This summary has been prepared by Alistair Wishart of the Minter Ellison Rudd Watts Employment team. Alistair is currently seconded to the Department of Corrections as a legal/hr adviser in the HR team.

The Court of Appeal has released its long awaited decision in the case of Attorney-General v Gilbert (unreported, Court of Appeal (CA141/00) 14 March 2002). This decision has implications for all employers in regard to workplace stress. The Court upheld the Employment Court's earlier decision that Mr Gilbert's disability was caused by workplace stress, and there was no question of contribution by Mr Gilbert arising on the facts. Some of the remedies awarded by the Employment Court were quashed, however, including the finding that the Department had deliberately caused Mr Gilbert's stress.

Facts

The Court of Appeal set out the background facts of this decision in detail. The Court stated that Mr Gilbert was a senior Probation Officer with the Department of Corrections, working in conditions that were said to create a real risk of "burn-out". The Court stated that these conditions included "inadequate" staffing levels, high workloads, "grossly deficient" management and an absence of any occupational health and safety plan. Mr Gilbert suffered numerous health problems, but was still expected to undertake full-time work. By mid-January 1996, he was advised by his cardiologist to retire. Consequently Mr Gilbert decided he had no choice but to resign. In April 1996 the Department of Corrections agreed to his retirement on medical grounds.

Employment Court

The Employment Court held that the Department had breached the express and implied terms of the employment contract by failing to take reasonable
precautions against unnecessary stress. The Employment Court also held that this breach had caused the damage to Mr Gilbert’s health, which led to his resignation, and which left him unable to resume employment. The Employment Court concluded that these were all foreseeable consequences of the Department"s breach.

The Employment Court awarded Mr Gilbert a lump sum for loss of income from the date of resignation for the 14 years of working life before he would become entitled to superannuation, $75,000 as general damages for humiliation, anxiety and distress, $50,000 for loss of career, loss of employment status, employability and future marketability, approximately $14,000 for medical expenses, and exemplary damages of $50,000.

Court of Appeal

The decision was appealed to the Court of Appeal on a number of grounds, including on the basis that an employer's obligation to provide a safe workplace requires it to take reasonable steps to protect employees from unnecessary physical harm or recognised psychiatric illness, but not stress or psychological harm. The Department also contended that an employer should not be liable for physical or psychological injury or illness caused by the phenomenon of stress.

The Court of Appeal held that the Department had an express contractual obligation to comply with the Health and Safety in Employment Act 1992 ("HSEA"). The Court noted that the principal object of the HSEA is "to provide for the prevention of harm to employees at work" (s 5), and that the HSEA also requires, under s 7, employers to ensure that there are methods in place for systematically identifying workplace hazards. The Court stated that the duty to take reasonable steps to maintain a safe workplace is also a term now implied by common law into employment contracts, in recognition of their special nature.

The Court noted that the HSEA does not make any distinction according to whether harm is physical, psychiatric or psychological, and the definition of harm is not limited to a "recognisable psychiatric illness". The Court agreed with submissions of Mr Gilbert's counsel that it would be contrary to the HSEA if an employer was not required to take reasonably practicable steps to avoid causing psychological harm. It also agreed with the submission that it would be contrary to the employer's duty of trust and confidence if the employer could expose the employee to unnecessary risk of psychological harm.

The Court stated that

"An employer does not guarantee to cocoon employees from stress and upset, nor is the employer a guarantor of the safety or health of the employee. Whether workplace stress is unreasonable is a matter of judgment on the facts. "The contractual obligation requires reasonable steps which are proportionate to known and avoidable risks."

The Court made some interesting comments on the calculation of compensation. It held that it was open to the Employment Court to award Mr Gilbert compensation for loss of earnings at Unit Manager level, a level above the position he had held. The Employment Court had implied that Mr Gilbert should receive 14 years' worth of lost wages, being the period between Mr Gilbert's retirement and normal retiring age. However, the Court of Appeal said the 14 year period must be taken as a starting point for calculation of loss of earnings, but must be reduced to take account of the chance of death or earlier retirement. Given Mr Gilbert's particular circumstances, the Court said, the 'discount' for such contingencies could be significant.

Decision

The Court allowed the Department's appeal in part, quashing the remedies of damages for loss of career and exemplary damages, totalling $100,000. The remaining appeals, including those relating to the causation of Mr Gilbert's stress, were dismissed.

Ramifications

As we advised clients when the Employment Court decision was released, it is now essential that employers create and operate a workplace stress management policy. The current passage through Parliament of the Health and Safety in Employment Amendment Bill, which also focuses on workplace stress, makes this even more important.

Workplace Stress Management Policies need to be introduced in conjunction with good training for managers. They are now not only something that a good employer should have and do: they have become an important risk management tool.

This article is prepared by Minter Ellison Rudd Watts. Professional advice should be sought before applying the information to particular circumstances. Whilst care has been taken in the preparation of this article, no liability is accepted for any errors.

Please contact us if you would like further information on the effect of this Bill.

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