Injuries related to mental stress in the workplace – insurance anyone?

It is easy to think of workers’ compensation as limited to "accidents." That is the common vernacular most people relate to a system that provides benefits to employees injured on the job. However, harassment, bullying and workplace stress have been a hot topic for several years.

Across Canada, bullying in the workplace has come to be recognized as a legitimate occupational health and safety hazard. Today, we know that mental illness and less visible forms of injury can be the legitimate result of workplace events, and their impact on the ability to work can be as real as a broken foot or slipped disc.

• What protection is in place for an employee who cannot work due to a mental disorder resulting from workplace events?

• Can she recover workers’ compensation benefits or must she sue her employer or co-worker?

• What is better for employers?

To understand the issue, it is important to go back to the beginning of Canadian law regarding workers’ compensation.

Workers’ compensation is a compulsory, no-fault insurance mechanism administered by the state. Often referred to as a
"historic tradeoff," the basic framework of a workers’ compensation program is a worker loses the right to sue her employer for damages resulting from a workplace injury, in exchange for the ability to receive benefits from a system that does not consider the fault of the employer or its ability to pay. While required to contribute to the mandatory insurance scheme, an employer gains freedom from potentially crippling liability.

Having a system that offers quick adjudication by a workers’ compensation board without the need for court proceedings depends on the principle of no-fault recovery, which significantly reduces the number of issues to be adjudicated.

Hand-in-hand with that system is the need for a prohibition on employees pursuing separate lawsuits against their employers. Without that bar, an employer would receive no benefit in exchange for the premiums it pays.

The workers’ compensation regime occupies, or should occupy, the space related to workplace injury that results in disability. It should not be open for an employee whose claim fits under the scheme of workers’ compensation to instead choose to sue his employer or launch a grievance because the terms of the workers’ compensation scheme have denied him an entitlement to benefits on a factual basis, or he prefers a wider range of remedies.

This was aptly illustrated by the British Columbia Court of Appeal in Downs Construction Limited v. British Columbia (Worker’s Compensation Appeal Tribunal). A female employee alleged she had suffered stress-related injuries as a result of the conduct of a male co-worker. Her claim for compensation was denied on the basis the event giving rise to the injury was not unexpected (a requirement at the time of the events).

She sued her co-worker and employer. The employer asserted a court action was barred. The Workers’ Compensation Appeals Tribunal determined that the factual circumstances were connected to the workplace, however, since the employee was not successful in obtaining benefits, there was no bar to her right to sue. On judicial review, it was reinforced the employee was able to sue her co-worker or employer for tortious conduct because she did not qualify for workers’ compensation benefits.

The British Columbia Court of Appeal disagreed and reinforced the historic tradeoff, noting that a worker gives up the right to sue an employer for injuries sustained in the workplace in exchange for the no-fault compensation system. An employee denied compensation under the mental distress provisions of the scheme is not then able to turn around and sue in court, even if the claim is for different and novel remedies.

The Court of Appeal correctly noted that the determination for whether an injury arose out of and in the context of employment (allowing the statutory bar to apply) is a distinct question from whether an employee’s claim was denied due to a failure to establish a required element for compensation (in this case, that the injury was not sudden and unexpected).

In short, if an injury could be compensable under a workers’ comp scheme, but fails to meet the requisite conditions, the employee is not entitled to sue separately in court or bring a grievance against her employer.

The events underlying the Downs case occurred prior to amendments to the British Columbia legislation. That act was amended in 2012 to loosen the requirements under which an employee can claim entitlement to benefits. The traumatic incident no longer needs to be unexpected and sudden, but rather the worker need only prove the mental disorder was a reaction to a traumatic event in the workplace or was predominantly caused by a significant work-related stressor. That stressor could include bullying, harassment or a combination and accumulation of such events.

There are many provincial regimes that still require a sudden and unexpected work-related trauma, as seen in a recent Ontario decision (WSIAT Decision number 2157/09). The court held that this restrictive approach to mental illness violates an equality provision of the Canadian Charter of Rights and Freedoms by creating a more difficult burden to claim benefits for mental illness as compared to physical disability. Although not binding on other tribunals, it will be interesting to follow the impact of this decision, which may still be judicially reviewed.

While recent trends suggest a growing number of employees seeking workers’ compensation benefits for injury arising out of workplace harassment and bullying, this is not necessarily a bad thing for employers. Yes, there may be legitimate concerns regarding the impact of claims on premiums required to sustain workers’ compensation systems across the country.

However, as demonstrated above, employers have been successful in bringing right-to-sue applications to prevent parallel litigation, and workers’ compensation adjudicators are applying a tight examination to claims of this nature.

Moreover, with the costs, uncertainty and significant damages that can be tied to litigation, it is not difficult to see how employers can benefit from the reinforced application of the "historic tradeoff." Insurance anyone?