Court rejects much discussed workers compensation claim
February 28, 2014
On 30 October 2013 the High Court of Australia, by a 4-2 majority, found that Comcare was not liable to compensate a worker who was injured while having sex with an acquaintance during an overnight stay at a motel booked by her employer.
The worker was employed by a Commonwealth Government agency. She was directed by her employer to conduct budget reviews and to provide training at a regional office in New South Wales. The employer booked one night’s accommodation at a motel for the worker.
After finishing work for the day, the worker called a friend who lived in the town. The two had dinner and then returned to her motel room where they had sex.
During the sexual encounter, a glass light fitting above the bed was pulled from the wall (whether by the worker or the acquaintance is not clear) thereby falling on the worker and causing injuries to her nose and mouth.
The worker claimed compensation under the Safety Rehabilitation & Compensation Act 1988 (Cth), which rendered Comcare liable to pay compensation in respect of ‘a physical or mental injury suffered by an employee … arising out of, or in the course of, the employee’s employment’.
The sole issue was whether the injuries were suffered ‘in the course of’ her employment.
The decision turned on the nature and application of the test formulated by the High Court in the 1992 decision in Hatzimanolis v ANI Corporation Ltd as follows:
‘An interval or interlude within an overall period or episode of work occurs within the course of employment if, expressly or impliedly, the employer has induced or encouraged the employee to spend that interval or interlude at a particular place or in a particular way. Furthermore, an injury sustained in such an interval will be within the course of employment if it occurred at that place or while the employee was engaged in that activity unless the employee was guilty of gross misconduct taking him or her outside the course of employment’.
It was common ground that the worker’s two day visit to the regional office constituted an overall period of work and that the injury occurred during an interval or interlude between actual episodes of that work. The employer had encouraged her to stay overnight at the motel. It was conceded that the worker’s decision to engage in sex during the interval did not constitute gross misconduct.
The decisions below
At first instance, the Administrative Appeals Tribunal concluded that the facts were insufficient to establish a claim for compensation.
The Tribunal held that the activities which led to the injuries must be induced or encouraged by the employer and the employer had not induced or encouraged sexual conduct. The Tribunal concluded that the worker’s injuries were unrelated to her employment. Her sexual activity was of a private nature, it took place in her leisure time and not in an interval in an overall period of the work, that interval having been ‘interrupted’ by that conduct. The Tribunal distinguished the sexual activity from activities such as showering, sleeping, eating or returning to a place of temporary residence from a social occasion, which were ordinary incidents of an overnight stay. It followed that the injuries did not occur in the course of her employment.
The worker appealed to the Federal Court of Australia, where Justice Nicholas found that the Tribunal erred in holding that it was necessary for the worker to show that the activity which led to her injuries had been induced or encouraged by her employer.
The relevant connection between the injuries and her employment was that her injuries were sustained while she was in the motel room in which her employer had encouraged her to stay.
On appeal, the Full Court of the Federal Court of Australia (Full Court) (Justices Keane C, Buchannan and Bromberg) upheld the decision of Justice Nicholas, holding that the Tribunal’s approach treated the conditions stated in Hatzimanolis ‘at a particular place or in a particular way’ as though they were conjunctive rather than disjunctive.
The Full Court noted that there were two ways whereby an injury in an interval in an overall period of work would be compensable: inducement or encouragement to spend the interval between periods of actual work at a particular place or inducement or encouragement to spend the interval in a particular way. In either case, the injury could be compensable unless the employee acted in a way amounting to gross misconduct, thereby taking him or her outside the course of employment. Although the employer did not induce or encourage the worker to engage in sexual activity, it was sufficient that the worker sustained her injuries at a place at which she had been encouraged by her employer to stay.
The High Court decision
The majority of the High Court (French CJ, Hayne, Crennan and Kiefel JJ) held that the Full Court misunderstood and therefore wrongly applied the Hatzimanolis principle.
It did not follow from Hatzimanolis that, absent gross misconduct on the part of the employee, an employer who requires an employee to be present at a particular place away from their usual place of work will be liable for any injury the employee suffers while present there. The majority explained the Hatzimanolis principle as follows:
‘Hatzimanolis sought to provide a legal justification for an injury, which occurred between periods of actual work, being regarded as occurring in the course of the employee’s employment. It did so by characterising the interval by reference to the employer’s inducement or encouragement. The employer’s liability in such circumstances depends upon what the employer induced or encouraged the employee to do. Hatzimanolis did not seek to extend the employer’s liability beyond that.
