Can an employee claim for personal injury arising from a breach of contract?
Yes, an employee can claim for personal injury arising from a breach of their employment contract.
In this article, we consider the recent decision of Martin v Telstra Corporation Ltd (No 2) [2024] FedCFamC2G 1174.
On 8 November 2024 the Federal Circuit and Family Court of Australia handed down a (268 paragraph) decision that confirmed the relatively unknown legal proposition that an employee can claim general damages arising from a personal injury caused by a breach of contract: Martin v Telstra Corporation Ltd (No 2) [2024] FedCFamC2G 1174.
Facts
2. Ms. Valerie Martin was employed by Telstra Corporation Limited (‘Telstra’) as a call centre Customer Service Operator from 1989 until 10 May 2021. It entailed shift work and being required to answer and handle the triple zero (‘000’) calls. Every two years, all employees had to undergo an audiometry, being a test that measure’s a person’s ability to hear specified frequencies. The routine testing on 2 August 2012, revealed Ms. Martin was suffering a hearing loss which caused her to fall below the necessary hearing threshold.
3. Following more testing, an audiologist report of 12 September 2012 confirmed Ms. Martin had a ‘mild to moderate high frequency hearing loss’ but she was able to perform her role with an adjustment in the form of a binaural headset. Telstra made the adjustments to her role and she was considered fit to perform her normal duties following her 2014 and 2016 testing.
4. In around December 2017, Telstra formed the view that Ms. Martin was under performing and mishandling calls. Following this, she was placed on a number of ‘performance support plans’ in November 2018, March, June and September of 2019.
5. On 23 September 2019, Ms. Martin underwent a further hearing test and again failed but the results were not materially different from previous test results. However, this time, Telstra referred the test results to an occupational health specialist for assessment. The assessment resulted in two reports which were interpreted by Telstra as indicating Ms. Martin was not fit to her perform her role.
6. On 7 November 2019, Telstra issued Ms. Martin with a direction that they did not view her as fit to perform her normal duties and directed that she takes sick leave from 8 November 2024 until such time as she could be medically confirmed fit to perform the role (‘November Direction’).
7. The occupational health specialist suggested they speak to Ms. Martin’s general practitioner (‘GP’) to determine whether or not she had medical issues which prevented her from performing her role. Ms. Martin did not consent to this happening and refused to sign the consent form. On 12 November 2019, following her objection, Telstra advised Ms. Martin that she would now be treated as receiving discretionary compassionate leave and she was paid until 14 February 2020. Ms. Martin was then not paid until 26 June 2020.
8. On 13 May 2020 Telstra advised Ms. Martin that they viewed her as fit to return to her role and on 26 June 2020 paid her the base salary (without allowances and shift penalties) for the period from 14 February 2020 to 12 June 2020.
9. From 11 June 2020 Ms. Martin submitted medical certificates certifying her as unfit for employment and she never returned to perform her duties. The medical certificates were issued around once per month up to 5 March 2021 with that final certificate covering the period from 7 March 2021 to 7 May 2021.
11. On 18 October 2021 Dr George, an independent psychiatrist, prepared a report at the request of Telstra which stated that Ms. Martin suffered from ‘persistent depressive disorder’ since 7 November 2019 becoming unfit on that date being the date ‘she was asked to leave the workplace’.
Claims
11. Ms. Martin commenced proceedings in the Federal Circuit and Family Court of Australia making the following claims:
11.1 the November Direction to take sick leave when she was not sick or injured contravened cl 32.1 of the Telstra Enterprise Agreement 2015-2018 (‘EBA’) and hence s. 50 of the Fair Work Act 2009 (Cth) (‘Act’);
11.2 not paying wages after 14 February 2020 constituted a breach of cll. 17.1 and 18.4(f) of the EBA and hence s. 50 of the Act;
11.3not paying wages after 14 February 2020 constituted a breach of s. 323(1) of the Act;
11.4 requiring her not to perform duties until she was medically fit and consenting to the occupational specialist contacting her GP breached the implied terms of the contract of employment that Telstra would co-operate with Ms. Martin; to act in good faith; and to only issue lawful and reasonable instructions;
11.5 the breaches of the implied terms of the contract constituted disability discrimination in breach of ss. 5(1) and 15(2)(d) of the Disability Discrimination Act 1992 (Cth) (‘DDA’).
