variety of ways. Sometimes the employee has already provided a medical certificate that unequivocally confirms the employee s permanent incapacity for his or her continued employment. NOTE- Employers should be careful not to act on a mere medical certificate or a report that is in any way vague or unclear about the employees prospects of returning to full capacity. If in doubt, employers should obtain their own medical evidence. More commonly, employees do not provide detailed medical evidence of their capacity or prognosis. In such cases, the employee may be directed to attend a medical
5 examination with a suitably qualified medical practitioner. In many cases, it is recommended that the opinion be obtained for a relevant medical specialist rather than a General Practitioner. The employer must be responsible for the cost of the examination, the report, and any tests (eg x-rays etc) that the Doctor requires to complete his/her report. (b) Written Authority from the Employee Before an employee can be sent for such an examination, the employer must first have written authority from the employee to obtain the confidential medical information relevant to the capacity assessment. An employee cannot refuse a reasonable and lawful direction to attend a medical examination (see misconduct below) and therefore cannot refuse to provide a written authority for the release of the relevant medical information. The authority should be worded as follows and signed by the employee: I (insert employee s name) hereby authorise my employer (insert employers name) to obtain any and all relevant information from (insert Doctors name) regarding my capacity for employment with my employer. (c) The letter to the Doctor Having arranged the appointment for the employee and obtained his/her authority, the employer should then provide a written request for the relevant information to the chosen Doctor. The letter to the Doctor should contain the following information and questions: 1. State the name of the employee and the duration and nature of their capacity problems; 2. Provide a detailed written position description for the position the employee performs when working at full capacity, including hours worked, weights lifted, number of days per week etc; 3. Ask the Doctor to answer the following specific questions: (i) (ii) (iii) (iv) (v) state the diagnosis of the condition from which the employee suffers; whether such condition is to any extent permanent; whether the condition in any way incapacitates the employee for the position contained in the position description; If there is any such incapacity, whether it is permanent; If it is not permanent, provide an estimate of the time it may take the employee to regain full capacity for the position contained in the position description. On receipt of the medical report from the Doctor the employee s capacity to perform their duties should be clear. The report should reveal that the employee is either:
6 1. fit to return to full duties; 2. will never be fit to return to full duties; or 3. may be fit to return at some foreseeable time in the future. (d) Dealing with the Results In the event that the report declares the employee fit to return to full employment, the employer may direct the employee to return immediately to normal duties. If the employee refuses e.g. because he/she does not agree with the medical report the employer may, subject to the employee producing alternative or more authoritative medical evidence, treat the matter as a disciplinary issue. The greatest difficulty arises when a medical report assesses the employee as presently unfit, but likely to regain full capacity. The key aspects of such a situation will be different in each case. In some cases, the Doctor may estimate recovery in eg 3 months. If, in such a case, the employee has only been incapacitated for 7 months and their absence is not causing substantial hardship to the employer, it may be unreasonable to consider dismissal in the face of such evidence. However, if the same employee has been incapacitated for 10 months and is currently being supplemented by expensive casual employees, the length of the existing absence and the hardship to the employer may justify dismissal. It will be a question of degree in each case and where in doubt, employers should take professional advice. (e) Dismissal Where the medical report declares the employee unfit to ever return to full duties or is unlikely to be fit in a reasonable time frame, the employer should meet privately with the employee to discuss the issue. The employee should be advised of the conclusive nature of the medical report and provided with a copy. In the event that redeployment is not an option (see below), the employee should be advised in writing as well as verbally that their employment is being terminated due to their incapacity. Employers should also be cautious where employees offer alternative medical opinions. If such alternative opinions can be easily and quickly obtained from an appropriately qualified medical practitioner, it may be prudent to delay dismissal until they have been considered. It is important to assure an employee that the dismissal is not disciplinary in nature. Often employees will associate dismissal with wrongdoing and, in order to make the issue clear, they should be advised that there is little choice for an employer when faced with such medical evidence. MISCONDUCT An employer s Duty of Care to maintain an injury free work environment is paramount in the employment relationship. Similarly, the obligations on an employer under the
