By Clare McIlwraith
Imagine your employer sends you to a conference interstate. Your travel, expenses and accommodation are all organised and paid for. Your 9-to-5 days and dinners are occupied with conference events. But what of all the other time you have on your hands? It is the stuff of folklore and Hollywood movies (like the 2011 movie Cedar Rapids) that those other times are filled with adventure. But for Australian employees there now exists a limit on what can be done out of the office that will be protected under workplace insurance schemes.
In October 2013 the High Court, by a 4:2 majority, allowed an appeal by the federal government’s workplace insurer, Comcare, denying the Commonwealth government employee respondent, known by the identifier ‘PVYW’, workers’ compensation under the Safety, Rehabilitation and Compensation Act 1988 (Cth) (SR&C Act).
PVYW had been sent to visit a regional office, and was required to stay overnight at a motel booked by the employer. While staying overnight at the motel, PVYW was struck in the face by a glass light fitting on the bed when it was pulled off the wall of the motel during sexual intercourse with a local acquaintance. Following the incident, PVYW claimed compensation for physical and subsequent psychological injuries under the SR&C Act.
The majority of the court held that the injury suffered by PVYW was not suffered ‘in the course of’ employment. This was because it was not caused through an activity encouraged or induced by the employer or was not considered ‘referable’ to a hotel stay. This last conclusion is perhaps surprising given the mythology of work trips and sex in hotel stays or because as Counsel for PVYW noted that sex is a universal incident of human life ( HCATrans 169).
Although the SR&C Act only applies to Commonwealth government employees the decision will be relevant to all employees subject to workers compensation schemes because each scheme limits insurance recovery in similar (though in some cases more restrictive) ways (see  HCATrans 114).
An injury suffered in the course of employment
To claim compensation under the SR&C Act (similar to other workplace insurance schemes), PVYW’s injuries had to meet the relevant definition of ‘injury’. Section 5A(1)(b) of the SR&C Act says that, in the Act, ‘injury’ means:
an injury … suffered by an employee, that is a physical or mental injury arising out of, or in the course of, the employee’s employment;
If an injury meets this definition, it will be compensable under the SR&C Act, unless the employer is able to show that the employee’s injuries were intentionally self-inflicted or caused by the employee’s misconduct. There was never any suggestion that PVYW’s actions could be classified in either of these ways, though implicit in the High Court finding is a conclusion that what I call ‘misadventure’ will now be an exemption to the recovery of compensation.
It was the phrase ‘in the course of’ that provided the basis of contention in this case: a case that started in the Administrative Appeals Tribunal and was subject to appeals and counter appeals as it ventured through the federal court system.
The relationship between an ‘interval’ and ‘in the course of employment’
An injury sustained by an employee after an ordinary working day would normally be considered outside of ‘the course of’ employment. However, where an injury is sustained by an employee, not whilst actually working, but during an interval of time within an overall period of work, the question arises whether the circumstances warrant the conclusion that the injury was suffered in the course of employment.
In this case, PVYW was injured during an ‘interval’ — the employee was staying at the motel at the employer’s direction between an overall period of work. This was not disputed. What was disputed was the proper interpretation and application of the principles to be applied in determining when an injury suffered during an ‘interval’ will be in the course of employment.
The Hatzimanolis principle
The debate at each stage of this case centered on the correct interpretation and application of the principles discussed in the High Court case of Hatzimanolis v ANI Corp Ltd  HCA 21. In Hatzimanolis an employee from New South Wales was sent by his employer to work in Western Australia for three months, where he was accommodated at a camp. On a day when the employees were not required to work, the employer organised an excursion and provided the necessary vehicles for the trip offsite. The employee was seriously injured when the vehicle he was in overturned.
In Hatzimanolis the High Court said (at ) that it should:
be accepted that 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.
The essence of this statement has been referred to as the ‘Hatzimanolis principle’ in subsequent cases. The proposition this principle provides is that for an injury suffered during an ‘interval’ to be considered to have occurred in the course of employment, the circumstance in which the employee was injured must be connected to the inducement or encouragement of the employer. The word ‘circumstance’ has been taken to be a reference to either the activity the employee was engaged in while they were injured, or the place at which the employee was present at the time they were injured.
The focal point of the AAT and courts’ disagreement was the correct interpretation and application of the Hatzimanolis principle.
