Should the High Court expand employers’ duties of care to prevent psychological injuries?

With changing community expectations around rights to psychological safety at work and the destigmatisation of psychological injury, the scene is set for the High Court of Australia to finally recognise the existence of an employer’s duty of care to avoid foreseeable risks to psychological health, writes Travis Schultz.

Editor’s note: This story first appeared on HR Leader’s sister brand, Lawyers Weekly.

In an employment context, psychological injury is undeniably on the rise. It is an issue not just for employers but also for their insurers. According to WorkCover Queensland’s 2022-2023 Annual Report, the number of psychological injury claims increased both in number and cost. Psychiatric injury claims accounted for 6.8 per cent of claims (up from 6.1 per cent in the previous year) and represented about 12.3 per cent of total statutory payments. This is significant because the total cost of $173.6 million meant that psychological injury claims cost more than double the average time loss for physical injuries. Perhaps alarmingly, psychological and psychiatric injury claims represented 13.9 per cent of all common law claims made – despite representing only 6.8 per cent of statutory claims.

For well over 100 years, common law courts have denied workers a right to recover damages for psychiatric injury suffered because of wrongful dismissal from employment – a rule that has persevered despite exceptional cases succeeding. But with changed community expectations around rights to psychological safety at work and the destigmatisation of psychological injury, the scene is well and truly set for the High Court to finally recognise the existence of an employer’s duty of care to avoid foreseeable risks to psychological health during investigative and disciplinary processes.

Employers in Queensland now have a legislated obligation to manage psychosocial hazards in the workplace. When the High Court handed down its decision in Koehler v Cerebos in 2005, it was acknowledged that stress could bring about psychological injury and that workplaces can, of course, be stressful, but the law didn’t then impose an overarching obligation on employers to recognise that their employees could be at risk of psychiatric injury caused by workload-related stress. Now, the WorkSafe Code of Practice imposes a duty on a person conducting a business or undertaking to manage psychosocial risks.

Significantly, the Code of Practice requires control measures to be implemented, having regard to workplace interactions or behaviours and the information, training, instruction, and supervision provided to workers. Against this statutory background, how is it possible to deny the existence of the common law duty of care to manage the same risks, at least in Queensland? The provision likely won’t be found to provide a cause of action for breach of statutory duty, but it certainly makes it plain that psychosocial hazards exist in workplaces and that employers are obliged to manage them.

Barring settlement, sometime in the next year, the High Court will deliver its decision in Elisha v Vision Australia Limited – a case involving a psychiatric injury suffered by an employee whose employment was unfairly terminated without regard to proper process. Despite finding that there had been a breach of duty, the trial judge found that damages for psychiatric injury were not available because they were too remote, citing the principle in Addis.

On appeal to the Victorian Court of Appeal, the decision was upheld, and from there, the plaintiff sought, and was granted, special leave (by five judges) to appeal to the High Court. Given the incremental developments in both common law and statute in recent years, it must surely be a case of “now or never”? I feel that it is likely that the High Court will recognise the existence of a duty of care to avoid risks of psychiatric harm on the part of employers in their management of investigative and disciplinary processes – because, otherwise, there will be no congruence between community standards, legislated obligations (at least in Queensland) and common law principles.

In State of New South Wales v Paige, it was found that an employer does not owe an employee a duty of care to take reasonable care to avoid psychiatric harm in the conduct of workplace investigations. In Paige, the court decided that the allegations related to the employer’s right under contract to investigate an alleged incident and to make decisions about the plaintiff’s contract of employment. The court found that because of this contractual entitlement, it was outside of the scope of the duty owed by the employer to provide a safe system of work to avoid psychological injury. This decision was followed some years later in Govier v The Uniting Church in Australia Property Trust.

Superimposed on these decisions was the High Court’s judgment in Koehler v Cerebos – where the court found that an employer does not owe an employee a duty of care to take reasonable care to avoid psychiatric injury where it wasn’t foreseeable that an employee may decompensate due to their workload. The court found that as the appellant had agreed to complete the tasks specified under the contract of employment, was being paid to do so, and had declined to have their duties modified, the employer could not have breached its duty of care – despite complaints by the employee about an excessive workload and an inability to cope.

Recently, in Kozarov v State of Victoria, Edelman J equated psychological injury with physical injury, saying: “In this sense, it is no different from the employer’s duty to protect an employee’s physical integrity from the unreasonable infliction of harm. It has long been recognised that psychiatric injury ‘is just as really damage to the sufferer as a broken limb ... [and] equally ascertainable by the physician.’”

Given the incremental “baby steps” taken by the High Court in Kozarov, it seems to me, quite likely that the High Court will take the Addis opportunity to expand the extent of the employer’s obligation to manage psychosocial risks in the workplace. Alongside developments in the law with respect to psychosocial hazards in the workplace, it is difficult to see how Paige and Govier can remain good law against contemporary standards and expectations.

In Queensland, a psychologically injured worker will still need to satisfy the requirements of Part 8 of the Workers’ Compensation and Rehabilitation Act 2003 if they are to succeed in a damages claim. But if the High Court expands an employer’s duty, it will be difficult for an employer to satisfy a court that the risk of psychological harm in a disciplinary or termination process was not foreseeable or not insignificant.

As Bob Dylan observed back in 1964, “the times they are a-Changin”.

Travis Schultz is the managing partner of Travis Schultz & Partners.