July 2007

Death of a worker at a workplace social function not in the course of employment

The NSW Court of Appeal in the case of Haider v JP Morgan Holdings Aust Limited trading as JP Morgan Operations Australia Limited (2007)NSW has confirmed the decision of a Presidential Member of the WCC. Justices Giles, McColl and Basten determined that a fatal injury occurring during a work social club activity which was not funded or organised by the employer, and took place outside work hours, was not an injury that arose out of or in the course of the worker’s employment and that employment was not a substantial contributing factor to the fatal injury. As a result the worker’s family failed to recover workers compensation death benefits.

The Case

The employer was JP Morgan Australia Limited. Employees of JP Morgan Australia Limited were members of a social club called the "JP Morgan Social Club". This was an informal association with no legal identity. The employer permitted its name to be associated with the social club, permitted use of its email facility for the distribution of information about events conducted by the club and allowed committee members of the club (who were also employees) to attend committee meetings of the club during work hours. In addition membership fees for the club were deducted from staff pay by the employer’s payroll department.

The social club organised a harbour cruise for which tickets were sold to club members and the short fall of the cost of the cruise was met by the JP Morgan Social Club out of money raised from membership subscription. The employer did not financially contribute to the cost of the harbour cruise. Mr Zaidi, an employee of JP Morgan Australia Limited, slipped, fell into the water and drowned in the course of the harbour cruise. A claim was brought by Mr Zaidi’s widow, parents and brother for death benefits under the Workers Compensation Act, 1987.

At first instance the Arbitrator in the WCC determined that Mr Zaidi’s injury arose out of or in the course of his employment and his employment was a substantial contributing factor to the death. As such, death benefits were payable. The employer appealed against that determination and Acting Deputy President Roche of the WCC upheld the appeal and set aside the Arbitrator’s determination. That decision was the subject of the appeal to the Supreme Court.

The Appeal

The Court of Appeal accepted that the Acting Deputy President appropriately distinguished between activities organised by the employer and the activities organised by the social club when determining the harbour cruise was not part of the employment of the deceased. In deciding whether Mr Zaidi died in the course of his employment the following distinctions were noted:-

  • The employer’s support for the social club generally compared to the support for a particular activity organised by the club; and
  • The activities of the social club compared to activities organised by the employer.

In his decision the Deputy President concluded that although the employer facilitated the operation of the social club that did not mean activities organised by the social club were activities of the employer. An employer sponsored event was something which was organised and funded by the employer and involved marketing, co-ordination by staff and use of employer’s logos. In this case the harbour cruise did not fall into that category.

In addition the Court of Appeal did not overturn the Commission’s conclusion that the facilities provided by the employer to conduct the social club’s operations did not involve the substantial allocation of resources by the employer especially where the harbour cruise was concerned. In other words, the Court considered the email facility, allowing the use of the employer’s name, allowing membership fees to be deducted by the payroll department and permitting committee meetings during work time did not by themselves constitute substantial allocation of resources by the employer.

The Court of Appeal accepted the Acting Deputy President’s finding and concluded there had been no error of law in the Commission finding that the harbour cruise did not arise out of or in the course of the deceased’s employment.

Strategies for Employers

If an injury occurs during an event outside work hours and the employer has not induced or encouraged the worker to participate in such an event, and has not financially funded the activity or event, it is unlikely injury will be found to have arisen out of or in the course of employment. In that event workers compensation will not be payable. However, if the employer had encouraged or funded the event, or made a substantial contribution of resources for the activity or event, it is likely to be found injury arose out of or in the course of an employment and employment was a substantial contributing factor to the injury. In that event, compensation will be payable.

In this case the accident occurred during an activity organised by a social club affiliated with the employer to a limited extent. Would the outcome have been different if the social club was part of the employer and not a separate entity? Probably yes.

The following should be considered where employees have social clubs, if employers want to limit their potential for workers compensation liability:

  • The social club should be a separate entity from the employer.
  • Employees should be advised the employer is not liable for any matters relating to the social club or its activities.
  • Use of the employer’s resources by the club should be minimised.
  • Employers should not fund or financially contribute to the club or to the events organised by the club.
  • The employer’s name, logo and bank account should not be used for the purposes of the club’s activities.

By taking precautions an employer can minimise its workers compensation exposure to claims by injured workers where the injury occurs outside work hours at functions organised by social clubs affiliated with an employer’s workers.

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