The decision of the Court of Appeal of the Supreme Court of South Australia, Department for Child Protection v Morris [2022] SASCA 131, has significant implications for the scheme, especially for seriously injured workers and/or workers who are totally incapacitated for work.

An object of the RTW Act is to compensate workers to the extent that they have an incapacity for work. The Court of Appeal’s decision emphasises the fact that the RTW Act was not intended to create a pension scheme for seriously injured workers and prevent those workers from suffering any penalty for conduct which violates the necessary degree of co-operation required between worker and employer.

In accordance with the Return to Work Act 2014 (SA) (“RTW Act”), a person who has sustained a work injury which has caused them to be permanently impaired to such a degree that they are determined to be a ‘seriously injured worker’ is entitled to receive weekly payments in respect of that incapacity until they reach retirement age. 

The RTW Act set outs the circumstances in which a person’s weekly payments may be discontinued. One such circumstance in which a person’s weekly payments may be discontinued is if they have breached the ‘obligation of mutuality’. 

Obligation of mutuality

Until recently the Courts had restricted the application of the mutuality obligation to injured workers with capacity to perform work. This stood in contrast to other obligations contained in Section 48 of the RTW Act (and its predecessors), which apply to a worker whether, or not, they had any capacity for work. 

This definition meant that injured workers who had no capacity for work but otherwise breached their employment obligations (in circumstances where it was not possible for their employment to be terminated for serious and wilful misconduct) were still entitled to receive weekly payments. An example of this might be an injured worker who reaches an agreement with the employer to terminate the employment relationship, but then breaches one of their ongoing obligations such as to keep their employer’s confidential information confidential. In a situation such as this, employers (either directly for self-insured employers, or through their premium for registered employers) were still required to pay weekly payments to injured workers who had breached their employment obligations. 

Background

In Morris, the worker had been designated as a seriously injured worker, (the worker had been assessed prior to the commencement of the RTW Act as having sustained a 64% whole person impairment as a result of a work injury sustained in 2002). In 2017 and 2018 (respectively) the worker separately pleaded guilty to trafficking in methylamphetamine and attempting to dissuade a witness from giving evidence. The worker also used a Department for Child Protection (“Department”) ID in the commission of the latter of these offences. Accordingly, her employer (the Department) discontinued her weekly payments pursuant to Section 48(3)(g) of the RTW Act on the basis that she had breached mutuality.

The worker disputed the discontinuances (there being two separate determinations discontinuing the worker’s weekly payments) through the South Australian Employment Tribunal, and at first instance the Tribunal found in her favour on the basis that in order for the worker to have breached the obligation of mutuality, she was required to have some capacity to work. This was despite the Tribunal finding that:

… it is difficult to imagine a more graphic example of an employee’s conduct that is utterly inconsistent with the necessary degree of co-operation required of a contract of employment. The circumstances of this offending also constituted a breach of mutuality.[1]

This decision was upheld on Appeal to the Full Bench of the South Australian Employment Tribunal, before the Department appealed to the Court of Appeal of the Supreme Court of South Australia.

The Decision of the Court of Appeal

The Court of Appeal found that the obligation of mutuality as encapsulated in the RTW Act in Section 48(3) has significantly expanded on the historical definition of the obligation and that the worker’s:

… convictions for drug trafficking and attempting to dissuade a witness from giving evidence represented serious breaches of the obligation of mutuality because her criminal conduct was “utterly inconsistent with the necessary degree of co-operation required of a contract of employment” of a public servant[2] (emphasis added),

thus accepting the Department’s characterisation of mutuality as “the necessary degree of co-operation as between worker and employer”. Such a definition requires that both parties do all things necessary to maintain an effective employment relationship

A worker therefore breaches the obligation of mutuality if they have conducted themselves in a manner which is “fundamentally destructive of the required mutuality between and employee and employer which enables the conclusion that the employee is not ready, willing or able to undertake or adhere to the responsibilities and duties of employment.[3] This can include circumstances unconnected with the worker’s employment, such as criminal conduct on the part of the worker, which undermines their employability.

