This Employment Update examines the recent decision of Ryan v Secretary, Department of Education [2024] NSWPIC 186.

Whilst the decision of the New South Wales Personal Injury Commission will not be binding on other Courts or Commissions in Australia, it does provide some helpful insight into what constitutes reasonable or unreasonable management action when it comes to the timing of conducting a performance management meeting.

In this case, the Commission member found that it was not reasonable for the employer to have raised its intention to conduct a performance management meeting on the day the employee returned to the workplace after having taken an extended period of leave due to stress and anxiety.

Facts

The employer in this case was the NSW Department of Education and the employee was a teacher employed by the Department.  The management actions that were in question in this case were actions taken by the teacher’s school principal.

Between 2021 and 2022, the school principal began engaging with the employee to address issues related to the employee’s performance. Eventually, the employee became subject to a performance development plan.

It is worth noting that during this period, there was regular conflict between the employee and school principal. The Commission member accepted that there had been an ‘increasing deterioration’ in the working relationship between the principal and the employee.

Of significance to the outcome of this case was the interaction between the parties on 31 August 2022. The employee had just returned from an extended period of sick leave because of ‘stress and anxiety’ which was purportedly caused by previous performance management interactions with the school principal.  As the employee walked to her class, she was met by the school principal and advised that there was to be another meeting ‘now that [she] was back at school’.

The employee claimed to have suffered a psychological injury as a result of the ongoing work-related conflict between her and principal and alleged that she had been:

• intimidated and harassed;
• subject to false allegations regarding her performance; and
• subject to unreasonable disciplinary and performance management processes.

The employer did not contest that the employee had suffered a psychological injury, nor that the injury was predominantly related the employee’s employment. However, the employer did argue that the psychological injury was ‘wholly or predominantly caused’ by ‘reasonable action’ taken by the principal with respect to the performance appraisal and/or discipline of the employee.

The Law

Workers’ compensation legislation across all states and territories provides a basic entitlement for employees to receive compensation in respect of a work-related injury.

In so far as claims are for compensation for psychological injury, the position is generally that a psychological injury will not be a compensable injury if it arises as a consequence of the employer taking reasonable management action with the employee.

In this case, the relevant provision was section 11A of the Workers Compensation Act 1987 (NSW). Section 11A provides that:

‘no compensation is payable under this Act in respect of an injury that is a psychological injury if the injury was wholly or predominantly caused by reasonable action taken or proposed to be taken by or on behalf of the employer with respect to [matters such as]…performance appraisal, discipline…[and others]…’

Decision

In this case, the Commission member found in favour of the employee and confirmed their entitlement to workers’ compensation under the NSW Act.

The Commissioner found that the injury was not ‘wholly or predominantly caused’ by an action related to discipline and/or performance appraisal. Rather, the injury was attributed to the ‘increasing deterioration’ in the working relationship between the principal and the employee.

The Commission member emphasised that even if she had accepted that the injury was ‘wholly or predominantly caused’ by an action related to discipline and/or performance appraisal of the employee, she could not accept that the principal’s management actions were ‘reasonable’. In support of this position, the Commission member made reference to the interaction between the principal and employee on 31 August 2022 and her view that the interaction was unreasonable, particularly in light of the principal’s awareness of the employee’s heightened state of stress and anxiety.

The Commissioner member stated:

“I do not think it is “reasonable” for [the principal] to have raised with [the employee] on her very first day back at school after an extended period of leave due to stress and anxiety any need for a further meeting regarding her work performance.

In circumstances where [the principal] was acutely aware of the deterioration of [the employee’s] mental health following her return to [the school] and subsequent raised concerns regarding [the employee’s] work performance, I am of the view it was not reasonable for [the principal] to raise with [the employee] any requirement for a further meeting regarding [the employee’s] work performance as soon as she returned to school after an extended period of leave necessitated by the deterioration in [the employee’s] mental health.

Key take-aways for employers

Whilst this case looks at a fairly narrow set of facts, and is a decision of a non-binding nature, there are some key lessons arising from it.

In particular, this case serves as a caution for employers who are considering commencing or continuing performance or conduct management actions (or engaging an employee about doing so) immediately following an employee’s return to work after a period of personal leave.  The risk will clearly be exacerbated where the leave period was lengthy; and/or where it is linked to ‘stress and anxiety’, and/or where the employer is aware of the employee’s stress and anxiety.

Employers need to carefully consider the timing of management actions (such as performance management meetings) and the timing of engaging an employee about the need for these types of management actions. This case demonstrates that it is possible that what would otherwise be entirely ‘reasonable management action’ may become ‘unreasonable management action’ when the management action is immediately sprung on an employee following their return from personal leave (and particularly if the leave is related to an alleged mental health condition).

One way that employers can avoid a risk such as this one is by asking the relevant employee to provide a medical clearance confirming that they are fit to return to their full duties and participate in a foreshadowed performance or conduct management meeting (if one needs to occur on the employee’s return to work). However, we recommend that employers who are considering this course of action take employment law advice before implementing this strategy, as it would be prudent to conduct a broader risk assessment prior to deciding on that course of action.