14 Apr 2005

Performance management, mental illness, dismissal and disability

by Dr Graham Smith

The situation needs to be approached with extreme caution and care because of the exposure to potential liability in OHS, unlawful termination, workers' compensation or discrimination.

Employers must be prepared to encounter mental illness in the workplace

With one in five Australians estimated to suffer a mental illness throughout their adult lifetime,[1] employers must now be prepared to encounter and manage such illness when it appears in the workplace.

Many of our clients have found themselves in a quandary when an employee who has been performing poorly is put through a performance management process and then embarks on a period of sick leave because of perceived work-related stress. The flow of performance management is then interrupted with periods of leave, making the situation very difficult to manage, especially if the employee suffers from anxiety or other stress related disorders while undergoing performance counselling.

Exercise extreme caution

The situation needs to be approached with extreme caution and care because of the exposure to potential liability in OHS, unlawful termination, workers' compensation or discrimination. So with all of these competing factors working against the employer, what strategies can they use to find the right balance?

Risk factors for employers

1. Disability discrimination - Purvis case

In the High Court judgment in Purvis [2003] HCA 62, the Court attempted to strike a balance between the rights of a child with a disability and the rights of non-disabled persons around him, where the disability led to disruptive and often aggressive behaviour in an educational setting.

The complainant suffered a brain injury which caused him difficulties in his thought processes and perceptions and led him to display disruptive and sometimes aggressive behaviour. After five suspensions, he was excluded from his high school because of his repeated anti-social and violent conduct towards other students and staff.

The Court resolved the conflict by considering the "remedial" nature of discrimination law, against the backdrop of breaches of criminal law, giving preference to the community's need for citizens to abide by the criminal law.

The High Court set up a three stage inquiry to determine if there was in fact disability discrimination:

  • Compare the treatment of the disabled person and the treatment of a person without the disability "in circumstances that are the same or are not materially different".
  • In those circumstances ask "How would the educational authority have treated a person without the complainant's disability?"
  • Then ask, if the complainant's treatment was less favourable than the treatment that would have been given to a person without the disability, was that because of the complainant's disability?

The implications of Purvis need to be considered when managing an employee whose behaviour impacts on his or her performance in the workplace

In a situation of poor work performance, it is important to consider how the employee's mental illness may be impacting on his or her co-workers. If the behaviour is anti-social, aggressive or violent towards others in the workplace, the employer needs to assess whether it would treat someone without the mental illness any differently. However, if the employee's poor performance is directly attributed to his or her mental illness and their behaviour is not disruptive to others, the employer will need to carefully manage the situation in a way that doesn't further exacerbate the employee's condition. Of course, the expectation is that this would be done within the context of what an employer could reasonably foresee.

2. Unlawful termination and unfair dismissal

Federal unlawful termination laws also operate to ensure that persons are not dismissed for prohibited reasons including "physical or mental disability". Under the Workplace Relations Act 1996 (WRA) an application for an unlawful termination can be made on a number of grounds, including discrimination on the grounds of physical or mental disability and temporary absences from work due to illness or injury.

In the recent decision of Sallehpour v Frontier Software Pty Ltd [2005] FCA 247, an employee's illness had manifested itself during his employment with the company. It affected his ability to perform his duties in a timely manner and his ability to respond to reasonable requests by the company to help him overcome or at least manage his illness whilst preserving his employment. After prolonged periods of absences from work, the company terminated his employment. The employee claimed he been unlawfully dismissed for reasons proscribed by the WRA including his temporary absence from work and mental disability. However the Court found that the temporary absence from work argument fell outside the terms of the legislation.

Justice Marshall held that an employer had a right to seek to arrange a return to work by the employee.

This judgment focused on the employer's exhaustive measures to help the employee return to work. The employer maintained accurate records, set clear guidelines and attempted to devise an action plan that acknowledged the employee's limited capabilities and set realistic time frames.

Justice Marshall found that these actions appeared to be those of an employer genuinely trying to improve an employee's performance. The Court accepted that the employer "certainly at a management level, was a caring employer which did its best to try and help an employee who was experiencing difficult health issues".

Ultimately, the Court found that the employer was entitled to terminate the employee's employment based on his failure to co-operate with reasonable requests to discuss a mutually satisfactory basis for a return to work.

This case illustrates the lengths an employer had to go to minimise exposure to a worker's compensation claim and manage an employee with a mental illness that manifested itself in the workplace.

3. OHS laws and a mental illness or anti-social disorders

OHS legislation strengthens an employer's common law duty of care owed to its employees as well as contractors, customers and all other persons in the workplace. Significant penalties apply if OHS duties are breached.

A number of the OHS Acts also specifically require employers to protect employees from psychological injury.