7 Workplace Health & Safety Act ( the WH&S Act ) are substantial, and must be given priority. Consequently, where an employee engages in conduct that in any way impedes the employer s discharge of their Duty of Care or obligations under the WH&S Act, the employer may treat the conduct as misconduct. One such type of misconduct from an employee that commonly occurs in the context of a capacity assessment is where an employee refuses to either sign the authority for release of medical information and/or refuses to go to the arranged medical appointment. Such behaviour makes it impossible for an employer to accurately assess the employee s capacity and therefore, creates an increased risk for the employer of either breaching their Duty of Care, or breaching their obligations under the WH&S Act. It therefore becomes a matter of misconduct i.e. the employee has failed to obey a reasonable and lawful direction. If this occurs, an employer should proceed to deal with the employee s refusal to comply with the request as an act of misconduct whichmay, in its own right give rise to dismissal. A variation of this is when the employee refuses to attend the Doctor nominated by the employer. There is little settled case law on the employer s right to select the Doctor of their choice to conduct a medical assessment of capacity. It is considered unlikely that an employer would be prevented from enforcing such a direction where the Doctor is suitably/appropriately qualified to comment having regard to the nature of the employee s injury/illness, and the employer agrees to cover the costs. If an employee insists on an opinion from their own Doctor, they should be given the opportunity to present such evidence before any decision is made to dismiss them. SUMMARY Management, redeployment and dismissal of injured workers must always include compliance with or consideration of the following: 1. Identify whether the incapacity is work-related or non-work related (having regard to the Workcover Review and Appeals process); 2. Observe any relevant Statutory restriction; 3. Obtain detailed medical assessment of the employee s prospects of returning to full capacity in the foreseeable future; 4. Consider any obligations to rehabilitate the employee and/or the possibility of redeployment; 5. Consider any medical evidence supplied by the employee.
8 QComp Case Law WHAT IS AN INJURY? PHYSICAL INJURIES In order for a worker to obtain workers compensation, he/she must have an injury in accordance with the definition in section 32 Workers Compensation and Rehabilitation Act 2003, that is: An injury that is a personal injury arising out of, or in the course of, employment and if employment is a significant contributing factor to the injury. There are many cases that have considered when an injury may arise out of, or in the course of, employment. One such case involved a situation where an employee, who had completed his shift, changed out of his clothes after work and when bending over to pick up his boots, he experienced sharp in his back.the Court said his injuries did not arise out of or in the course of employment. The overriding factor is that, the injury or aggravation must have been sustained in the course of work, or must have arisen as a result of the work that he/she was performing. An injury will also include one that was sustained during an ordinary recess break, provided a worker has not voluntarily subject him/herself to an abnormal risk of injury during the break. In most factual situations, the question in issue is normally whether or not work was a significant contributing factor to the injury. There is much case law on this point. In particular, it has been held that whilst employment activities may be the cause of a worker s pain, it must still be found that employment was a significant contributing factor to the injury. Significant needs to be a real and operative cause of the injury or aggravation to the pre-existing condition. In Plemming's case, the Court held that work was only an 'irritant' and no more, therefore, the claim was dismissed. In relation to physical injuries, it is imperative that medical evidence is obtained to support the fact that work was not a significant contributing factor to the injury. Otherwise, a worker s claim will, in all likelihood, succeed. PSYCHOLOGICAL/PSYCHIATRIC INJURIES Similarly, the definition of 'injury' in section 32 Workers Compensation and Rehabilitation Act 2003, includes a psychiatric or psychological disorder arising out of, or in the course of employment and where employment is a significant contributing factor to
