Liability for Employee Grievances: Mental Stress and Wrongful Termination

By Richard A. Victor

October 1, 1988 Related Topics: Other

In recent years, the growing number of occupational stress claims has captured the attention of the national media. The leader in this field, California, experienced a 430 percent increase from 1980 to 1986. Data from other states are sparse, but the National Council on Compensation Insurance estimates that nearly 5 percent of workers’ compensation claims involve mental stress.

Changes in the law have made compensation for stress easier to obtain in a growing number of states. Typically the courts have acted to liberalize the law. In some states where court decisions opened the door for larger numbers of claims, legislatures have acted to limit court rulings.

Several other factors also play a part in the growth of mental stress and employee grievance claims:

  • The growth of white-collar jobs makes occupational stress a greater concern. In California, white-collar workers account for only 20 percent of all workers’ compensation claims but nearly 70 percent of stress claims.
  • International competition and economic downturns have led to layoffs and plant closings. Under the best of circumstances, these are stressful events. In some instances, those affected look to workers’ compensation and tort systems for relief.
  • The baby boom generation seems to have expectations of the workplace different from those of its predecessors. When these expectations are not met, the result is stress.
  • Traditionally, union procedures provided many workers with an important method of redress for many types of employment grievances. The growing non-union sector has not provided an internal substitute. As a result, workers more often seek redress externally—hiring an attorney and filing a claim in workers’ compensation or tort.
  • Workers’ compensation provides an unusual profit opportunity for medical providers in mental stress claims. Most group health insurance plans offer outpatient mental health benefits that are limited, both in the number of visits and the amount paid per visit. By contrast, workers’ compensation medical benefits provide full, unlimited coverage—no deductible, no copayments, and no limits on the number or cost of visits.
  • The prospect of liability for occupational stress claims creates two challenges for employers: prevention and reducing litigation. Prevention often entails identifying stressful conditions in work groups or settings and ameliorating them. It can also involve greater scrutiny in hiring, promotion, and job assignment practices.

Given the inevitability of employee grievances, reducing litigation is also a central concern. One option is to provide workers with an internal procedure for redress in lieu of resort to workers’ compensation or tort.

There are several problems facing legislators and administrators charged with designing and operating fair, efficient workers’ compensation systems in terms of occupational stress claims. First, these cases require the answers to three difficult questions:

  1. Does the worker have a disabling condition?
  2. Is the cause of the condition work related?
  3. What is the extent of the disability?

To answer these questions, adjudicators must rely on medical evidence, but there is little objective evidence to depend on in these cases. The system is vulnerable to the highly litigious practice of relying on adversarial dueling medical experts—one or more experts hired by each party. WCRI research shows that this leads to unnecessarily high litigation costs and delays payments to deserving workers. A key challenge for public officials, then, is to design and administer systems that rely on less-partisan medical evidence, especially for mental stress claims.

In some states, legislative action has limited the types of claims that can be brought for occupational stress and employee grievances in workers’ compensation. But, if excluded from workers’ compensation, a claim can be brought in tort. A second challenge for public officials is to determine the types of claims that should be allowed in the tort system. Policymakers should consider carefully the data from two examples: mental stress claims as an example of workers’ compensation outcomes, and wrongful termination cases in tort as an example of what happens when the tort system takes on employee grievance liability issues.

This book is a collection of papers first presented at WCRI’s Annual Issues & Research Conference in June 1988. They bring together the diverse perspectives of the corporate attorney, the industrial psychologist, and the economic researcher. An introduction provides an overview of the issue. The first two papers address the problem of mental stress claims in workers’ compensation, citing hard data on mental stress and wrongful termination claims. The third paper suggests that the litigation of claims arising from employees’ grievances can be reduced by an internal dispute resolution process. The last paper suggests ways to prevent stress claims by identifying stressors in the workplace.

Liability for Employee Grievances: Mental Stress and Wrongful Termination. Dr. Richard B. Victor, Editor. October 1988. WC–88–6.

Copyright: WCRI

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