Termination of employment for work-related stress: avoiding claims of discrimination and unfair dismissal
When an employer decides to terminate the employment of someone suffering from an illness or disorder said to be connected with work-related stress, potential areas of liability arise under both statute and common law, said Bruce Moore, a partner in the Melbourne office of Mallesons Stephen Jaques.
Mr Moore was speaking at a LexisNexis Butterworths Conference with the theme Managing Workplace Stress and Psychological Injury Claims.
According to Mr Moore, the potential for liability arises, in a statutory context, in respect of workers’ compensation; occupational health and safety; disability discrimination; and under the Workplace Relations Act. Mr Moore’s speech covered general, and commonly applicable, principles as they apply in Australian jurisdictions
It is now well-settled that injury or illness arising from work-related stress falls within the meaning of “compensable injury” for the purposes of workers’ compensation legislation, provided there is a sufficient connection between the condition and the worker’s employment.
The acceptance of stress-related injuries as a compensable condition in the 1990s led to legislative amendments in some workers’ compensation legislation to expressly limit the circumstances in which compensation can be claimed, where the employee’s stress claim was linked to disciplinary or similar action by an employer.
Consequently, an employer must ensure that any decision it makes to transfer, demote, discipline, retrench, redeploy or dismiss a worker constitutes “reasonable action” taken “in a reasonable manner”.
Employers should ensure that they have complied with their “return-to-work” and rehabilitation obligations under the applicable workers’ compensation laws, before making any decision to terminate the employee’s employment, and also review an employer’s associated policies and procedures to ensure that they are appropriately adjusted to allow for stress-related injuries.
Occupational health and safety legislation
OHS legislation in every jurisdiction imposes some form of duty on employers, so far as practicable, to prevent illness or injury (i.e. which affects the health of an employee) arising from workplace stress.
Recent case law (Simpson v SA (Department of Correctional Services) [2002] SAWCT 122) has highlighted the need for employers to systematically address the potential for stress in the workplace, and to ensure that psychological hazards, as well as physical hazards, are taken into account when protecting the health and safety of employees.
For example, bullying and occupational violence are among the workplace factors that can create an unsafe working environment. The employer’s duty may therefore include a duty to ensure that bullying and violence do not occur in the workplace.
The point of principle is that, just as systems of work may affect an employee’s physical health, other aspects of the conduct of the employment relationship have the potential to be stressful which in turn, in some situations, may give rise to a recognised illness or disorder being suffered by the employee.
It follows that employers should establish and maintain systems for ensuring that the risk of hazards in the workplace that could give rise to psychiatric or psychological disorders is controlled and regularly review those systems and policies. Psychological injuries should be reported to the relevant WorkCover authority and any complaints or reports or instances of psychological injury should be investigated. Directors and senior managers need to be aware that their OHS obligations also extend to risks of psychological injury, including potential consequences of stress
In this context, however, a prudent employer would be well-advised to be conscious that whilst stress management training can be helpful in managing and perhaps reducing stress, it may not be enough: they would be well-advised to identify and address the underlying causes of stress in their workplaces.
“Disability” is defined broadly under the DDA and includes “loss of bodily or mental functions” and a disorder, illness or disease that affects a person’s thought processes, perception of reality, emotions or judgment or that results in disturbed behaviour.
Both mental and physical illness are classified as types of disability or impairment under anti-discrimination legislation. Employers must therefore treat employees suffering from stress-related conditions with care, so as not to breach anti-discrimination laws.
In the context of employment, the Disability Discrimination Act 1992 (DDA) makes it unlawful to discriminate against a person on the ground of disability in the terms and conditions of employment, by denying or limiting an employee’s access to opportunities for promotion, transfer or training, by dismissing the employee, or by subjecting them to “any other detriment”.
Therefore, if an employer sought to terminate the employment of a worker suffering work-related stress, it may face a claim for discrimination under the DDA on the basis that the termination was unlawfully discriminatory because it was based on a disability constituted by the stress condition.
Direct discrimination means treating an employee with a disability less favourably than another employee who does not have that disability, in the same or similar circumstances. Under the DDA, indirect discrimination occurs where the discriminator requires an employee to comply with a requirement with which a “substantially higher proportion” of employees without the disability comply, or are able.
The main exception to disability discrimination which is relevant to workplace stress is the “inherent requirements of employment” exception. It provides that discrimination will not be unlawful where, taking into account the employee’s past performance and all relevant factors that it is reasonable to take into account, the employee would, because of their disability, be unable to carry out the inherent requirements of the employment.
The rule also applies where the employee would only be able to carry out those inherent requirements if the employer was to provide services or facilities the provision of which would impose “unjustifiable hardship” on the employer.
Future developments: an implied duty?
Some interesting developments have arisen in New Zealand in the case of Attorney-General v Gilbert.
In some relatively extreme factual circumstances, the Court held that a probation officer who was forced to retire after suffering a number of coronary problems and depression, which he claimed resulted from work overload and his employer’s failure to address the situation, was entitled to compensation for his work-related stress. After he was “retired”, the employee alleged that he had been constructively dismissed and that his employer had breached an implied term of the employment contract to take reasonable care to avoid exposing the employee to unnecessary risks of injury to his physical or psychological health.
The Court of Appeal accepted that the duty to take reasonable steps to maintain a safe workplace is also a term now implied by common law into employment contracts, recognising the special nature of the relationships created by employment contracts.
It is therefore now clear that illness or injury, arising from stress at work, can be a very serious issue. An employer who does not take appropriate steps to prevent or reduce the risk will run the risk of increases in costs, both in greater workers’ compensation premiums and in lost productivity.
Conclusions and recommendations
If it is reasonably practicable to do so, the best way to avoid claims of discrimination and unfair dismissal is not to terminate employment, or take other steps adverse to the employee, until after other necessary and reasonable steps have been taken to reduce the likelihood that the employment will have the potential to cause stress-related illness, and, if stress does arise, to assist the employee to return to work.
Risk-management strategies include managing performance reviews and dealing with misconduct issues and disciplinary action, in a careful and considered manner which reduces the prospect of the employee suffering from stress which may in turn cause forms of illness or injury affecting the employee’s capacity to perform their ordinary duties.
Before making any decision concerning employment, the employer will need to make an informed decision about the employee’s work capacity. This will require obtaining reliable and comprehensive medical evidence concerning the employees’ prognosis and current and future capacity for work.
Another aspect of deciding whether to exclude an employee from work on the ground of incapacity due to work-related stress, is whether the employee’s exclusion is necessary and reasonable for the protection of the employee’s own health and safety. This can be done by making all necessary enquiries of the person’s ability to work in a safe manner and determining whether any adjustments are required and providing those adjustments will not cause unnecessary hardship to the employer. The decision must also not be made on discriminatory grounds.
An employee is entitled to seek remedies if he or she were to be dismissed by reason of one of the prohibited grounds of termination of employment (which includes illness or injury), or if he or she were to be dismissed unfairly. Taking these approaches will also assist in ensuring that any termination will not breach the provisions of the Workplace Relations Act.