Where an employer is dealing with an employee with a mental illness or anti-social disorder which manifests into aggression or violence against others, the employer not only has to contend with the employee's illness but also provide a workplace for the other employees which is safe and free of harassment and violence. Employers therefore need to address violent and other forms of unacceptable behaviour promptly and effectively.

It is also important to retain the employer's ability to deal with unacceptable behaviour in the workplace, without being faced with discrimination complaints from persons arguing that their unacceptable behaviour was a symptom of, say, their depressed state or even their addiction to a prohibited substance. [2]

As discussed previously, Purvis suggests that the employer must first determine if the employee is suffering from a disability. If they are, the employer must ensure the treatment afforded to them is the same as what other employees would receive. Ultimately this must be balanced against the employer's primary obligation to provide a safe workplace for all employees.

3. Workers' compensation - recent cases

Worker's adjustment disorder was substantially caused by his employment

The SA Workers' Compensation Tribunal recently found that a worker who was unable to deal with his supervisor's aggressive management style was entitled to compensation for stress: Doolan v South Australia [2005] SAWCT 13.

The worker, a systems controller employed by the SA Water Corporation, suffered an adjustment disorder which he claimed was a result of stressful work conditions. SA Water rejected his claim on the basis that his condition was wholly or predominately the result of a meeting to address unresolved industrial issues and comprised reasonable administrative action taken in a reasonable manner (a disqualifying event under the SA legislation).

The Tribunal found that the meeting may have been the "final straw" and a significant stressor, but neither it nor any of the other administrative events could be seen to be the whole or predominant cause of the worker's stress. However, along with the supervisor issue, the worker's inability to cope with the demands of his work, the long hours he was required to work and the strain this placed on his personal relationships were prominent causes of his disorder and could not be characterised as disqualifying events. The Court found that his adjustment disorder was substantially caused by his employment.

High Court finds healthy employee who willingly takes on stressful workloads will be unlikely to be able to claim their employer was liable for any resulting psychiatric injury

In Koehler v Cerebos (Australia) Ltd [2005] HCA 15 the High Court found that a healthy employee who willingly takes on a stressful workloads will be unlikely to be able to claim their employer was liable for any resulting psychiatric injury.

In this case, the employee had worked for 18 months as a sales representative in various Perth supermarkets before taking on a part-time position as a merchandiser. On commencing the new position the employee indicated that she had too many stores to cover in too little time. While she continued to provide this feedback, she gave no indication that the job may be adversely affecting her health. After five months in the job, a doctor diagnosed fibromyalgia - a psycho-physical disorder that causes severe pain and a depressive illness.

The High Court upheld a ruling by the WA Supreme Court that the employer could not reasonably foresee that the employee's duties would lead to a risk of psychiatric injury. Also, while the employee's complaints about workload "may have been understood as an industrial relations problem… they did not suggest danger to her psychiatric health".

The Court indicated that it would be reluctant in a psychiatric injury case to consider notions such as overwork and excessive work that rely on "external" or "industry standards".

The decision makes it clear that "within the bounds set by applicable statutory regulation, parties are free to contract as they choose about the work one will do for another."

Steps to minimise liability

  • Aim for sound human resource management and practice, including feedback and counselling.
  • The process must be seen as fair and transparent. This can be achieved by clearly defining expectations at the outset of a performance management process and setting realistic goals.
  • Actively manage factors likely to elevate stress during a performance management process including:
    • employee feeling out of control
    • employee has lost his or her direction
    • unachievable goals or deadlines
    • change
    • uncertainty.
  • Document the whole process. For example, clarify discussions held with the employee by asking him or her to sign off on the agreed outcomes. If the employee refuses to sign off on the basis that they are not in agreement, then document the discussion or ask them to respond in writing.
  • Allow the employee to have a support person present during performance counselling meetings and offer access to an employee assistance program (if available).
  • Sometimes, the use of an external facilitator or mediator can assist the parties where the employee is adversely affected by the process or perhaps antagonistic towards the process.
  • Be aware of and don't tread over the line in terms of the employee's right to privacy. For example, employers may have the right to know when an employee is going to return work after a prolonged period of sick leave and whether or not they are fit to return, but they do not necessarily have the right to require a full medical disclosure of the employee's mental illness unless, of course, the employee is claiming it is a work-related injury.
  • Be empathetic but remain focused on the specific performance management goals.
  • Recognise the warning signs and intervene early. The law takes the view that employers have to be proactive in consulting with their employees about health and safety issues.

[1] Australian Bureau of Statistics, Australian Survey of Disability, Ageing and Carers, Publication No. 4430.0

[2] See Marsden v HREOC & Coffs Harbour & District Ex-Servicemen & Women's Memorial Club Ltd [2000] FCA 1619 and Carr v Botany Bay Council [2003] NSWADT 209



Thanks to Serena Seenikatty and Alice Rubira for their help in preparing this article.

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