Two fairly recent decisions of the Administrative Appeals Tribunal (the AAT) have provided some further guidance as to how the reasonableness of performance management and appraisals are to be, or can be, analysed in the context of stress claims….This article furthermore covers what Reasonable management action carried out in a reasonable manner’ actually means, and provides several case samples in an attempt to clarify the topic.
The chameleon-like nature of reasonableness in the context of stress claims
In Thompson v Comcare  AATA 752, the AAT upheld the rejection of liability for a claim for compensation lodged by a worker, a public servant who claims he was devastated by an informal performance appraisal conducted in June 2011.
In June 2011 the worker was working reduced hours in an alternative department of an agency after suffering a prior stress episode in September 2009.
Liability for the earlier claim had been accepted and the worker was subsequently off work with an adjustment disorder, depression and anxiety until March 2010.
The AAT accepted the worker had suffered a new mental injury as a result of the June 2011 performance appraisal but concluded the injury had arisen from reasonable administrative action under Section 5A of the Safety, Rehabilitation and Compensation Act 1988.
In considering the reasonableness of the appraisal, the AAT found:
- The appraisal had complied with agency’s operational plan with respect to the management of underperforming employees;
- The fact the worker had improved his performance after a previous appraisal to the point where he had been rated “fully effective” did not preclude him from further criticism;
- It was likely the worker was aware of the issues with his performance and the standards expected of him in relation to his performance based on informal counselling sessions undertaken by a previous supervisor;
- Although the worker was restricted in his hours of work, there were no restrictions on the types of duties he could perform and it was reasonable to assess him against the full criteria for his role on a part-time basis;
- There had been no denial of natural justice in the worker not being aware of adverse comments made about him in an independent medical report received by the employer prior to the appraisal as the adverse information was either negated by other evidence or was only confirmatory; and
- It was not unreasonable for the executive committee of the agency to meet in advance of the performance appraisal sessions in order for there to be some degree of consistency in the assessments of officers at the same level, and this was particularly so given the agency’s policy on appraisals specifically stated they were “not a negotiation”.
In Martinez and Comcare  AATA 795, the AAT set aside a decision to reject a claim for compensation lodged by a worker who suffered a psychological injury after commencing formal performance management.
The worker, a contract manager in the public service, had experienced a number of significant personal problems.
In particular, she had been a victim of domestic violence and had separated from her husband; she had complained of ongoing pain and migraines from an earlier work-related injury in 2009; and she had been extremely disappointed when she failed to secure a transfer to her agency’s Brisbane office in the same year, which she had sought in part to be closer to her eldest son and his family.
The worker commenced formal “underperformance meetings” in mid-2010 to address deficiencies in her work output.
A short time thereafter, she was diagnosed with an adjustment disorder with depressed mood by her General Practitioner.
On 17 September 2010, her time sheet was rejected for inaccuracy and she left work and did not return.
The AAT accepted the worker’s injury had been caused by her perceived poor treatment at work.
It also accepted the “underperformance meetings” were reasonable administrative actions, but considered the manner in which they had been conducted was unreasonable.
In coming to this conclusion, the AAT found:
- The meetings had been conducted in a separate room visible to other staff which had “attracted a degree of notoriety” and humiliated the worker;
- The supervisor conducting the meetings had failed to take account of the worker’s personal issues, including poor self-esteem;
- The supervisor had failed to consider other options, such as seeking advice from her superior or the human resources section of the agency before conducting the meetings; and
- The supervisor had failed to formally find the worker’s performance was “unsatisfactory” in accordance with the agency’s underperformance process before commencing the meetings, and she had implemented the process without activating its in-built protections.
Both decisions refer to the, arggh yes, chameleon-like nature of reasonableness in the context of stress claims.
Compliance with internal policies and procedures did, however, have a significant impact in both cases. While not legislative, they tended to be determinative as to whether the action in question and its conduct were reasonable in the circumstances.
What does ‘Reasonable management action carried out in a reasonable manner’ mean?
Behaviour will not be considered bullying if it is reasonable management action carried out in a reasonable manner.[Fair Work Act s.789FD(2).]
This exclusion is comprised of three elements:
- the behaviour must be management action
- it must be reasonable for the management action to be taken, and
- the management action must be carried out in a manner that is reasonable.
What is management action?
The following are examples of what may constitute management action:
- Performance appraisals [Thompson and Comcare  AATA 752.]
- Ongoing meetings to address underperformance [Martinez and Comcare  AATA 795.]
