In the somewhat surprising ruling of Waugh v Simon Blackwood (2014), the Queensland Industrial Relations Commission upheld the decision of the state's Workers' Compensation Regulator to reject the employee's application. Astrid Waugh had suffered a psychological injury (an adjustment disorder) when her employer told her about photos of her that were covertly taken by her superior, Bruce McGregor. Six of the photos focused on her breasts. They were taken while Waugh was at work. Their existence was revealed to Waugh during meetings with the library's human resources and managerial staff.

Waugh developed her injury from both the primary stressor, McGregor's sexual harassment in taking the photographs, and a secondary stressor, the manner in which managers informed her of and dealt with the incident.

Deputy President Les Kaufmann found that: "Even if it could be said that the injury arose out of, or in the course of, her employment, the employment was not a significant contributing factor. The significant contributing factor was the taking of the photographs by Mr McGregor. This had nothing to do with the employment."

At first glance, Kaufmann's distinction creates an odd result: a worker who suffers a psychological injury in the workplace due to a colleague's behaviour is not entitled to workers' compensation.

However, under Queensland law, the circumstances where compensation will be paid for psychological injury are more limited than for other injuries. Section 32(1)(b) of the state's Workers' Compensation and Rehabilitation Act 2003 requires the employment to be the "major significant contributing factor to the injury". Kaufmann used the reasoning of the then Industrial Court of Queensland judge Paul de Jersey in Croning v Workers' Compensation Board of Queensland (1997) to apply a factual approach to determining the cause of injury.

In practice, this approach (as applied by Kaufmann and others) has resulted in a very narrow reading of the causation provisions of the Queensland legislation. This allowed Kaufmann to divorce McGregor's offending conduct from Waugh's employment.

Under the workers' compensation legislation that applies to ACT and federal government staff – the Safety, Rehabilitation and Compensation Act 1988 (C'th) – Waugh's injury would have most likely been compensable. Section 5A of this act does not require the employment to be the "major" significant contributing factor to the injury.

In Queensland, there has been a discrete policy decision to limit the circumstances in which psychological injuries are covered by workers' compensation. This is the case historically, as section 32 of the state legislation is largely a restatement of its predecessor.

The federal act has been amended to move closer to the Queensland legislation following two cases in the Federal Court: Wiegand v Comcare (2002) and Secretary, Department of Employment and Workplace Relations v Comcare (2008). In the latter case, the department challenged the Administrative Appeals Tribunal's decision to uphold Comcare's acceptance of liability for the aggravation of multiple injuries, including a psychological injury. The employee, Wendy Caire, said in her Comcare application her injury was a "disease" within the meaning of the then section 4 of the Safety, Rehabilitation and Compensation Act. That section required that the ailment or aggravation of the ailment "was contributed to in a material degree by the employee's employment".

Caire's psychological injury was caused largely by her perception of work pressure and deadlines that, in reality, were not established by the evidence. She had a history of mental illness before sustaining the injury. Accordingly, the department argued that her "employment was nothing more than the scene in which the development of her depression took place".

Justice Rodney Madgwick adapted the reasoning in Wiegand and found Caire's employment could be seen to have contributed materially to her injury despite the fact that her assessment of her workload was not established by the evidence. After these two decisions, the definition of "disease" was amended in the federal act to requiring a "significant degree" of contribution by the employment instead of merely a "material degree".

The compensability for psychological injuries is further limited under the federal act through the exclusion of injuries that are "suffered as a result of reasonable administrative action taken in a reasonable manner in respect of the employee's employment". A similar limit also exists in section 32(5) of the Queensland legislation.

Despite legislative changes that have brought the constraints on compensation for psychological injuries in the federal act closer to the Queensland legislation, it remains unlikely (at this stage) that the limits will be extended to the degree present in Queensland law. So employees in the Commonwealth and ACT can rest assured that, if they are unfortunate enough to suffer a similar fate to Waugh, they would not be so readily denied compensation for their workplace injury.

John Wilson is the managing legal director at Bradley Allen Love Lawyers and an accredited specialist in industrial relations and employment law. john.wilson@bradleyallenlove.com.au