Australia: Workers comp lessons - ironing out the creases in performance management

There has been controversy in Western Australia around the implementation of performance management plans (PMP) in the context of determining whether the defence under s 5(4) of the Workers' Compensation and Injury Management Act 1981 (WA) (the Act) can protect an employer from a workers' compensation claim for a worker's psychiatric injury. So the question is, are PMPs a form of discipline or part of a pre-disciplinary process?

Last week's decision of Pilbara Iron Company (Services) Pty Ltd v Suleski [2017] WADC 114 has confirmed that a PMP is in fact disciplinary. The case also provides important commentary around the other elements of the s 5(4) defence, including whether employer actions are unreasonable and harsh.

Elements of the case

The case related to a claim for workers' compensation in WA following a meeting on 22 August 2013 between the employee, Mr Suleski, and his employer, Pilbara Iron Company (Services) Pty Ltd (Pilbara Iron). Mr Suleski attended the meeting with his superintendent, Ms Bufton, during which he was formally advised (with prior warning) that he would be placed on a PMP due to a number of performance issues identified in the preceding six months. The PMP was implemented from the meeting on 22 August and in part stated that it "...may result in disciplinary action up to and including termination of employment".

It was accepted by the Court that Mr Suleski suffered from a psychiatric disease that rendered him incapacitated for work from 22 August 2013 and that his employment was a significant contributing factor to the disease.

At first instance, the issue for determination was whether the employer had a defence under s 5(4) of the Act, which was dependent on whether:

  • the meeting was disciplinary
  • if so, whether the meeting was the whole or predominant cause of his incapacity, and
  • if so, whether Pilbara Iron's actions on 22 August were unreasonable and harsh.

The employer argued that:

  • Mr Suleski's psychiatric disease arose wholly or predominantly from his expectation of discipline and that the Arbitrator was therefore not in a position to consider whether Pilbara Iron's conduct was unreasonable and harsh (McPherson v State Print [Unreported, WASC, Library No 960697, 15 December 1996]) or,
  • Mr Suleski's psychiatric disease arose wholly or predominantly from actual discipline which was not unreasonable and harsh.

Referring to FAI General Insurance Co Limited v Goulding [2004] WASCA 167, Arbitrator Nugawela found that the meeting was disciplinary and that Mr Suleski's psychiatric condition wholly or predominantly arose from the PMP's implementation at the meeting. The Arbitrator also found that the reasons given by Pilbara Iron for implementing the PMP were unreasoned and unjustified, and therefore unreasonable and amounting to harsh conduct. In so finding, the Arbitrator determined that:

  • it was unreasonable for Pilbara Iron not to accept (or to disregard) Mr Suleski's explanations concerning the issuing of warnings to subordinates
  • there was no reasonable opportunity for Mr Suleski to complete the transport operator role description and it was unreasonable for Pilbara Iron not to accept (or to disregard) his explanations concerning the provision of the role description, and
  • it was unreasonable to implement a PMP where:
    • Mr Suleski had not been provided with any or adequate leadership training
    • his mid-year performance review was selectively downgraded on his superintendent's email instruction, and
    • Pilbara Iron deviated from its own procedures by placing him on a PMP instead of a development plan.

Pilbara Iron's appeal

The Judge reviewed the Arbitrator's reliance on Department of Education v Azmitia [2014] WADC 85 in coming to a decision and found it had no application in this case. Azmitia was concerned with a causation test where the issue is whether the employment was a significant contributing factor to the contraction of a disease. This was not the issue under consideration in the present case.

The Judge also noted the worker's perception of whether he had been treated unfairly versus whether he had in fact been treated unfairly, was not relevant to the issue to be determined—whether the PMP's implementation constituted discipline (and if it did), whether any disease suffered by Mr Suleski was caused by stress (and if it was), whether the stress wholly or predominantly arose from the discipline under consideration.

Although the Arbitrator had erred in his application of Azmitia, the Judge stated that this did not lead to an error in the ultimate finding that the PMP's implementation was disciplinary and the predominant cause of the stress-related disease.

The Judge also noted—notwithstanding the apparent failure to adduce evidence of any relevant policies, codes of conduct, practice or guidelines relevant to Mr Suleski's employment and work performance—that placing Mr Suleski on the PMP fell within the natural and ordinary meaning of the word "discipline" under s 5(4)(a), as it involves instruction to train to proper conduct, to subject a person to rules of conduct, to maintain a state of order by training and control, or to bring to a state of order and obedience by training and control.

The Arbitrator erred in law by the way he approached the determination of whether the PMP's implementation was unreasonable and harsh. The correct approach was to objectively determine whether, in all of the circumstances, the employer's action of placing Mr Suleski on the PMP was unreasonable and that the consequences were harsh. The relevant circumstances included those leading up to the decision to implement the PMP, such as how:

  • Mr Suleski was informed of the decision in the context of all the policies, guidelines and codes of conduct that regulate his conditions of employment and work performance
  • he was informed of the decision to implement the PMP, and
  • the PMP impacted upon Mr Suleski after it was imposed, to his work performance and any personal issues.

The Judge commented that an opportunity to address poor work performance would not normally be unreasonable or harsh, although this depends on the procedure being followed, what internal guidelines or codes of conduct require, and on consequences to the worker. Further, the worker's belief that he was being unfairly targeted was not relevant to whether the actions of the employer were unreasonable and harsh. Consequently, the issue of whether the implementation of the PMP was unreasonable and harsh was remitted to the Workers' Compensation Arbitration Service to a different arbitrator for further determination.

How does this decision affect you?

While the Judge confirmed that a PMP is discipline, the success of the appeal could be short-lived as the matter of whether the employer's behaviour was harsh and unreasonable has been remitted for rehearing. In this decision, it is important for employers to ensure they are following policies, codes of conduct and guidelines in their workplace and that if performance management is required through the implementation of a PMP, that it is reasonable to do so.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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