- Counselling or disciplining a worker for misconduct [Truscott and Comcare  AATA 220]
- Modifying a worker’s duties including by transferring or re-deploying the worker [Towns v Comcare  AATA 92.]
- Investigating alleged misconduct [State of Tasmania v Clifford  TASSC 10]
- Denying a worker a benefit in relation to their employment [Towns and Comcare  AATA 92]
- Refusing an employee permission to return to work due to a medical condition [Drenth v Comcare (2012) 128 ALD 1;  FCAFC 86]
An informal, spontaneous conversation between a manager and a worker may not be considered management action, even if issues such as those listed above are raised.[Rutledge and Comcare (2011) 130 ALD 94;  AATA 865.]
The term ‘management action’ has been extensively considered in the context of workers’ compensation laws. Recent workers’ compensation cases suggest that, to be considered management action, the action must be more than simply day-to-day operational instructions that are part and parcel of the work performed.[Commonwealth Bank of Australia v Reeve (2012) 199 FCR 463; (2012) 217 IR 335]
The words used in s.789FD(2) however are less qualified: they exclude ‘reasonable management action carried out in a reasonable manner’. Unlike some workers’ compensation exclusions they do not refer to prescribed actions taken ‘in respect of the employee’s employment’ etc. or prescribe any list of ‘management’ or ‘administrative’ action. The Explanatory Memorandum suggests that the term may be required to be given a wider meaning under s.789FD(2):
112. Persons conducting a business or undertaking have rights and obligations to take appropriate management action and make appropriate management decisions. They need to be able to make necessary decisions to respond to poor performance or if necessary take disciplinary action and also effectively direct and control the way work is carried out. For example, it is reasonable for employers to allocate work and for managers and supervisors to give fair and constructive feedback on a worker’s performance. These actions are not considered to be bullying if they are carried out in a reasonable manner that takes into account the circumstances of the case and do not leave the individual feeling (for example) victimised or humiliated.
This suggests that the legislature intended everyday actions to ‘effectively direct and control the way work is carried out’ to be covered by the exclusion
The following case examples related to ‘management action’ are taken from decisions made in other jurisdictions, under different laws. Whilst these laws contain similar provisions they are not identical, as a result these examples do not directly relate to the term ‘management action’ as provided by the Anti-bullying provisions of the Fair Work Act.
NOT considered management action—Workers’ Compensation
Case 1: General operational action
Commonwealth Bank of Australia v Reeve (2012) 199 FCR 463; (2012) 217 IR 335.
A Commonwealth Bank manager sought workers’ compensation after developing a depressive illness. The Administrative Appeals Tribunal found that a number of circumstances contributed to the worker’s depression, including staffing changes affecting his branch in June 2008, and a number of events on the day of 18 July 2008. These included a telephone conference with fellow managers and his area manager in which the worker had to report poor results to colleagues and felt humiliated, an unsupportive visit from his area manager, his receipt of poor customer service results for the branch, and the anxiety he felt about reporting these results to his colleagues at an upcoming teleconference.
The Bank sought judicial review of the AAT’s decision. It submitted that it was not liable to pay the worker’s compensation because the actions that contributed to his depression, such as the staffing changes and use of teleconferences, were ‘administrative action’ and excluded the Bank from liability.
A Full Court of the Federal Court did not accept this submission. It held that the exclusion applies to specific action taken in respect of an individual’s employment, such as disciplinary action, as opposed to action forming part of the everyday tasks and duties of that employment. This meant that the ordinary work routine, changes to routine and directions to perform work were not ‘reasonable administrative action taken in respect of the employee’s employment’. The worker’s claim for compensation was successful.
Case 2: Regular meetings
National Australia Bank Limited v KRDV (2012) 204 FCR 436.
A worker attended regular weekly meetings with other team leaders and her manager, which were used to assess workloads for planning purposes. She was criticised for poor work performance during one of these meetings.
The worker claimed workers’ compensation, alleging injury after being ‘picked on and singled out’ by her manager, and subjected to personal criticism in front of other managers.
The worker’s employer denied the claim, arguing her condition was a result of reasonable administrative action taken in a reasonable manner in respect of her employment.
The court held that, because the meeting was not arranged for the purpose of discussing the worker’s performance, the behaviour did not fall within the ‘reasonable administrative action’ exclusion for a workers’ compensation claim.
When is management action reasonable?
