Employee stress: when is an employer liable for psychiatric injury?

Employee stress: when is an employer liable for psychiatric injury?

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Author: Alexandra Newborough

Applies to: England, Wales and Scotland

Stress in the workplace is arguably the new 'bad back': a common ailment with which employers regularly have to deal. But employers can face serious legal liability if they fail to manage it appropriately.

It's common for employers to face allegations that they have caused an employee to become stressed, often in the context of an on-going disciplinary or capability procedure.

Recent case law

In the recent case of Yapp v Foreign and Commonwealth Office (FCO), the Court of Appeal gave some useful guidance about the extent to which employers may be liable for injury caused to an employee by a one-off, traumatic incident.

The Yapp case involved the British High Commissioner in Belize, against whom allegations were made of sexual misconduct at public functions and bullying and harassment of his staff.

Due to reputational concerns relating to the allegations of sexual misconduct, the FCO immediately suspended Mr Yapp pending the outcome of an investigation. He was not informed of the nature of the allegations against him, but was told that if exonerated the FCO would try to identify a different posting for him. The FCO nominated the same individual to both investigate the allegations and conduct the disciplinary hearing. The allegations of sexual misconduct were not ultimately upheld. However the allegations of bullying were found to be substantiated and a final written warning was issued.

Following the outcome, Mr Yapp became depressed and unable to work. He did not return to work and subsequently retired, at which point he brought proceedings against the FCO.

He argued that the manner of his suspension and the way the disciplinary process was handled by the FCO was unfair. Mr Yapp claimed compensation in respect of the enhanced pay and allowances he would have received but for his suspension, and also claimed that the FCO's treatment of him caused his depressive illness which constituted a loss in itself and also led to financial loss through his inability to work.

The Court of Appeal found:

  • The FCO had been unfair to remove Mr Yapp from his post without any initial investigation and without allowing him an initial opportunity to respond to the allegations against him. A basic preliminary investigation (including speaking with Mr Yapp) would have quickly identified the allegations of sexual misconduct as having no basis and therefore it would have been clear that there was no immediate need to remove Mr Yapp from office
  • It was not a sufficient excuse for the FCO to argue it felt obliged to keep confidential the identity of the individual who had raised the sexual misconduct allegations. The FCO should have found a way of dealing with the issue of confidentiality, for example by disclosing the content of the allegations without revealing their source or seeking consent from the individual to disclosure their identity
  • As such, Mr Yapp was entitled to compensation for breach of contract for loss of the enhanced remuneration and allowances he would have earned had he not have been removed from office whilst the investigation and disciplinary process was carried out
  • The suspension caused Mr Yapp's depression. The Court did not accept the FCO's argument that because Mr Yapp became depressed following the outcome of the disciplinary hearing (as opposed to immediately upon his suspension) his suspension could not be the main cause of the depression
  • However, Mr Yapp was not entitled to damages for his depressive illness and the financial loss that flowed from that illness (either under breach of the implied term of trust and confidence or breach of common law duty) because the FCO could not have reasonably foreseen that the breach would lead to the losses claimed

In principle, an employer's conduct could be so devastating that it will be foreseeable that a one-off serious act could cause psychiatric injury to the employee. However, it will be exceptional that an apparently robust employee, with no history of psychiatric ill health, will develop a depressive illness as a result of a very serious setback at work.

Comment

An employer is usually able to assume that employees can withstand the normal pressure of working life unless it is on notice that there is a particular vulnerability, for example a history of mental illness.

All employers have an implied duty to take reasonable care of the health and safety of their employees and also to ensure they do not act in a way which is calculated or likely to substantially undermine the trust and confidence which exists between the parties.

For a stress claim to succeed, the employee must show that they suffered loss because of a breach of duty by the employer and that the loss is not too remote from the breach.

Given an employer's duty to refrain from acts or omissions which could endanger the employee's mental wellbeing, including in relation to steps taken by the employer leading up to dismissal (but not including the dismissal itself), particular care must be taken when investigating disciplinary allegations, conducting meetings and deciding whether (and for how long) to suspend the employee.

Conclusion

This case is a useful reminder to employers to take proper care in implementing internal procedures and always to consider whether the proposed action is necessary and appropriate in the circumstances. However, the judgment also provides comfort to employers in confirming that employees have a high threshold to meet in order to show that a stressful situation created by the employer has caused psychiatric injury for which they can claim compensation.

About the author

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Alexandra Newborough

Solicitor

03700 86 8434

Alex is an employment law specialist, providing advice on both contentious and non-contentious employment issues to a diverse range of public and private sector clients. Alex's experience includes restrictive covenants & confidentiality, advising on and drafting employment contracts & handbooks, advising clients on Tribunal matters and business immigration.

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