Insurance Post

Workplace worries

If a recent legal case awarding compensation for injured feelings is upheld, it could prove worrying for employers. Sheena MacGregor says employers need to ensure they keep on top of legal developments and make sure preventative measures are in place

The decision taken in February on the Dunnachie v Kingston upon Hull case is a groundbreaking legal development. While an appeal in the House of Lords is expected, there will be widespread repercussions if the current decision is upheld - employers could face a deluge of stress claims from workers saying they are suffering from injury to their feelings as well as their health. Therefore, HR departments and line managers need to be aware of the potential backlash and how best to prevent it.

In this case, the Court of Appeal upheld the decision by a Hull employment tribunal to award £10,000 to former Hull City Council worker Christopher Dunnachie as compensation for stress and psychiatric injury suffered during his employment and departure from his position.

Lack of action

Mr Dunnachie was forced to leave his environmental health officer job after 17 years when his council employers repeatedly failed to prevent his line manager's sustained bullying. The tribunal awarded him the maximum compensation available for an unfair dismissal claim, which at the time of the original hearing was £51 700, plus a basic award of £3000. Crucially, the tribunal awarded £10,000 of this maximum compensation to be paid to Mr Dunnachie as specific recompense for the despair he had suffered at the hands of his workplace tormentors.

Previously, employment tribunals could only make awards to cover economic loss and had no power to award compensation for non-financial losses such as psychiatric harm or serious injury to feelings, self-respect and reputation. This case, therefore, reverses a 30-year-old established principle.

The Court of Appeal's decision represents a landmark shift away from the judiciary's traditional hardline stance against non-economic compensation in employment claims, and in that respect is almost certain to be appealed to the House of Lords. Whatever the outcome, it will further increase the problems of employers in preventing, fighting, and compensating claims made by outgoing employees.

Employment tribunals may only compensate an employee for real injury to their self-respect - this is perhaps more likely to happen in constructive dismissal cases. Nevertheless, in the immediate future applicants will be seeking compensation for injury to feelings in all types of unfair dismissal claims.

Unfair dismissal

So how does an unfair dismissal claim work? The employee must show eligibility. This has meant a potential claimant must have the formal status of an employee. In most circumstances this means at least one year's continuous employment (although there are some exceptions to this) and must be within the statutory age limit of 65. But who is an employee is not clear-cut.

The employment tribunal will look at the individual circumstances of each case to decide whether someone was indeed an employee as opposed to a temporary worker hired from an agency.

If an employee can show sufficient eligibility and dismissal, the employer can defend a claim on the basis that the dismissal was made for one or more of the five permitted 'fair reasons'; that they 'acted reasonably' in carrying out the dismissal; and that the proper procedures had been followed. The five fair reasons - embracing capability, conduct, redundancy, illegality of employment, and the narrowly interpreted 'some other substantial reason' - have not afforded great relief to employers seeking to justify dismissals. Employers have often struggled to show tribunals that dismissals have actually been for the reason cited.

The maximum awards for unfair dismissal have regularly been raised in accordance with average pay, so the highest basic award now stands at £8100 and the uppermost compensatory award is £55,000.

Within these limits, tribunals are charged with awarding "such amount as the tribunal considers just and equitable in all the circumstances having regard to the loss sustained by the complainant in consequence of the dismissal".

This discretionary power has traditionally been used to compensate purely for financial loss resulting from a dismissal. As we have seen, Dunnachie has, at least for the time being, upset the traditional way of thinking in unfair dismissal cases.

Contrary to unfair dismissal cases, the employment tribunal has long been able to award compensation for injury to feelings in cases brought in respect of racial or sexual discrimination - and now harassment. This ability has been further supported by the Court of Appeal in the recent race discrimination case of Essa v Laing.

Psychiatric illness

Elsewhere, employees are continuing to bring claims against their employers in the civil courts for psychiatric illness caused by stressful working environments.

The decision in Hatton v Sutherland set out a 16-point test for employees to meet in order to bring successful claims. Many employees continue to establish sound cases and no employer should ignore its responsibilities to its employees in this respect.

Recommendations by the Health and Safety Executive are that employers carry out a stress audit as part of any risk assessment carried out in relation to physical and psychological hazards in the workplace.

The upshot of these developments has been a vicious circle for employers. Greater compensation in employment tribunals, continuing compensation in the civil courts - not to mention the cost to business of sickness and management time spent dealing with such claims.

What can be done to limit an employer's liabilities? Something as simple as offering access to a confidential helpline or counselling service can minimise or eliminate an employer's exposure to a civil claim.

Employers need to be aware of legal developments so they can ensure their procedures, policies and actions comply with those deemed to be reasonable by the law. If disputes arise they need to act quickly to assess risk and ensure their responses are fair and pragmatic. New statutory procedures for dealing with disputes and grievances will come into play in October 2004 and employers will have to follow them.

A preliminary legal view needs to be taken to make sure nothing is done to jeopardise the employer's position and everything possible is done to show reasonableness and procedural compliance. Ultimately, employers need to ensure they are adequately insured.

Sheena MacGregor is head of Lawphone, Allianz Cornhill Legal Protection's 24-hour helpline.

  • LinkedIn  
  • Save this article
  • Print this page  

You need to sign in to use this feature. If you don’t have an Insurance Post account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an indvidual account here: