Mental illness in the workplace: a cautionary tale for employers

In the recent decision of Penglase v Allied Express Transport Pty Ltd [2015] FCCA 804, the Federal Circuit Court ordered an employer pay a penalty for engaging in adverse action in breach of section 351 of the Fair Work Act 2009 by offering an employee a reduced role at work because the employee was suffering from a mental disability and not because the employer was concerned about the employee’s health and welfare.

The facts

In late 2012, the employee returned to work after a week-long absence. The employee provided the employer with a medical certificate explaining that her absence was due to an anxiety related condition.

The employee subsequently requested further time off work due to her being unfit to work as a result of anxiety. Upon the employee returning to work on the second occasion, the employer requested the employee to attend a medical examination with the company doctor. The company doctor subsequently deemed the employee fit for work despite clear evidence that the employee was experiencing higher than normal levels of anxiety and stress.

On the basis of the findings of the doctor, the employer allegedly determined that the employee could not sustain her level of performance if she were to continue her usual duties. As a result, the employer gave the employee three options to choose between before the close of business that day:

• perform a telephonist role with a greatly reduced salary;
• move to the position of sales executive with a significant increase in workload; or
• resign.

The employer contended that these options were presented to the employee ‘solely by a desire to protect [her] health and welfare’.

The employee complained to the company that she felt bullied and believed she was being forced into resigning from her position, which was placing her under intense stress. On account of her stress and anxiety, the employee sought an extra month of leave by way of a medical certificate citing her unfitness for work due to an anxiety condition.

The employee returned to work in early 2013 after the month off. However, on her return to work she was informed that her position had been made redundant, due to a restructure of the business. She was also informed that she was not considered a suitable candidate for the new position.

The law

In his decision, Judge Turner accepted that the decision to restructure the workplace was a ‘genuine’ decision to streamline the staff in the employee’s workgroup. This, in his Honour’s opinion, was evidenced by the fact that the employee was not being directly replaced. Rather, her position as account manager had disappeared completely, and an entirely new position at a much higher hierarchical level had been created and was being advertised for a much larger salary.

However, his Honour noted the employer’s recognition that the employee had been suffering from higher levels of stress and anxiety, and the employer’s subsequent attempt to alter the employee’s employment status due to her being so unwell.

His Honour held that by forcing the employee to choose between the three options, the employer had breached section 351 of the Fair Work Act by taking steps that constituted ‘adverse action’. His Honour expressed significant doubt at the veracity of the employer’s claim that the offering of the three options to the employee was ‘motivated solely by a desire to protect the health and welfare’ of the employee, particularly given one option encompassed an increase in workload.

What should employers take from this decision?

This case highlights the challenges employers face managing employees suffering from legitimate mental disabilities at work. Employers that find themselves in these types of situations should carefully consider medical reports and other evidence to ensure they engage in sound and lawful decision making concerning any change that may adversely impact on the employee with a disability. If you have any queries about this issue, please contact a member of our team.

This article originally appeared in Cooper Grace Ward’s Workplace Relations & Safety Risk Management Adviser – May 2015. Click here to download the full newsletter