Determining whether management action is reasonable requires an objective assessment of the action in the context of the circumstances and knowledge of those involved at the time, including:
- the circumstances that led to and created the need for the management action to be taken
- the circumstances while the management action was being taken, and
- the consequences that flowed from the management action.[Georges and Telstra Corporation Limited  AATA 731 ]
This covers the specific ‘attributes and circumstances’ of the situation including the emotional state and psychological health of the worker involved.
The test is whether the management action was reasonable, not whether it could have been undertaken in a manner that was ‘more reasonable’ or ‘more acceptable’.[Bropho v Human Rights & Equal Opportunity Commission (2004) 135 FCR 105 ] In general:
- management actions do not need to be perfect or ideal to be considered reasonable
- a course of action may still be ‘reasonable action’ even if particular steps are not[Department of Education & Training v Sinclair  NSWCA 465.]
- any ‘unreasonableness’ must arise from the actual management action in question, rather than the worker’s perception of it, and
- consideration may be given as to whether the management action involved a significant departure from established policies or procedures, and if so, whether the departure was reasonable in the circumstances.
At the very least, to be considered reasonable, the action must be lawful[Von Stieglitz and Comcare  AATA 263 ] and must not be ‘irrational, absurd or ridiculous’.
What is a reasonable manner?
For the exemption in s.789FD(2) to apply, the management action must be carried out in a ‘reasonable manner’.
As above, what is ‘reasonable’ is a question of fact and the test is an objective one.
Whether the management action was taken in a reasonable manner will depend on the action, the facts and circumstances giving rise to the requirement for action, the way in which the action impacts upon the worker and the circumstances in which the action was implemented and any other relevant matters.[Keen v Workers Rehabilitation & Compensation Corporation (1998) 71 SASR 42;  SASC 6519]
This may include consideration of, for example:
- the particular circumstances of the individual involved
- whether anything should have prompted a simple inquiry to uncover further circumstances[Georges and Telstra Corporation  AATA 731 .]
- whether established policies or procedures were followed,[Yu and Comcare (2010) 121 ALD 583;  AATA 960; Devasahayam and Comcare  AATA 785.] and
- whether any investigations were carried out in a timely manner.[Wei and Comcare  AATA 894.]
Carried out in a reasonable manner
Case1: Failure to obtain a promotion
Devasahayam and Comcare  AATA 785.
A Public Servant claimed she suffered psychological injuries during the course of her work, due in part to a number of issues relating to her performance appraisals, failure to be promoted and being ‘humiliated’ in front of others. Her compensation claim was refused on the basis her condition was a result of ‘reasonable administrative action undertaken in a reasonable manner’.
The Administrative Appeals Tribunal upheld this decision, finding that all applicable guidelines had been followed.
NOT carried out in a reasonable manner
Case 1: Adherence to established internal policies
Yu and Comcare (2010) 121 ALD 583;  AATA 960.
A high school teacher claimed she suffered a psychological injury which was significantly contributed to by her employment, including the implementation of a performance management process. Her compensation claim was refused on the basis that her condition was a result of ‘reasonable administrative action undertaken in a reasonable manner’.
The Administrative Appeals Tribunal overturned this decision on appeal, finding that the employer failed to comply with the applicable employment instruments and policy provisions. This went well beyond ‘… a matter of legal or technical nicety’.
The Tribunal held that the management action in question was not within the meaning of ‘reasonable administrative action’ and that it was not undertaken in a reasonable manner. The worker for example had been denied procedural fairness and no documentation was produced setting out the evidence concerning the worker’s alleged underperformance.
The Tribunal noted that the employer’s inadequate record keeping may have adversely affected its case.
Case 2: Performance monitoring and mentoring
Krygsman-Yeates v State of Victoria  VMC 57.
An experienced teacher alleged that she sustained an adjustment disorder with mixed anxiety and depressed mood as a result of having her performance as a teacher subjected to monitoring and mentoring, and being bullied and harassed by the school principal.
Her compensation claim was refused on the basis that her condition was a result of ‘management action taken on reasonable grounds and in a reasonable manner…’.
The Court found that the action taken was ‘management action’ based on reasonable grounds. The teacher’s employer had a legal duty and responsibility to respond to and take action in relation to complaints it had received about the teacher’s performance.
However the management action was not taken in a reasonable manner because:
- a three-page letter detailing performance-related issues was provided to the worker on her first day after returning from long service leave
- guidelines on monitoring and mentoring weren’t followed
- feedback was not provided to the worker during the monitoring and mentoring processes, and
- insensitive and unreasonable action was taken by continuing to provide comment by the delivery of letters, given the worker’s ‘eccentricities and her previous emotional response and reaction to receiving [such] letters’.
Revised May 2014