The Jarvis Principle

3 April 2018

In a key 2016 case, Jarvis v The Salvation Army Southern Territory, the Court of Appeal set out the requirements for self-insurers where determining the eligibility of workers to weekly payments of compensation, where termination has occurred due to misconduct. This case marked a key point of elucidation for workers and insurers where such matters are concerned.

Background

Mr Jarvis, a worker employed by the Salvation Army as a truck driver collecting donated goods for resale, suffered a left knee injury in the course of his employment.

He subsequently made a claim pursuant to the Accident Compensation Act 1985 (the Act) which was subsequently accepted by the Victorian WorkCover Agent (VWA) for weekly payments of compensation.

The worker’s injury required surgery, after which he returned to his employment with the respondent on full time modified duties.

His employment was later terminated on grounds of serious misconduct after he was found to have taken items intended for donation for himself. The worker sought the reinstatement of weekly payments pursuant to the Act on the basis of residual incapacity. His claim was rejected in accordance with section 114(2) of the Act, which provides that the VWA or self-insurer may reduce or not pay compensation where a worker’s current weekly earnings are reduced because his employment was terminated for reasons of misconduct.

Magistrates Court

Mr Jarvis commenced proceedings in the Magistrates Court to seek an order for weekly payments to be paid to him pursuant to the Act.

A magistrate set aside the written notice of rejection for his weekly payments after considering the proper application of section 114(2) of the Act, deciding that the insurer had wrongly considered the allegation of theft against Mr Jarvis despite it not being properly established.

Supreme Court

On appeal, his Honour Judge Riodran found that, once the elements of section 114(2) of the Act are established, the insurer has discretion to grant weekly payments or not to do so. His Honour suggested that the Magistrate was required to determine whether or not a relevant precondition was established and then whether or not compensation in the form of weekly payments should be paid to the worker, having regard to the overall purpose and object of the Act.

His Honour found that the preconditions were met, given that there was misconduct by the worker and he was terminated. His Honour concluded that the insurer was entitled to deny the worker’s claim for weekly payments of compensation.

Court of Appeal Decision

Mr Jarvis then applied to the Court of Appeal. The key issue for the Court’s consideration was again the proper interpretation of section 114(2) of the Act.

The Court found that Judge Riordan’s reading of the Act was incorrect, and that the discretion held within section 114(2) was not an entitlement of the authority or insurer. Instead, the Court of Appeal stated that the relevant consideration was as to whether the relevant precondition was established, and if so, whether weekly payments of compensation should be paid in accordance with the objects and purpose of the Act.

In finding for the worker, the Court considered that the role of the Magistrate was to consider all evidence and make a fresh determination on whether the worker had a right to the weekly payments of compensation.

Lessons Learned

This decision means that self-insurers should assess any decision to terminate a worker’s employment and exercise the discretion to grant the worker weekly payments of compensation based on that initial assessment.

If a dispute arises, the Magistrates Court will have to consider the decision to terminate the worker, and whether that decision was appropriate when put in the context of the relevant conduct. The seriousness of the conduct must, then, be considered.

This holds further implications for employers where unfair dismissals and general protections are concerned under the Fair Work Legislation.

Self-insurers should thus ensure that they examine all evidence around investigations into a worker’s misconduct where termination for that reason occurs. Self-insurers will have to rely on such evidence when seeking to establish their entitlement to reject a worker’s claim.