The full bench of the Federal Court has dismissed an appeal from workplace health insurer Comcare, which had argued the woman's motel room tryst had nothing to do with her job.
However, the court said it did not matter whether she spent her evenings having sex or ''playing a game of cards'', she was still, in effect, at work.
The case, which has involved three legal appeals, is likely to have significant repercussions for employers, as it clarifies when they are responsible for staff.
Her employer booked her a motel, where she arranged to meet and dine with a male friend after work.
They returned to her room and had sex, during which a glass light fitting above the bed was pulled off its mount and fell onto her face. It injured her nose and mouth and she suffered from depression and anxiety afterwards, rendering her unable to work.
The Federal Court suppressed the woman's name during an earlier appeal, saying she was unprepared to continue with the case ''if a consequence of doing so is that her true identity will be made public''.
Comcare initially accepted her claim but later revoked her compensation, saying the injury happened outside the course of her official duties.
She appealed unsuccessfully against that decision, the Administrative Appeals Tribunal saying her ''injuries were unrelated to her employment, took place during her leisure time and were of a private nature''.
However, a second appeal to the Federal Court last year was decided in her favour.
The workplace insurer then took the case to the court's full bench this year, saying the public servant's employer had not approved her out-of-hours liaison and could not be held responsible for it.
But the three judges ruled last week that the woman's ''lawful sexual activity'' was not misconduct and she should not, therefore, be punished for it.
''If the applicant had been injured while playing a game of cards in her motel room she would be entitled to compensation even though it could not be said that her employer induced or encouraged her to engage in such an activity,'' the judges said.
''In the absence of any misconduct, or an intentionally self-inflicted injury, the fact that the applicant was engaged in sexual activity rather than some other lawful recreational activity while in her motel room does not lead to any different result.''
Comcare must now appeal to the High Court if it wants to overturn the decision. Its spokesman said the agency was reviewing the judgment.
''The issue is a significant one. Workers need to be clear about their entitlements and employers should have an understanding of their responsibilities and how to support their staff,'' he said.