Using the management action defence against psychological claims

Claims for primary psychological injury have been growing in the Northern Territory over the past four years, and employers need to be aware of a defence against such claims which involves reasonable management action, according to a legal expert.

The Safe Work Australia 2021 report Taking Action: A best practice framework for the management of psychological claims in the Australian workers’ compensation sector says “psychological health conditions are the fastest growing cause of disability in Australia”.

The top three claims for psychological injury are anxiety/stress disorder, anxiety/depression and reaction to stressors.

Although claims for primary psychological injury accounted for just over 11 per cent of total claims in 2020/2021, those claims accounted for 22.3 per cent of the total claim costs and 21.9 per cent of the total lost hours for the Northern Territory, said the managing partner of Roussos Legal Advisory, George Roussos, who recently spoke at the AIHS NT Health & Safety Symposium 2022.

He said most schemes exclude psychological injury if reasonable management action was the cause, variously referring to injury wholly or predominantly caused by, or arising out of:

• reasonable management action taken or proposed to be taken by or on behalf of the employer;
• reasonable management action taken in a reasonable way by the employer in connection with the worker’s employment; or
• reasonable administrative action taken in a reasonable manner by an employer in connection with a worker’s employment.

“In the Northern Territory, the legislation protects the employer from liability where a mental injury is caused wholly or primarily by management action taken by the employer, as long as it is taken on reasonable grounds and in a reasonable manner,” said Roussos.

This exception was introduced to protect employers from liability for adverse consequences of managing employees and address the perception that “stress-related claims were easy to bring and difficult to defend” and Roussos said courts apply the exception meaningfully according to Parliament’s intention.

A 2019 paper University of Tasmania paper referred to a study that found of 32 cases of interim determination, 21 found the employer had a reasonable case, and of seven cases that ran to hearing, five were in favour of the employer.

“Employers should still be mindful the WHS legislation provides for a primary duty of care on a PCBU to ensure so far as is reasonably practicable the health and safety workers and other persons. The term ‘health’ includes psychological health,” said Roussos.

“Also, aside from defence and settlement costs, the business should take into account the broader costs of managing the employment and claim, including the costs of replacing the team member, brand reputation, potential loss of customers and management time.”