The AAT finds that sex was not induced or encouraged by the employer; rather it is a private recreational activity
The AAT denied PVYW’s compensation claim. The Tribunal held that it will be insufficient if the employee suffered their injuries at a place the employer induced or encouraged them to be present at — that the activity engaged in must have been induced or encouraged by the employer.
Critically the AAT formed the view (cited at  of the Full Federal Court decision):
The employer had not expressly or impliedly induced or encouraged the applicant’s sexual conduct that evening. Nor did the employer know or could reasonably expect that such an activity was contemplated … The activity was not an ordinary incident of an overnight stay like showering, sleeping, eating, or returning to the place of residence from a social occasion elsewhere in the vicinity. Rather [PVYW] was involved in a recreational activity which [the] employer had not induced, encouraged or countenanced.
Accordingly, the applicant’s injuries were unrelated to … employment, took place during … leisure time, and were of a private nature. As a consequence, [the] activity did not take place during an interval or interlude and did not arise during the course of … employment.
The Federal Court and Full Federal Court conclude that injuries suffered in a place where an employee is directed to be are compensable irrespective of how the injury is caused
Nicholson J in the Federal Court (PVYW v Comcare (No 2)  FCA 395) disagreed with the reasons and conclusion of the AAT, allowing PVYW’s appeal. Nicholson J said there was nothing before the AAT to indicate whether PVYW’s employer approved or disapproved of its employees entertaining other people in their motel rooms with whom they might engage in lawful sexual activity during an overnight stay arranged by the employer, and nothing before the Tribunal to suggest that PVYW’s sexual activity was in any respect incompatible with the nature or terms of employment.
The judge also said that despite it being agreed that the employer had not expressly or impliedly induced or encouraged PVYW’s sexual activity, it did not follow that the interval was interrupted, as the AAT had found. Rather, Nicholson J said the underlying question the AAT should have determined was simply whether there was a sufficient connection between PVYW’s injuries and employment, and that it was the temporal relationship between them that was of utmost importance.
For Nicholson J it followed that because PVYW’s injuries had occurred while at a particular place where the employer induced or encouraged her to be during an ‘interval’, the requisite temporal relationship or nexus between PVYW’s injuries and employment was established (–). In Nicholson J’s view, it was not necessary for PVWY to show that the particular activity which led to their injury was one that had been expressly or impliedly induced or encouraged by their employer (). Justice Nicholson gave the example that if PVYW had been playing a game of cards in the motel room any ensuing injury would be entitled to compensation even though it could not be said that their employer induced or encouraged that activity ().
On appeal, the Full Federal Court (Keane CJ, Buchanan and Bromberg JJ) (Comcare v PVYW  FCAFC 181) upheld the decision of Nicholson J, agreeing that it is sufficient to find the injury compensable if the employee suffered their injury at a place they were induced or encouraged to be by their employer. The Full Court agreed it is not also necessary for the employee to show that their employer induced or encouraged them to engage in the particular activity they were engaged in at time of injury.
The Full Court said that in their view it was not the High Court’s intention to superimpose an ‘activity test’ on a ‘place test’, and that no combined or two-stage test arose from Hatzimanolis; that following Hatzimanolis, provided that one of the qualifying conditions is met (place or activity), the onus is on the employer to show that an employee’s conduct qualified as ‘gross misconduct’, thereby taking it outside the course of employment (–).
The High Court’s decision and a notion of misadventure
A majority of the High Court allowed Comcare’s appeal, overturning the decisions of the courts below and reaffirming the decision of the AAT. Bell J and Gageler J wrote separate dissenting judgments. Keane J did not sit, having found for PVYW when a member of the Full Federal Court.
The majority dismissed PVYW’s argument that it was not relevant whether they had been induced or encouraged by their employer to engage in the activity they were at the time they were injured — that is was sufficient for PVYW to be at a place induced or encouraged to be by their employer when they were injured.
The majority was firm in their interpretation of the Hatzimanolis principle, holding that the requisite connection that must be shown to exist between the employee’s injuries and employment depends on the employer’s encouragement or inducement. They said that because the basis of the employer’s liability is its inducement or encouragement, the circumstances of the injury must correspond with what the employer induced or encouraged the employee to do. Simply put, if the employer induced or encouraged the employee to be present at a particular place and the employee was injured whilst at that particular place, the injury will be suffered in the course of employment, and if the employer induced or encouraged the employee to engage in a particular activity and the employee was injured whilst engaging in that activity, the injury will be suffered in the course of employment.
