Stress, workers’ compensation and the law

As legislators seek to limit claims, could more cases end up in court?
By Gavin Marshall
|Canadian HR Reporter|Last Updated: 09/04/2003

Statistics and anecdotal evidence support the view that stress in the workplace is a burgeoning phenomenon. Stress claims by their nature defy precise legal categorization and create headaches for human resources practitioners and lawyers alike.

As a medical condition, stress is often difficult to satisfactorily demonstrate. Moreover, issues of compensation typically turn on cause and the causes of stress are notoriously difficult to pinpoint. For employers, the problem from a legal standpoint has been compounded rather than eased by increased sensitivity on the part of the medical profession to the mental and psychological aspects of human health.

Recent developments affecting the legal landscape for workplace stress have come in two areas: the common law, and changes in workers compensation law, particularly in British Columbia where a wholesale review of workers’ compensation legislation has clarified the board’s policy concerning stress claims.

Common law

Old cases in the common law stated that workplace stress which prevented an employee from performing the functions of a job, even though not the fault of the employee, could justify ending employment on the principle of “frustration of contract” provided that the employee could not be reasonably expected to perform work in the future. However, the evolution of employment law, the wide availability of short- and long-term disability plans, and the application of human rights principles to the workplace have probably rendered the strict application of the doctrine of frustration obsolete.

An employer that knows prior to dismissal that an employee is suffering from a medically recognized stress-related illness is exposed to a claim of wrongful dismissal and possibly aggravated damages. Many of the modern dismissal cases involving employee stress turn on whether or not the employer actually knew of the employee’s condition at the time the decision was made. (see for example

Tarailo v. Allied Chemical Canada Inc. (1989)

, 26 C.C.E.L. 209 (Ont. H.C.)).

As far as termination without cause is concerned, in usual circumstances the recovery of damages for wrongful dismissal is based on principles of contract. Traditionally this approach precluded damages for the stress arising from the termination.

The law allowed certain exceptions to this general principle. In certain extreme situations, the manner of dismissal or the treatment of the employee would, it was said, give rise to an “independently actionable wrong” which itself would allow the employee to recover what are called “aggravated damages” in compensation. However, even in the leading case from the Supreme Court of Canada, (

Vorvis v. ICBC [1989] 1 S.C.R. 1085

), the court did not grant the damages sought for stress created by the harsh treatment of the employee at the hands of employer.

According to the courts, suits making claims for wrongful conduct which cause stress could include “intentional infliction of emotional harm and/or nervous shock” (see

Rahemtulla v. Vanfed Credit Union (1985), 51 B.C.L.R. 200 (S.C.)

) or defamation and damage to reputation (see

Dixon v. BC Transit (1995), 13 C.C.E.L. (2d) 272 (SC)

), all of which may have an adverse impact on the emotional health of the former employee.

However, proof that the “stress” or another diagnosable adverse emotional or psychological condition exists requires medical evidence. Proving a condition was caused by employer misconduct is often difficult.

The principles on which the courts would consider the damage caused by stress in the context of a dismissal changed dramatically with the landmark decision in

Wallace v. United Grain Growers ([1997

], 3 S.C.R. 701). In that case, the highest court in the land established an implied duty imposed on the employer to exercise “good faith and fair dealing” with the employee, arising especially at the time of dismissal. Mistreatment of an employee upon dismissal is a breach of the duty created, and is compensated by an extension of the notice period. (For more on


visit, select “search” and enter article #1846.)

In practice, an employee who can link symptoms of stress to the misconduct of the employer upon dismissal will have a far easier time making out a claim for greater damages on the Wallace principle, than was ever the case under the old theory that an “independently actionable wrong” was required. Not surprisingly, plaintiffs and their counsel have met with considerable success attaching


claims to virtually every garden variety wrongful dismissal action. Wallace also seemed to dampen the enthusiasm of the courts for suits making claims in dismissal cases although this trend may have been short-lived as the recent case of Prinzo v. Baycrest Centre for Geriatric Care ([2002] O.J. No. 2712) seems to attest. (For more on Prinzo visit, select “search” and enter article #2169.)

