Fair working practices - 'ignore at your peril'

The recent House of Lords decisions in Eastwood and Another versus Magnox and McCabe versus Cornwall County Council highlight that the issue of stress in the workplace remains a complex one; and one that employers and the insurance industry ignore at their peril. The area of psychiatric damage, in particular, continues to create difficulties about where the line should be drawn as to what the employer should or should not be liable for.

Both cases illustrate what can go wrong where an employer fails to act promptly and fairly and follow appropriate procedures, when considering employees for either suspension or dismissal. If unfair treatment in the investigation leads to psychiatric illness, a claim against the employer's liability policy could result.

Should employers have cause to be anxious at the prospect of claims by employees for psychiatric injury arising in the workplace, as a result of these decisions? Provided good employment practices are followed, employers should not be inhibited in handling disciplinary matters. Such situations can be stressful and employers should be alert to picking up the signs of stress and take appropriate steps. But, should procedures fail and a claim arise, involving the insurer at an early stage is crucial, to ensure that appropriate evidence is obtained and to avoid, where possible, an adverse finding in the tribunal, which could have a knock-on effect in any subsequent court case.

The Health & Safety Executive continues to research and monitor the issue of stress at work. It has recently issued an online consultation document with a view to establishing benchmarks in relation to stress at work.

The consultation period ended on 27 August 2004.

Of potential concern for all employers is that, if the standards suggested by the HSE are introduced, the threshold of liability, as set by the courts (for example, Hatton versus Sutherland County Council) may become lower and open the way for more claimants to succeed.

Given the uncertainty in this area, it is vital that brokers review with their clients that they have appropriate systems in place and consider the cover available, whether under an employment practices liability or employers' liability policy.