Employers need to manage stressful situations sensitively and decisively, to
prevent claims being bought against them by employees for mishandling
pre-dismissal issues, by Karen Seward & Sheila Fahy
I t will be no surprise to OH practitioners that workplace stress is on the
increase. The latest study from the Health and Safety Executive into
work-related illness in 2001-02 found that, next to musculoskeletal disorders,
stress was the most common reason for workplace sickness absence.
The causes of stress will come as no surprise either. The list includes
threats of violence, bullying, harassment, discrimination, workload and the
lack of work-life balance, to name but a few.
What practitioners may find surprising is that over the last few years,
there has been an increase in the number of claims arising from the way in
which employers handled pre-dismissal issues.
Employees are claiming that the way in which their boss or HR department
handled an investigation or suspension resulted in stress-related psychological
injury. This is worrying for employers, because they may end up saddled with
liability for stress-related injury, even though the employee was performing
below standard or the investigation or disciplinary sanction was triggered by
allegations of misconduct.
Mutual trust and confidence
Common law contractual claims for stress-related illness require the
employee to show that the employer has breached a term of the employment
contract, and that as a result, the employee has suffered psychiatric injury.
Employees have based their claims on breach of the implied term of mutual
trust and confidence. This provides that employers will not, without reasonable
and proper cause, conduct themselves in a manner calculated or likely to
destroy or seriously damage the relationship of confidence and trust between
Essentially, an employee builds a claim by arguing that:
– The employer’s conduct in relation to how the disciplinary procedure,
investigation or suspension was handled was a breach of the contractual term of
mutual trust and confidence
– It caused unacceptable levels of stress
– The stress resulted in a stress-related psychiatric injury.
Until very recently, the courts have said that these mutual trust and
confidence claims do not apply in cases that end in dismissal. In Johnson v
Unisys, 2001, IRLR 279, the House of Lords took the view that as the statutory
scheme for unfair dismissal rules pays compensation for the manner of the
dismissal, it was not necessary for the courts to develop a common law remedy.
Trust and confidence was concerned with the preservation of the employment
relationship and, therefore, the term had no place in contractual claims for
The term does, however, apply in circumstances where a dismissal does not
take place. In Gogay v Hertfordshire County Council, 2000, IRLR 703, the
applicant was a residential care worker.
She was suspended pending an investigation into allegations of child abuse
made by a child in her care. Gogay was eventually cleared of all charges, but
the suspension lasted for some time. She sought damages for clinical
depression, caused by her suspension and the employer’s failure to properly
investigate the surrounding circumstances.
The court found in Gogay’s favour. The strict rules in the Johnson case were
distinguished as Gogay related to a suspension, not a dismissal.
Extension to dismissal cases
The latest Court of Appeal decision on trust and confidence says that the
distinction between dismissal and non-dismissal cases is not always clear-cut.
McCabe v Cornwall County Council, 2002, EWCA Civ 1887, examines whether the
events leading up to the dismissal are sufficiently distinct so as to
circumvent the rules in Johnson.
The McCabe case concerned a number of schoolgirls who complained of
inappropriate sexual conduct by their teacher, McCabe. Some days after the
complaints were received, McCabe was suspended. No details of the allegations
against him were given.
Four months later, while still under suspension, McCabe was made aware of
the allegations. From this point he suffered from psychiatric illness. Over the
course of the next three years there were three disciplinary hearings, each
unfavourable to McCabe. In the end, he was dismissed, even though it was found
that his conduct could be described as relatively trivial.
When the case arrived at the High Court, it was dismissed on the basis that
it disclosed no cause of action because the Johnson rules applied. The Court of
Appeal took a different view. It said that the dismissal is not an automatic
bar to a common law claim. In some cases, the conduct complained of would be so
closely linked to the dismissal that the Johnson principle will apply. The
difficult task is knowing where to draw the line. According to the court, the
following factors may be relevant:
– An employer may not embark on disciplinary proceedings with dismissal in
mind. Dismissal may transpire when it is discovered that the conduct is more
serious that originally envisaged
– The nature and pattern of any warnings
– Whether there is a natural break in the process before the dismissal
becomes a practical proposition
– Whether the injury complained of is attributable to the employer’s
The case was then remitted to the High Court for a full trial.
The McCabe case means that stress claims based on breach of mutual trust and
confidence may be extended to those situations that result in dismissal. The courts
will closely scrutinise the employer’s conduct in the run-up to the
termination. Where events are closely linked, particularly in time, itis less
likely that an employer will be held liable for any resulting stress-related
illness caused by the events.
Conversely, where there is protracted delay, or a break in the process,
especially where it has an adverse effect on the employee, there is more chance
that the courts will hold that mutual trust and confidence principles apply.
How can you avoid stress claims?
The cases are clear on one thing. Procrastination and indecisive management
in dealing with these issues, be it an investigation, disciplinary, grievance
or dismissal, are more likely to give rise to stress and psychological injury
Consider all available options
How can employers avoid claims? Take the Gogay case. Most employers would
assume they were doing the right thing by suspending an employee accused of
child abuse, pending the results of an investigation. After all, most employment
contracts reserve the right to suspend in just these circumstances.
In many cases, suspension will be the appropriate option, but the decision
to suspend should not be a knee-jerk reaction. Employers should consider all
the alternatives. In the Gogay case it may have been possible to transfer the
employee to a temporary role, which did not involve direct contact with
That makes it easier for the employee to be reintegrated into the workplace
following a favourable finding in the investigation.
Indecisive management is a magnet for these stress claims. The McCabe case
is a perfect example.
This was an extremely serious allegation of inappropriate sexual conduct,
the consequences of which could have been ruinous to McCabe’s career and
reputation. Yet, there appeared to be no action plan in place.
McCabe himself was only made aware of the allegations after having spent
four months on suspension.
Employers should project manage each situation. Set out a realistic action
plan and timetable at the outset, and stick to it. The plan should incorporate
the appropriate sections of the employer’s disciplinary policy, so that the
processes are not flawed for want of procedure.
At the best of times, investigations, suspensions and disciplinary
proceedings are stressful for employees. The finger of suspicion is pointing at
the employee until these issues have been resolved.
This is particularly true when the employee has been suspended and
effectively withdrawn from the workplace. Delay in these circumstances is
likely to exacerbate the stress felt by the employee. It is important therefore
that the resolution process is as streamlined as possible.
Stay connected with the employee
All too frequently, employees are suspended and the accoutrements of the
employment relationship are removed while an investigation takes place.
For example, ID passes, laptops and mobile phones are withdrawn. Contact
with colleagues ceases. There is little or no news on the progress of the
investigation. For the suspended employee, it feels like being cast into the
wilderness. It is not too difficult to imagine that stress-related illnesses,
such as depression, could be triggered in these circumstances.
Avoid this by staying connected with the employee. Keep in regular contact,
and where there is an unexpected delay in the process, inform them so that
expectations are managed. It is often the not knowing what is happening that
tips the employee over the edge.
The key message is to manage these stressful situations sensitively and
decisively. While delays should be avoided at all costs, so should
over-enthusiastic management. Keep the employee involved in the process by
giving regular updates. These steps will not alleviate the stress inherent in
these processes, but they will minimise those stress-causing factors for which
the employer is responsible.
Partner Karen Seward and professional support lawyer Sheila Fahy are
members of international law firm Allen & Overy’s employment, pensions and