Workers’ compensation tackles stress: B.C.’s approach

Workers compensation legislation has been struggling with the issue of stress claims arising in the workplace for years. WCB schemes seek to cover “personal injuries” or “industrial diseases” that arise “out of and in the course of employment.” Certain kinds of stress related conditions, notably “chronic stress,” have never fit easily into the categories established by the legislation, which do not distinguish between an injury or disease with physical origins versus mental or psychological origins. Moreover, as distinct from the kind of workplace event which constitutes a single traumatic event (a bank teller who witnesses a violent robbery or a miner who narrowly escapes without physical injury from a cave-in), a psychological impairment, such as chronic stress, which is caused by mental stimuli acting over time, presents difficult issues of identifying the true cause of the stress, and whether the true cause originates in the workplace.

Acknowledging the difficulty in determining whether such claims are truly work related, many provincial workers’ compensation regimes have specifically excluded chronic stress claims, permitting recovery for other kinds of stress-related claims, such as mental stress related to a physical injury or stress caused by an acute reaction to a single traumatic event.

The debate was joined in British Columbia as part of the core review of government services following the 2001 election of the provincial Liberal government. A report on the WCB recommended that the types of chronic stress covered be strictly limited and that a higher evidentiary onus be required to prove claims.

The B.C. government went further, and placed the province in line with many other provinces on the issue. Amendments to the Worker’s Compensation Act effective June 30, 2002 now restrict the conditions under which an employee can claim for “mental stress” to those where an acute reaction to a sudden and unexpected traumatic event occurs in the course of employment, which results in a clear diagnosis. Moreover, the stress cannot have been caused by a decision of the employer in respect of the workplace or the employee, such as discipline or dismissal.

WCB policies in B.C. concerning stress have also been amended to reflect the new standard. Consistent with the new legislation, a “psychological impairment” is a recoverable form of “personal injury,” even if not accompanied by a physical injury, provided it arises in the context of a traumatic event, as defined. The policy expressly precludes recovery for “chronic stress” and distinguishes the concept of a “chronic” condition from one that is “acute” (the latter being one which “comes to a crisis quickly”).

Buried in the WCB report is an interesting observation. Traditionally, worker’s compensation legislation was the outcome of what has been called the “historic compromise” of substituting an employer-funded, government-managed insurance scheme for workplace injury, in exchange for employees relinquishing the right to sue an employer for harm suffered in the workplace (for example, against an employer whose negligence was the cause of the harm).

Legislation preventing certain types of injury claims begs the question: if certain forms of harm can be shown to have arisen in the workplace, and are expressly precluded from the WCB avenue of recovery, is it then open for employees to seek once again to recover directly from employers? More lawsuits could be the result.

This just in from the U.K.

The problems which have plagued consideration of stress claims in Canada’s WCB regimes have sometimes been developed in other common law jurisdictions through the courts using the principles of tort law.

For example, the English Court of Appeal has recently provided a good example in

Hatton v. Sutherland [2002] 2 All ER 1

, where the court established guidelines concerning the treatment of stress claims against employers. Employees who claim against employers for stress related harm must show an injury to health was “reasonably foreseeable” and was attributable to stress at work. But unless an employer has prior knowledge of a susceptibility, the employer is entitled to assume that the employee is “up to the normal pressures of the job.”

Moreover, the court clearly outlined that the accommodative measures taken by an employer once there is a foreseeable risk of harmful stress, must only be “reasonable,” taking into account factors such as the size and nature of the enterprise and other employees. The availability of confidential counselling for stress was identified as going a long way towards inoculating an employer against a successful claim. The apportionment of liability will depend on the degree to which the cause of the stress can be attributed specifically to the workplace.

Much of the above sounds very similar to principles of reasonable accommodation developed through human rights legislation in Canada.

Gavin Marshall is a lawyer in the Vancouver office of Fasken Martineau DuMoulin LLP. He practices in the area of labour and employment law. He can be reached at (604) 631-4808 or at

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