Psychological Injuries in the Workplace: What is an Employer to Do?

Claims for workplace stress or mental health issues arising out of the course of a worker’s employment have been on an upward trend. It is now more important than ever for employers to understand, reduce and manage the risk of workers suffering a psychological injury. Psychological injuries in the workplace can be caused by a myriad of factors including but not limited to bullying and harassment, high-pressure workloads resulting in burnout, and poorly managed work environments.

However, it is not always easy for workers to succeed in a common law claim against an employer for a psychiatric injury suffered in the course of their employment. This is illustrated in the recent Shearer v iSelect Services Pty Ltd [2021] VSCA 328 decision handed down in the Victorian Court of Appeal, where Mr Shearer, a call centre salesperson for iSelect Services, failed to prove his employer was liable for his deteriorating mental health in the workplace.


Mr Shearer claimed he developed a stress-induced psychological condition from working long hours, lack of downtime, having strict deadlines and pressure to meet sales targets. In response to Mr Shearer’s deteriorating mental health, iSelect Services offered him a new role (at a lower income), arranged psychiatric assessment, and initiated a return-to-work program on the advice of Mr Shearer’s treating health providers.

Mr Shearer alleged the risk he would suffer a psychological injury was reasonably foreseeable and the steps his employer took to reduce his stress were inadequate. He claimed iSelect Services should have taken additional steps to manage his stress, such as reducing or removing his sales targets, changing the types of calls he worked on or transferring him to a different area (despite there being no roles in other sections to offer).

What Happened?

At trial, the judge found iSelect Services was made aware of Mr Shearer’s stress (and related stress symptoms), and the pressure Mr Shearer felt from attempting to achieve his sales targets. The trial judge also found it was reasonably foreseeable Mr Shearer’s work duties could lead to a diagnosable psychological injury. However, while the trial judge found iSelect Services owed Mr Shearer a duty of care as his employer, the judge also concluded reasonable foreseeability of psychological injury to a particular employee alone is not sufficient to enliven a duty of care.

The trial judge found when considering an employer’s duty of care, one must take into account the obligations which the parties owe one another under the contract of employment. Mr Shearer was aware of his duties and obligations as a salesperson as these were clearly set out in his contract of employment. As Mr Shearer’s employer, iSelect Services was under an obligation to modify Mr Shearer’s work, where reasonable, and within the context of the commercial operations of the business.

When looking at the steps undertaken by iSelect Services in response to Mr Shearer’s deteriorating mental health, the trial judge concluded the scope of the duty of care did not include a requirement for iSelect Services to undertake the further steps suggested by Mr Shearer. Accordingly, the trial judge found there was no breach of duty of care.

Also, as no medical evidence was provided on whether the steps Mr Shearer proposed would have had any effect on his psychological condition, the trial judge found causation was not established.

Mr Shearer’s claim failed.

The Outcome

Mr Shearer appealed his loss to the Victorian Court of Appeal.

The Victorian Court of Appeal unanimously agreed with the trial judge’s findings that while Mr Shearer’s employer did owe him a duty of care, that duty was not breached and even if it had been, the evidence did not prove the hypothetical breach caused Mr Shearer’s psychological injury.

The Court of Appeal emphasised the risk of psychiatric injury due to performing work duties is not reasonably foreseeable by any employer in the absence of some reason for an employer to ‘suspect that [the employee is] at risk of psychiatric injury’. 

The Court of Appeal also highlighted the importance of the obligations of each party under the contract of employment (and the limitation of those obligations) when considering an employer’s duty of care. To that end, the Court of Appeal found the steps undertaken by iSelect Services by moving Mr Shearer to a different team, seeking medical opinions, approving leave, and facilitating a staggered return to work in line with the recommendations of Mr Shearer’s treating providers were reasonable. Essentially, there was nothing more iSelect Services, as Mr Shearer’s employer, could have or should have done in the circumstances.

Mr Shearer’s appeal ultimately failed.

Measures Your Business Can Adopt

The cost of psychological injuries can be high due to lost time, decreased productivity, reduced morale in the workplace and the increased risk of workers’ compensation claims.

Consequently, it is important that employers not only understand their duty of care but also what measures are available to them to proactively identify and cooperatively manage mental health risks in the workplace. These measures may include:

  • developing and implementing workplace policies and procedures to appropriately respond to the risk of declining mental health;
  • educating all workers (management and subordinate staff alike) on how to recognise and address safety risks, including risks to mental health;
  • supporting and assisting managers to recognise and appropriately respond to factors that may give rise to an employee’s stress or disguise underlying issues, such as appropriately managing workloads and/or overtime, or identifying increased absenteeism;
  • providing managers with support to sensitively and properly discuss and manage health issue disclosures made by employees;
  • working closely with the employee’s treating providers (and/or workers’ compensation insurer) when developing and implementing a return-to-work program;
  • enforcing strict start and finish times for employees and encouraging regular breaks;
  • clearly communicating expectations of a role and how performance-based bonuses are calculated;
  • encouraging and supporting a flexible work environment.

However, such measures need not be to the detriment of the achievement of the reasonable tasks the worker was employed to perform.

“The content of this publication is for reference purposes only. It is current at the date of publication. This content does not constitute legal advice and should not be relied upon as such. Legal advice about your specific circumstances should always be obtained before taking any action based on this publication.”
For the latest publications and updates, click on the link below.
Scroll to Top

Book a consultation