Stress at work claims in the new era of costs and funding

One in three absences from work are caused by mild to moderate mental health disorders, a Government study has revealed. The study, an evaluation of statements for fitness to work, or ‘fit notes’, issued by GPs between October 2011 and January 2013, found that there is “some evidence that mild to moderate mental health disorders are a growing cause of sickness absence”.

The results of this survey coincide with a survey commissioned by the mental health charity, Mind, which reports that work is the most stressful factor in people’s lives with 34 per cent saying their work life was either very or quite stressful.

Some people who become ill as a result of stress in the workplace may have a claim for compensation for personal injury. To succeed in a claim for stress at work, the claimant must establish the legal criteria (as set out in the leading Court of Appeal case of Hatton v Sutherland) which include:

• The illness must be a recognised psychiatric illness (as distinct from stress).
• The illness must be attributable to stress at work (as distinct from other factors).
• The employer must have known (or ought to have known) that the employee was at risk of becoming ill as a result of stress at work, taking into account, for example, the nature and extent of the work done by the employee, signs from the employee of impending harm to health and/or a particular problem or vulnerability on the part of the employee.
• The signs of impending harm to health to the employee must have been plain enough for a reasonable employer to realise that they should do something about it.
• A failure on the part of an employer to take identifiable steps which were reasonable in the circumstances, bearing in mind the risk of harm occurring, the severity of the harm which may occur, the costs and practicability of preventing it, and the justifications for running the risk.

The recent changes to the way in which personal injury cases are funded, as of April 2013, may provide new opportunities for claimants to pursue stress at work cases by removing some of the practical difficulties previously associated with such claims.

The introduction of Qualified One-way Costs Shifting (QOCS) means that in most cases, claimants will not be liable for the defendant’s legal costs if the case is not successful. Whilst there are exceptions to this (for example, if a defendant’s formal Part 36 offer is not beaten at trial, if the claim is struck out or if the claim is found to be fundamentally dishonest), in general a stress at work claimant does not need to worry about securing After The Event (ATE) insurance to cover the risk of paying costs in the same way as before the implementation of the “Jackson reforms”.

Obtaining ATE insurance for stress cases before 1 April 2013 was not straightforward. Most insurers insisted that a claimant must have better prospects of success than for other types of personal injury claims before offering terms. Some ATE insurers refused to consider insuring any stress at work claim at all.

With the introduction of QOCS, defendants who decide to fight a stress at work claim to trial will incur large legal expenses which will be mostly unrecoverable from the claimant whether the defendant wins or loses. This is in contrast to the previous position in which claimants would usually be insured to cover a winning defendant’s legal costs.

In such environment, there is, arguably, a much greater incentive for commercially-minded defendants to consider settlement of stress at work claims at an early stage, rather than incur unrecoverable legal expenses in fighting the case to trial.

The combination of the removal of the need for ATE insurance and the costs risks for defendants following the April 2013 costs reforms can therefore be seen as a positive development for stress at work claimants.

However, the practical difficulties of such cases before the reforms (problems securing of ATE insurance and the reluctance of defendants to consider settlement at an early stage) reflected the inherent difficulties in these claims which should not be lost sight of in the new era of personal injury litigation.

*Disclaimer: The information on the Anthony Gold website is for general information only and reflects the position at the date of publication. It does not constitute legal advice and should not be treated as such. It is provided without any representations or warranties, express or implied.*