Because the employer’s inducement or encouragement of an employee, to be present at a particular place or to engage in a particular activity, is effectively the source of the employer’s liability, the circumstances of the injury must correspond with what the employer induced or encouraged the employee to do’.
The majority went on to draw a distinction between a case where an injury occurs at and by reference to the place on the one hand, and where the injury occurs whilst the employee is engaged in an activity on the other, in the following terms:
‘When an activity was engaged in at the time of injury the question is:
Did the employer induce or encourage the employee to engage in that activity? When the injury occurs at and by reference to a place, the question is: did the employer induce or encourage the employee to be there? If the answer to the relevant question is affirmative, then the injury will have occurred in the course of employment. It follows that where an activity was engaged in at the time of the injury, the relevant question is not whether the employer induced or encouraged the employee to be at a place. An employer’s inducement or encouragement to be present at a place is not relevant in such a case’.
In separate dissenting judgments, Bell and Gageler JJ held that the Federal Court correctly applied the Hatzimanolis principles.
According to Justice Bell:
‘The test provides clear and workable guidance for the Tribunal of fact in the determination of the notoriously difficult question of whether injury is within the course of employment. To superimpose on the test consideration of the connection between the circumstances of the injury and the employment relation would be to add complexity at the cost of certainty and consistency’.
Justice Gageler was also critical of the formulation of the test advanced by the majority noting that:
‘A test in those terms would represent a return to the outmoded, artificial and intrusive form of analysis that the Hatzimanolis principles were formulated to overcome’.
His Honour also commented that it should not be necessary to break up the single overnight stay at the motel into a series of discrete events and to then analyse those events separately when determining the compensability of the worker’s injury.
The decision of the High Court limits the circumstances in which an employer will be liable where a worker is injured during an interval between actual periods of work in an overall period of work.
Over the last 20 years, the principle in Hatzimanolis has been interpreted and applied to provide compensation cover to a worker while staying in accommodation provided by the employer, regardless of the activity engaged in at the time (with the exception of gross misconduct).
According to this decision, the principle has, in effect, been misinterpreted and wrongly applied. Hatzimanolis does not mean that the employer becomes the insurer of the employee during the time that the employee is at the place provided by the employer. It does not follow that all activities (with the exception of gross misconduct) in which the employee is engaged at the place are compensable.
In all cases, the basis of liability is the inducement or encouragement by the employer. A distinction is drawn between the case where an injury occurs at and by reason of the place on the one hand, and where the injury occurs while the employee is injured whilst engaged in an activity on the other.
According to the majority decision, an injury associated with a place may involve something occurring to the premises or some defect in the premises. Therefore, if the light fitting in this case had been insecurely fastened into place and simply fell upon the worker, the injury would have arisen by reference to the place. According to the majority decision, the proper application of the test in Hatzimanolis involves the following steps:
- The starting point is a factual finding that the employer has suffered an injury, but not while engaged in actual work
- The next enquiry is what the employee was doing when injured. For the principle in Hatzimanolis to apply, the employee must have been either engaged in an activity or present at a place when the injury occurred
- The essential enquiry is then: how was the injury brought about? In some cases, the injury will have occurred at and by reference to the place. More commonly, it will have occurred whilst the employee was engaged in an activity
- When an activity was engaged in at the time of injury, the question is: did the employer induce or encourage the employee to engage in that activity?
- When injury occurs at and by reference to a place, the question is: did the employer induce or encourage the employee to be there?
- If the answer to the relevant question is affirmative, then the injury will have occurred in the course of employment.
It follows that, in the case where an activity is engaged in at the time of the injury, the employer’s inducement or encouragement to be present at a place is not relevant.
Although the decision is undoubtedly beneficial to employers, the refinement of the Hatzimanolis principle advanced by the majority decision may be difficult to apply in practice. Whether the injury occurs by reference to the ‘place’ rather than as a result of an ‘activity’ may not always be easy to discern.
The minority decisions argue that the test is unnecessarily complex, leading to uncertain and inconsistent outcomes. In his judgment, Justice Gageler refers to an example whereby an employee would not be in the course of employment if the employee slipped in the hotel gymnasium, unless the conditions of employment were such that the employer expressly or impliedly encouraged or required the employee to be fit. The event of an employee slipping in the shower after using the hotel gymnasium ‘would appear to be one of especial difficulty’.
Authored by Robert McKenna, Partner, Sydney.
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