Demoted By Default: Insights From Morgan v Roman Catholic Archbishop Of Perth [2026] WASCA 62

In Morgan v Roman Catholic Archbishop of Perth [2026] WASCA 62, the Western Australian Court of Appeal has confirmed that a ‘demotion’ for the purposes of the stress exclusion in the former Workers' Compensation and Injury Management Act 1981 (WA) (1981 Act) does not require ‘active’ employer conduct. The case has broader significance in interpreting the current relevant provisions in the Workers’ Compensation and Injury Management Act 2023 (WA) (2023 Act).

Background

The appellant, Nicholas Morgan, was employed as the Deputy Principal of Pastoral Care at Lumen Christi College (College) under a fixed-term executive contract, which was a leadership position he had held since 2011.

Following a restructure, Mr Morgan’s executive contract was not extended beyond 31 December 2020. Despite applying for other executive roles throughout 2020, he was unsuccessful and assumed a classroom teaching position from January 2021 with significantly reduced salary and status.

On 9 March 2021, he ceased work due to a stress-related psychiatric disorder.

He made a claim for workers' compensation pursuant to the 1981 Act.

The arbitrator's decision

The Arbitrator found that Mr Morgan had sustained an ‘injury’ within the meaning of the 1981 Act.

However, the Arbitrator also found that the predominant cause of the appellant's stress was his loss of status (the move from the executive leadership team to a classroom position) and his belief that this was attributable to the designs of the new Principal of the College.

Under section 5(1) of the 1981 Act, a stress-related disease was excluded from the definition of ‘injury’ if the stress ‘wholly or predominantly’ arose from matters listed in s5(4) including, relevantly, ‘demotion’ (stress exclusion).

The Arbitrator held that what had happened constituted a ‘demotion’ within section 5(4)(a) of the 1981 Act, and because Mr Morgan did not contend that the demotion was ‘unreasonable and harsh’, the claim for stress was excluded by reason of the stress exclusion.

The argument on appeal

Mr Morgan appealed to the District Court and subsequently to the Court of Appeal, advancing a single constructional argument: that ‘demotion’ in section 5(4)(a) of the 1981 Act required a positive act on the part of the employer, which diminished the worker's employment status.

It was contended that, because Mr Morgan's executive contract simply expired and was replaced by a lesser contract, there was no active ‘demotion’, and the stress exclusion should not apply.

The Court of Appeal's decision

The Court of Appeal unanimously refused leave to appeal and dismissed the appeal, carefully analysing the ordinary meaning of ‘demotion’.

It was held that there was no good reason to confine the word to the active construction only, and that the ordinary meaning encompassed both senses. What engaged the exclusion was the ‘objective fact of a demotion rather than the way in which the demotion came about’.

Implications

Whilst decided under the 1981 Act, this decision has broader and current significance in the context of the 2023 Act.

The stress exclusion did not apply if the relevant matter was ‘unreasonable and harsh on the part of the employer’.

Section 7 of the 2023 Act takes a different structural approach. Rather than listing specific employment events (demotion, dismissal, etc.) as freestanding exclusionary matters, section 7 introduces the umbrella concept of ‘administrative action’ used in other jurisdictions.

Under section 7(1), ‘administrative action’ includes performance appraisal, suspension, disciplinary action, or anything done in connection with those actions, and anything done in connection with the worker’s demotion, dismissal or retrenchment, or failure to obtain a promotion, reclassification, transfer or other benefit (section 7(1)(e)).

A psychological or psychiatric disorder is not compensable if it results wholly or predominantly from administrative action that is not unreasonable and harsh on the part of the employer, or from the worker’s expectation of such action (section 7(2)).

The difference lies in how ‘demotion’ is now treated. Under the 1981 Act, a ‘demotion’ was itself a listed exclusionary matter, meaning the bare fact of a demotion (through action or inaction, as confirmed in Morgan) engaged the exclusion. This is the point decided in Morgan.

Under section 7(1)(e) of the 2023 Act, the exclusion is triggered not just by the demotion itself, but by ‘anything done in connection with’ the worker's demotion.

This is a meaningful shift.

In assessing liability for claims under the 2023 Act, it will be critical to conduct a broader enquiry and consider evidence as to the events in connection with the ‘demotion’, and the claimant’s expectation of such action, as being sufficient to successfully rely on this defence.

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.