The Federal Government's biggest department has taken legal action to protect its right to discipline employees without incurring workers' compensation claims.

The Department of Human Services (DHS) has successfully challenged a compensation payout to one of its Queensland Centrelink workers who claimed she was left mentally damaged by the agency's disciplinary process.

The department stepped in after federal workplace insurer Comcare agreed to pay out the worker for “adjustment reaction” allegedly caused by being counselled over a public tirade against her colleagues two years ago.

The giant department, which employs 36,000 workers nationwide in “frontline” agencies Centrelink, Medicare and the Child Support Agency, took the unusual step of challenging Comcare's decision to pay compensation to 20-year Centrelink veteran Jennifer Haseler.

Ms Haseler, a Client Service Adviser at Centrelink's Beenleigh Service Centre was formally counselled by one of her bosses after she stood up at a meeting, attacked the performance of a colleague and the service, and walked out.

After a complaint was made about her conduct Ms Haseler was notified that she would be counselled for breaching the public Service Code of Conduct, with the action to remain on her personnel file for seven years.

But Ms Haseler fought the process, alleging she was the victim of “lies and gross exaggerations”, that her bosses were biased and had denied her procedural fairness.

She did not deny lashing out at her colleagues but disputed the words that were allegedly used and objected to being counseled.

After her Regional Manager Susan Morrison ordered the counseling to go ahead despite Ms Haseler's objections, the Client Service Advisor went off on sick leave and was diagnosed with “adjustment disorder with anxious mood,” caused by her problems at work.

Comcare initially dismissed the public servant's claim for workers' compensation but after the insurer changed its decision on review, DHS stepped in and lodged a challenge in the Administrative Appeals Tribunal, arguing its managers' had acted reasonably in their dealings with Ms Haseler and she was not entitled to a payout.

Tribunal Deputy President Phillip Hack SC has backed the department's handling of the case, deciding that Ms Haseler had not established there was anything wrong with the process undertaken by DHS.

“No sensible basis was advanced why formal counseling was inherently unreasonable,” Mr Hack wrote in his decision.

“In reality the question in this case is whether Ms Morrison's actions were taken in a reasonable manner.

“I consider that they were.”