Their Honours found that such an obligation was no longer restricted to only those who had a partial capacity to work, but that: 

… there is nothing in the text or context of these provisions, or the [RTW] Act as a whole, to suggest that these provisions have no application to workers who are totally incapacitated. None of these provisions is necessarily confined in operation to workers with some capacity for work.[4]

Not only that but, their Honours found that criminal misconduct, as was committed by the worker, “provides a stark example of a case where both the employability of the [worker] and the required element of mutuality have both been undermined[5] and that it is “not unjust to require that a totally incapacitated worker, including a seriously injured worker, abide by the requirements of that worker’s employment.[6]

Their Honours concluded that:

The designation of a worker as “seriously injured” is an important aspect of the [RTW] Act. That designation carries with it valuable entitlements that may be life long or, in the case of weekly payments, that may subsist until normal retirement age. As important as the entitlement to weekly payments is, it does not amount to a statutory sinecure which is to be enjoyed regardless of criminal misconduct by a worker which is both inimical to and destructive of the mutuality required in an effective employment relationship” (emphasis added).

Their Honours ultimately found that the Tribunal and the Full Bench should have found that Section 48(3)(g) of the RTW Act does have application to a worker who is totally incapacitated for work.

Practical impact of decision and recommendations

The practical impact of this decision is that injured workers must be mindful of all their employment obligations at the relevant time in order to preserve their entitlement to weekly payments.

In addition to this, Compensating Authorities and particularly Self-Insured Employers, ought to be undertaking a review of their ability to provide suitable employment in respect of any seriously injured workers. Providing suitable employment to a seriously injured worker will benefit both injured workers (who will remain engaged in the workforce) and Compensating Authorities who will see a significant reduction in their liability for weekly payments. 

Clearly there remains a distinction to be drawn between:

  1. workers with capacity;
  2. seriously injured workers with capacity; and
  3. injured and seriously injured workers with no capacity. 

The unique circumstances of each case will be important in determining whether the obligation of mutuality has been breached. In particular, Compensating Authorities will need to consider what is required for the necessary degree of cooperation between the employer and worker, having regard to all the circumstances of the employment relationship. As an example, it could not reasonably be asserted that there is a breach of mutuality if the employer and worker have agreed to the terminate the employment relationship.

While it was not directly an issue for the Court of Appeal, it was a necessary finding that seriously injured workers remain subject to section 48 of the RTW Act. As such, although the RTW Act makes it clear that a Compensating Authority cannot compel a seriously injured worker to perform work as part of a recovery/return to work plan, a seriously injured worker remains subject to the requirement to:

  • undertake work that is offered and the worker is capable of performing (section 48(3)(e)); and
  • participate in assessments of the worker’s capacity and/or employment prospects (section 48(3)(f).

This expanded definition of mutuality also means that seriously injured workers with no capacity for work need to remain mindful of their employment obligations, such as maintaining confidentiality and not bringing their employer into disrepute.

If a Compensating Authority determines (or an employer wishes to seek a determination to that effect) that the obligation of mutuality has in fact been breached, and they wish to discontinue the worker’s entitlement to weekly payments, we recommend that:

  • they ensure that they do so under the correct provision of the RTW Act (noting that Section 48(3) of the RTW provides multiple means by which a worker can breach the obligation of mutuality) to account for the conduct of the worker which the employer asserts has breached the obligation; and
  • there is a solid basis for attempting to discontinue a worker’s entitlement to weekly payments, meaning that adequate investigation should be carried out to ensure that the Compensating Authority is satisfied that the worker has in fact breached their obligation of mutuality.
  1. Morris v Department for Child Protection [2020] SAET 92, [46].

  2. Department for Child Protection v Morris [2022] SASC 131, [131].

  3. Department for Child Protection v Morris [2022] SASC 131, [75].

  4. Department for Child Protection v Morris [2022] SASC 131, [155].

  5. Department for Child Protection v Morris [2022] SASC 131, [106].

  6. Department for Child Protection v Morris [2022] SASC 131, [169].

This communication provides general information which is current as at the time of production. The information contained in this communication does not constitute advice and should not be relied upon as such. Professional advice should be sought prior to any action being taken in reliance on any of the information. Should you wish to discuss any matter raised in this article, or what it means for you, your business or your clients' businesses, please feel free to contact us.

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John Walsh

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