‘Reasonable management action’ in workers’ compensation claims – what is it and how does it work in practice?

‘Reasonable management action’ in workers’ compensation claims – what is it and how does it work in practice?

09 September 2021 Authored by: Damian Hinkley   |   Topics: Insurance, Workers’ compensation

If a person gets injured at work in Queensland, they are entitled to statutory compensation, including wage replacement benefits and medical treatment until their injuries resolve or stabilise.

The same principle applies for psychological or psychiatric injuries but there are some exceptions. The most common exception is where the worker’s injury is the result of ‘reasonable management action’ (RMA).

This article provides an overview of that exclusion and how it works in practice.

It is important that the RMA exclusion is clearly understood because it is the primary issue in a large percentage of contested psychological or psychiatric injury claims.

How does the legislation define reasonable management action?

Section 32 of the Workers’ Compensation and Rehabilitation Act 2003 (Qld) defines ‘injury’ as:

personal injury arising out of, or in the course of, employment if the employment is a significant contributing factor to the injury

‘Injury’ includes an aggravation of a prior condition provided the aggravation is similarly caused by work: section 32(3)(b).

Therefore, if an injured worker sustains a psychological injury ‘arising out of, or in the course of, employment’ and ‘employment is a significant contributing factor to the injury’, the injury will be compensable unless one of the exceptions applies.

The exceptions are set out in section 32(5). By far the most common of those exceptions is the RMA exclusion in subsection (a). It says:

‘Injury’ does not include a psychiatric or psychological disorder arising out of, or in the course of, reasonable management action taken in a reasonable way by the employer in connection with the worker’s employment.

Therefore, even if an injured worker sustains a psychological injury at work, if the injury arises as a result of reasonable management action taken in a reasonable way, the injury will be excluded from the compensation scheme.

The purpose is to allow employers to manage (and discipline) employees without fear of retribution.

What are the criteria for reasonable management action?

For the RMA exclusion to operate, three criteria must be satisfied:

  1. The behaviour or action by the employer must be management action (and it must relate to the employment relationship of the worker claiming injury).
  2. It must have been reasonable for the management action to have been taken.
  3. The action must have been taken in a reasonable way.

If any of the criteria are not met, the RMA exclusion cannot operate.

Requirement 1 – management action

The first criterion is that the behaviour or action must be management action. This is often misunderstood.

Historically, the interpretation of management action was broad and encompassed all business actions or decisions. However, the position has now been clarified by courts and management action is limited to actions relating to the employment relationship with the worker.

Helpfully, the legislation gives some examples of what constitutes ‘management action’:

  • action taken to transfer, demote, discipline, redeploy, retrench or dismiss the worker; and
  • a decision not to award or provide promotion, reclassification or transfer of, or leave of absence or benefit in connection with, the worker’s employment.

For the RMA exclusion to operate, the relevant actions must genuinely be management action taken in respect of the employment relationship with the worker and not any and all actions, such as broader operational actions or decisions.

General operational actions will not fall within the definition of ‘management action’.

To help understand the distinction, consider the following case extracts:

  • In Read v Workers’ Compensation Regulator [2017] QIRC 72, the Commission said:

Management action does not embrace every instruction of and action by an employer. Rather, the expression contemplates a particular type of action by an employer, and something other than a mere instruction or requirement that the worker perform his or her duties. Management action must be something different to the normal duties and incidents of her employment as a Town Planner. In other words, it must be something more than what was part and parcel of her employment.

  • In Allwood v Workers’ Compensation Regulator [2017] QIRC 88, the Commission said:

The concept of management action […] is not so broad that it encompasses anything and everything that a manager does or says in the particular workplace, rather the expression ‘management action’ relates to those actions undertaken when managing the worker’s employment. […] [The RMA exclusion] was, in my view, intended by Parliament to relate to specific management action directed to the appellant’s employment itself, as opposed to action forming part of the everyday duties or tasks that the worker performed in their employment.

Requirement 2 – reasonable for action to be taken

The second criterion is that it must have been reasonable for the employer to have taken the action. In other words, the employer’s decision to take the action must have been reasonable.

For example, in the case of performance management, there must have been a reasonable basis for the employee to have been subjected to performance management. It cannot be reasonable for an employer to subject an employee to performance management unless there have been issues that justified that action.

Requirement 3 – the action must have been taken in a reasonable way

The third criterion is that the action itself must have been taken, or carried out, in a reasonable way.

Using the same performance management example, the performance management must be carried out reasonably. Even if performance management was justified (i.e. criterion two), the action subsequently taken must also be reasonably carried out.

Tips and tricks when considering reasonable management action

There are some general considerations that should be borne in mind when considering RMA. These permeate the three criteria above.

In no particular order:

  • The RMA criteria should be determined prospectively, without the benefit of hindsight. It can be easy to fall into the trap of exercising hindsight bias – for example, if an unpredictable adverse result arises from a particular action, it might be tempting to be influenced by that adverse result when determining whether the action was taken reasonably at the time.
  • Any assessment should be an objective one in the context of the circumstances and knowledge of those involved at the time. It is not a subjective assessment based on how the particular injured worker felt at the time. Instead, determinations should be made based on how a reasonable person in the position of the injured worker would have reacted in the same circumstances. Having said that, worker sensitivities that are known to the employer can also be relevant.
  • Whether action was ‘reasonable’ is a legal question. It is not a determination of whether things could have been done better. Similarly, management action does not need to be perfect. In Hansen v WorkCover Queensland, the Court said:

Reasonable management act permits failings, deficiencies and flaws provided the management action was sound, based on reason, was not arbitrary, did not involve any unfairness and did not produce an unfair result.

  • The onus of proof is on the employer or insurer to prove RMA. It is not for injured workers to prove that RMA does not apply.
  • An overall course of management action may be reasonable even if particular steps are not. The determination should be holistic and consider whether management action was reasonable in all of the circumstances. In Davis v Blackwood [2014] ICQ 009, the Court said:

While [the manager’s] conduct […] was not always appropriate, there were mitigating factors. In all the circumstances of this case, I did not consider it fatal to the [employer’s] defence for a supervisor to lose her temper with a subordinate in response to what appeared to be a wilful disregard of an important organisational procedure. [The manager’s] frustration at [the employee …] was understandable. Clearly, [the manager’s] performance was blemished but, in all the circumstances of this case, I decline to find that the events associated with the meeting […] gave rise to unreasonable management action unreasonably taken.

Specific scenarios

Courts and Commissions in Queensland have considered many different RMA scenarios. The context in which RMA arises is important as it can alter the outcome.

Some recent scenarios that have been considered are:

  • Revocation of supervisory powers pending an investigation into serious breaches – Schultz v Workers’ Compensation Regulator [2020] QIRC 208
  • Multiple stressors, some constituting management action and some merely operational – King v Workers’ Compensation Regulator [2020] QIRC 180
  • Employment redundancy when employer knew specific worker sensitivities – Scott v Workers’ Compensation Regulator [2021] QIRC 110

For further information on this topic, contact Damian Hinkley or another member of Cooper Grace Ward’s insurance team.

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This publication is for information only and is not legal advice. You should obtain advice that is specific to your circumstances and not rely on this publication as legal advice. If there are any issues you would like us to advise you on arising from this publication, please let us know.