12. Ms. Martin claimed that as a consequence of Telstra’s conduct she suffered psychiatric injury and, on that basis, she claimed general damages and damages for economic loss equal to the income she says she would have earned from 7 November 2019 until 18 May 2023 being the date she turned 75 years of age and planned to retire.
Decision on Liability
13. His Honour Judge Manousaridis, rejected the first claim that the November Direction to take sick leave when Ms. Martin was not sick or injured breached cl. 32.1 of the EBA on the basis that the EBA merely required Telstra to pay an employee when on sick leave and Telstra did pay her.
14. The second claim was unsuccessful as the failure to pay the wages in breach of cl. 17.1 and cl.18.4 of the EBA was not relevant to clauses which merely set out the rates and allowances to be paid when performing shifts. As no work was performed there was no breach.
15. For similar reasons, the third claim failed as no work was performed so there was no breach of s. 323(1) of the Act as it required the employer to pay the employee ‘in relation to the performance of work’.
16. The fourth claim was upheld. His Honour did not adopt the basis of the claim as pleaded (i.e. a reliance on implied terms of cooperation, good faith and a duty not to give unreasonable or unlawful directions) but rather found that the November Direction constituted a repudiation of the employment contract by Telstra. The November Direction was a breach of ‘an essential promise which is implied in every contract…that neither party will, without just cause, repudiate its obligations under it, whether the time for performance has arrived or not; that is that [neither party] will not expressly or impliedly intimate that [it] refuses to be bound by it in whole or part’ (at [225]). (The interesting issue is that his Honour does not appear to deal with the issue of whether Ms. Martin ever actually accepted the repudiation.)
17. His Honour then found that Ms. Martin had suffered a psychological injury as a result of the November Direction and she was therefore entitled to damages. At [243] his Honour held that it was ‘reasonably foreseeable that the repudiation by the employer of an employment contract constituted by directing the employee to leave work would cause stress and disturbance, and psychiatric injury in consequence of such stress and disturbance’.
18. The final claim under the DDA was dismissed on the basis that Ms. Martin was treated no differently to any other employee in the same or similar circumstances..
Damages
19 Although his Honour stated the evidence suggests she experienced ‘sleep disturbance, ruminations, agitation, a degree of anxiety and mild panic phenomena at times, in combination with depressed mood, which has been somewhat persistent’ he was not satisfied that the pain and suffering was ‘substantial or sustained’ (at [258], [260]). His Honour then assessed the general damages for the psychological injury at $30,000.00.
20. In respect of the economic loss claim, his Honour held that given Telstra’s perceptions that Ms. Martin was not consistently performing to the appropriate level, it was very unlikely that she would have remained employed until 18 May 2023 as claimed. His Honour determined there was only a 15% chance that Ms. Martin would have remained employed until that date and therefore only allowed 15% of the total claimed loss of $330,064.07 less the amount paid from 7 November 2020, making a final award of $11,994.41.
Take out
21. The take outs from this decision are as follows:
21.1 standing down an employee carries significant risks;
21.2 a direction to an employee to take sick leave when they are not sick or injured potentially constitutes repudiation of the employment agreement and that it is reasonably foreseeable that an employee would suffer a psychological injury arising out of such a direction.
21.3 although the issue of acceptance of the repudiation was not discussed in the decision, the fact that the act which caused the psychological injury was the termination of the contract raises the issue as to whether it was still governed by the Workers Compensation Act 1987 (NSW) as being an injury that arose out of or in the course of employment (s. 4) and that employment was a substantial contributing factor (s. 9A).
22. Employers must be very careful when standing down or suspending employees and consider whether such conduct could amount to a termination of the employment relationship giving rise to a number of potential claims including damages for personal injury.
23. If you have any questions, please do not hesitate to contact our Workplace Relations Team.
Leisa Driscoll-Hayward Simon Berry
Senior Associate Partner
ldh@hilliardandberry.com.au sberry@hilliardandberry.com.au
If you require any further information, please do not hesitate to contact the Hilliard & Berry Solicitors’ office on (02) 8324 7500 asking for the Workplace Relations Team.