In contrast to the conclusion of the courts below it, the majority of the High Court was clear that an injury suffered during an ‘interval’ will not be considered to have occurred in the course of employment if the employee was injured whilst engaging in an activity they were not encouraged or induced to do by their employer, even if they were present at a place the employer induced or encouraged them to be at the time the injury occurred. The majority said that Hatzimanolis did not seek to extend the employer’s liability beyond such circumstances. In doing so the High Court raised a novel misadventure basis for rejecting the causal connection between injury and work. It followed that because PVYW’s employer did not (according to the High Court majority) induce or encourage the sexual activity that led to injury, PVYW was not injured in the course of employment under the definition of ‘injury’ in the SR&C Act.
The majority provided a further reason for rejecting PVYW’s contention that also illustrates the idea of misadventure as a basis for causal disconnection. They said that PVYW was not injured at a place in the sense in which ‘that expression’ is to be understood in the joint reasons in Hatzimanolis. They said that an injury occurs at a place only when the circumstance of the injury is referable to that place: ‘The place where an employee is required to be assumes particular importance when it is the cause of an injury or death’ (). The majority gave the example that if the light fitting had been insecurely fastened to the wall and had simply fallen onto PVYW, then the injuries would have arisen ‘by reference to the motel’: there being a defect in the motel, which would provide the necessary connection between the employer’s inducement or encouragement for them to be at that place, and the injuries. The majority said compensability in this circumstance would have been justifiable, but employer responsibility for everything that occurs whilst the employee is present at that place is not necessarily justifiable under the place referable test.
If there was any room to potentially find an employer responsible for an employee’s injury when they did not impliedly or expressly induce or encourage the activity the employee was engaged in when their injury was sustained, the majority’s narrow interpretation of the relevance of ‘place’ seems to confine the space of employer liability to an even greater extent and to limit the types of conduct within that space that an employee can do before the employee’s activity will become misadventurous.
The new sphere of course of employment
The words ‘in the course of … employment’ used in the SR&C Act and other workplace compensation laws do give rise to the need for there to be a factual connection or association between the circumstances of the injury and the employee’s employment. It is clear from an analysis of the relevant case law that where an employer’s encouragement or inducement is relevant to a case, this has often provided the requisite connection between the employee’s injury and their employment. What is less clear following this case, is how employer encouragement and inducement itself seems to have become a necessary requirement in finding employer liability for injuries suffered by employees during a work ‘interval’.
Not only does the approach of the majority give rise to serious questions related to the correct interpretation of the SR&C Act, it seems likely that there will be cases in which it may be difficult to apply the majority’s interpretation of the Hatzimanolis principle, which one would be forgiven for thinking, after this case, is of critical importance to the determination of employer responsibility for injury in the context of an ‘interval’. It is not hard to think of a situation where an employee might suffer an injury in circumstances where it is difficult to separate the contributions of the ‘activity’ and the ‘place’ to the injury. For example, if an employee was injured while exercising using gym facilities at a hotel booked by their employer. In cases like this, employer encouragement or inducement, if it exists at all, is likely to be of little assistance in determining whether the injury was suffered in the course of employment. Employees who have suffered injuries in circumstances of this nature are likely to face uncertainty in their claim for compensation.
The High Court’s reasoning in this case also leaves open the issue of what conduct would be considered to be ‘impliedly’ encouraged or induced by an employer. For instance, in the conference example I started with are trips to city museums, to alternative dinner venues, to bars ‘impliedly’ encouraged or misadventures for the purpose of workplace compensation schemes? If there is a line between conduct that might be considered to be automatically implied, such as preparing meals, brushing teeth, or sleeping, and conduct which is arguably just as ordinary but may push the boundaries of what some would consider should be compensable by an employer, it is in no way clear from the High Court’s decision where that line lies.
Clare McIlwraith is a final year JD student at Melbourne Law School
AGLC3 Citation: Clare McIlwraith, ‘Injuries and Workplace Misadventure: Comcare v PVYW’ on Opinions on High (8 September 2014) <http://blogs.unimelb.edu.au/opinionsonhigh/2014/09/08/mcilwraith-pvyw>.