The Federal Court has rejected Maria Martinez's claims the Department of Education, Employment and Workplace Relations acted unreasonably by asking her to one-on-one meetings with her boss to talk about her poor performance.

The case sent shockwaves through the public service late last year when the Administrative Appeals Tribunal found the face-to-face counselling was ''insensitive'' to the worker's issues, ''humiliated'' her and contributed to her ''adjustment disorder''.

Federal workplace insurer Comcare launched a Federal Court appeal, arguing that the actions of Deborah Ward, Ms Martinez's boss in the department's National Indigenous Cadet Program, had been fair and reasonable in her reaction to the worker's performance issues.

In a decision handed down on Friday, Justice Alan Robertson found the tribunal failed to consider fully the insurer's guide to bullying that says ''management action is reasonable if conducted fairly, transparently and in line with approved processes''.

The judge ruled that an employee's reaction cannot determine whether the management action is reasonable or not and that ''some degree of humiliation may often be a consequence of a manager exercising his or her legitimate authority at work''.

The judge allowed most of Comcare's points of appeal and ordered that the case be sent back to the AAT, but rejected the insurer's request that it be heard by different tribunal members.

Justice Robertson also opened the way for the Commonwealth government to meet the costs of both Comcare and Ms Martinez for the appeal.

The original tribunal hearing was told of an atmosphere of gossip and backstabbing within the employment section of the National Indigenous Cadet Project Program, where Ms Martinez worked until August 2010

Ms Martinez's claim for workers' compensation, alleging ''patronisation, bullying, being made to feel stupid, work colleagues speaking ill'', had twice been rejected by Comcare because the insurer believed Ms Martinez's bosses had been reasonable in their attempts to improve her performance.

After hearing two days of evidence in September, the tribunal ordered Comcare to review its decision, taking into account the ''bullying'' Ms Martinez had sustained from her supervisor, Ms Ward.

Witnesses said Ms Martinez was disruptive, made ''silly mistakes'', had been promoted beyond her abilities and brought her personal problems to work.

Other colleagues said she had been a good worker but acknowledged she had been having trouble coping with her personal problems.

Tribunal senior member Robyn Creyke and her colleague Bernard Hughson found Ms Ward had been reasonable in taking Ms Martinez's personal problems into account, offering her counselling, time off and support to improve her work.

But the tribunal members decided the supervisor bullied Ms Martinez by holding the private meetings, which attracted ''notoriety'' among her workmates, and that Ms Ward should have found another way to approach Ms Martinez's problems.

The case will be relisted for consideration in the AAT.