9 the disorder. However, an injury will not include a psychiatric or psychological disorder arising out of, or in the course of, any of the following circumstances: (a) Reasonable management action taken in a reasonable way by the employer in connection with the worker's employment; (b) The worker's expectation or perception of reasonable management action being taken against the worker; (c) Action by WorkCover or a self-insurer in connection with the worker's application for compensation. Stress therefore becomes an injury if: (a) It is developed to a point of becoming a psychiatric or psychological disorder; (b) Arising out of, or in the course of, employment if the employment is a significant contributing factor to the injury; and (c) If does not arise from reasonable management action taken in a reasonable way by the employer in connection with the worker's employment or the worker's expectation or perception of reasonable management action being taken against the worker.. Arising out of not caused by reasonable management action The psychiatric or psychological condition does not need to be caused by RMA to be excluded from the definition of injury it merely needs to arise from RMA taken in a reasonable way. This means that RMA is not limited to situations where an overt act causes the decompensation (such as disciplinary procedures) but also includes where a worker becomes stressed in the wake of reasonably taken changes. Example: (a) Bob is formally counselled for poor performance in building tractors and becomes stressed as a result of that counselling. He subsequently develops and anxiety disorder. [RMA has caused the injury] (b) Bob s employer, Yes We Can Pty Ltd restructures the organisation to focus more on maintenance and Bob s role is changed from a Tractor builder to a Tractor fixer. He becomes stressed and decompensates because he has a lack of confidence fixing tractors. [The injury has arisen out of RMA]. Reasonable management action must be taken in a reasonable way The action taken by management must be reasonable but it also must be taken in a reasonable way. In other words, reasonable decisions will not fall within the exclusion unless the processes for implementing the decision are also reasonable. Example: The change in position to a tractor fixer results in a increased workload for Bob. He struggles coming to terms with Yes We Can s tractor fixing policy. Management does not put in place any programs to assist Bob and his team manage the change and stands idly by as Bob struggles. Bob becomes stressed and decompensates. [The reasonable
10 decision to restructure has been implemented in an unreasonable way the stress falls within the definition of injury]. Does stress equal a failure to take reasonable management action? The courts have rejected the argument that, if an employee becomes stressed, either the management action or the way in which the management action is carried out must, by definition, be unreasonable. This has been rejected by the Courts who have held that reasonable schemes reasonably implemented can miscarry. Example: Bob s brother Bill is hired by Yes We Can Pty Ltd after passing through a thorough interview and selection process. After years of working for his father, Bill cannot cope working for private enterprise. He becomes stressed with the workloads (which are easily being met by others) and decompensates. [This is still RMA as the processes and expectations were all reasonable but Bill simply couldn t cope with the work]. Multiple stressors It will often be the case that a worker who becomes stressed complains not only of one incident or stressor, but a number of incidents or stressors. The question then becomes how these are dealt with in the context of the definition of injury (section 32). For the purposes of section 32, each individual stressor must be examined separately to determine: (a) whether it arose from reasonable action taken in a reasonable way; (b) whether it is work related, and (c) whether it is a significant contributing factor to the development of the stress. As a result, despite the fact that the majority of a worker s stressors arise out of RMA, so long as one of the stressors does not (for example if abused by a fellow employee), or one of the stressors is a product of unreasonable management action, and this stressor is a significant contributing factor to the development of the stress, then the injury will fall under the definition of section 32 and be compensable. Example: Yes We can s restructure proceeds using adequate processes but Bob becomes stressed because of the increased workload. A co-worker becomes frustrated with Bob s slowness and hits Bob over the head with a shovel. This causes Bob great anxiety and further stress. He becomes further agitated by the counselling process and the time it takes WorkCover to process his Application for Compensation. Around the same time he is experiencing marital difficulties. He decompensates. The medical reports show that each of these stressors equally contributed to Bob s now severe condition. [The injury would be compensable. Although some of the stressors were a product of RMA (restructure, counselling process), were not work related (marital difficulties) or related to
11 his WorkCover claim, one stressor (being hit with the shovel) is not excluded and is a significant contributing factor to the illness.] Evidentiary Steps in defending stress claims Of crucial importance in defending any stress claim is to be able to provide evidence that actions taken by management were reasonable. At all stages of the decision and appeal process employers need to be able to detail without question: (a) What management actions were taken; (b) Why they were taken; and (c) How they were taken. Obviously good HR practice in taking detailed notes wherever possible goes a long way towards meeting this evidentiary requirement.
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