'The manner in which supervisors and management are managing their workplace conflict is increasingly becoming scrutinized by the board'
A recent British Columbia Supreme Court decision has narrowed the “labour relations exclusion” in the province’s Workers Compensation Act (WCA), potentially paving the way for more workers to succeed in psychological injury claims.
The decision narrows section 135(1) of the B.C. WCA (the labour relations exclusion) which excludes employer decisions from psychological injury claim compensation.
Alissa Demerse, partner at Roper Greyell LLP in Vancouver, says the ruling marks a significant shift.
“It’s positive news for workers in British Columbia, because it narrows the labour relations exclusion, so it makes it somewhat easier to have a claim accepted based on a management decision.”
The judge in Pickering v. Workers' Compensation Board, 2025 BCSC 376 found that the labour exclusion was overly broad and discriminatory. The case revisited a WorksafeBC decision from 2021 which upheld the denial of a mental disorder claim.
The employee said persistent bullying and harassment by a co-worker, and the employer’s failure to effectively deal with it, had caused him psychological harm. But, the claim was denied because the board found the injury was due to the employer’s decision, making it exempt from coverage.
What counts as a generic employer decision?
The ruling defines liable employment decisions in new, narrower terms, stating that the only decisions now exempt under the “labour exclusion” must fall under the heading of “generic processes made in good faith.”
However, it does not clearly define what those terms will mean in action, which Demerse explains means the definition’s interpretation will be decided in future arbitration cases.
“It gives much more clarity around that exclusion – it's narrowed to generic processes that are made in good faith,” she says.
“The big question about that is, the court doesn't define what generic processes are.”
This has significant implications for both employee psychological injury claims as well as employer conduct, she says. “It does make it easier for workers to make these kinds of claims, because it opens the door for them to make arguments about the standard in which managers are performing in their role.”
Another way to interpret the impact of the ruling, according to Demerse, is that “if a manager makes a mistake in exercising their managerial authority, then that should not preclude a worker from bringing a psychological [claim]. Before, they were precluded from bringing that claim by this part of the statute.”
Good faith, bad faith, and employer liability
Although it might seem such a decision will cause a landslide of psychological injury claims in B.C. and in other jurisdictions if they follow suit, the change is not as groundbreaking as it seems, explains Joseph Oppenheim, partner at Carbert Waite in Calgary.
The emphasis on good faith decisions being exempt from employer liability is not new from a legal standpoint, he says, as bad faith conduct is already generally seen as a breach of common law.
“Because bad faith conduct is always actionable, particularly when you're dealing with employees, and in any contract between people or entities, there's a presumption or a duty that is implied at law that you will deal with each other in good faith,” says Oppenheim.
“If you fail to do that, that's a breach of common law, and so on.”
This underlying legal principle suggests that if a denial of a claim is rooted in employer bad faith, it’s already unlawful.
“To deny a worker’s compensation claim by acting in bad faith,” Oppenheim explains, “amounts to a breach of the law, that amounts to an unlawful act and can be dealt with accordingly.”
Two-step requirement for psychological injury claims
For a psychological injury claim — legally referred to as a “mental disorder claim” — to be accepted, the workplace must be the predominant cause of the injury.
“Either a reaction to a traumatic event, or one or more traumatic events arising out of the worker’s employment and in the course of the worker’s employment, or if it is predominantly caused by a significant work-related stressor, including bullying or harassment or a cumulative series of significant work-related stressors,” Oppenheim explains.
“There's sort of a hurdle that you have to jump through. It's different than just breaking your arm on the job, which is pretty straightforward, right? Mental disorder, it's a bit trickier.”
Under the WCA in British Columbia, workers seeking compensation for mental disorders must meet a higher standard than those with physical injuries.
This higher burden of proof is controversial because physical injuries only require a standard of “causative significance.” Pickering challenged this dual standard as discriminatory under section 15 of the Charter. However, the Court upheld the “predominant cause” test, accepting expert evidence that mental disorders are more often linked to non-workplace causes.
Advice for employers: reassess how managers respond
With this narrowing of the labour exclusion in psychological injury claims, the focus for employers and HR should now shift to managerial conduct, and how employers address psychological risks in the workplace.
With this in mind, Demerse advises HR professionals and leaders to take stock of their existing capabilities.
“The manner in which supervisors and management are managing their workplace conflict is increasingly becoming scrutinized by the board and other adjudicators, and primarily at the WCAT level,” she says, adding that this will likely be exacerbated by expected policy changes and new regulatory standards related to psychological safety and workplace harassment.
“We're entering an era in British Columbia where we're going to have new regulations with respect to harassment as well,” Demerse explains.
“Employers... should be aware that the regulatory change is not just coming from a psychological safety standpoint, but also from harassment standpoint.”
The Pickering case, she adds, provides a clear example of how ineffective management — even when not malicious — can be considered causation for a psychological injury claim.
“Pickering, it was ineffective management, and that was the causation of his mental disorder that can't fall within the exclusion, because that's outside of the inherent stress that we would expect workers to be resilient to.”
