Many ‘employers’ in New Zealand, operate under a corporate identity through a limited liability company. There is a common assumption if a company becomes insolvent, that directors or those that influence or control the company, are protected by the ‘corporate veil’ – and can avoid personal consequences. In some circumstances, as this article explores, this common assumption is wrong.
Mental health, employee conduct and performance – can it be managed?
Disciplinary and performance management of employees in the workplace can be a difficult task depending on the circumstances. How does it change when mental health concerns are raised? In this article, our employment law team explores two cases that address these concerns.
The management of mental health in the workplace is notoriously difficult, especially when it coincides with a performance/disciplinary process. Employers have a concurrent obligation to:
- be a fair and reasonable employer, as provided for in the Employment Relations Act 2000 (the Act); and
- provide a safe working environment for their employees in accordance with the Health and Safety at Work Act 2015 (HASAW). This obligation extends to addressing mental health issues, specifically when they stem from, or are impacted by, issues in the workplace.
FGH v RST[1], heard before the Employment Court in both 2018 and 2022 sets out what the Court considers best practice when addressing mental health in the workplace. In both cases, the Court considered how a ‘fair and reasonable’ employer could address mental health concerns during a performance / disciplinary process. Both cases involved the same employer and employee, during different performance / disciplinary processes.
Different outcomes were determined in each case. The key reason for the different outcome was when the employer was put on notice of the employee mental health concerns and the actions they took after this.
Of note are the significant remedies and costs awarded by the Court. The remedies awarded reflect an increased uplift in hurt and humiliation remedies under s123(1)(c)(i) of the Act.
FGH v RST [2018]
FGH was described as a “poor performer” and throughout her employment she had been subject to informal discussions regarding her performance. Eventually, RST initiated formal performance management of FGH, to address its concerns.
Early in the performance management process FGH placed her employer on notice that she suffered from ADHD and anxiety. It was submitted that this was exacerbated by managerial conduct. Instead of halting the performance process, RST introduced measures to provide support to FGH. These included, but were not limited to:
- EAP services;
- providing time off work to attend the gym;
- having fewer meetings;
- summaries of RST’s performance concerns being issued in writing, in advance of meetings; and
- meetings being postponed at FGH’s request.
During FGH’s absence from work, RST requested a medical report to obtain updated information about her return to work. This report detailed that FGH could return to work, however, it recommended that RST seek a specialist occupational physician report. While RST had taken multiple steps to mitigate the impact on FGH’s mental health by implementing the additional support listed above it did not obtain the occupational physician report. RST instead continued the performance management process.
FGH raised personal grievances against RST, for unjustified disadvantage, pointing to RST’s failure to provide a safe working environment.
The Court questioned, why, given its clear knowledge of the issues, RST did not seek further clarification around FGH’s mental health prior to commencing performance proceedings. The Court determined that despite RST providing additional support for FGH, and its genuine belief that it was acting fairly and reasonably; that it was “entirely foreseeable” that FGH would react negatively to a continuing performance / disciplinary process.
The Court found that RST had an obligation to actively seek an occupational physician report as per the recommendations of the medical report. It was held that RST did not “act in a manner which a fair and reasonable employer would have in the circumstances”.
Turning to costs, in the 2018 case the parties filed a join memorandum requesting that a consent judgment be issued. Judge B A Corkill was satisfied with the joint memorandum and ordered payment of $165,000, less application funds to be paid into FGH’s Lawyers account. This sum was made up of
(a) $60,000 (gross) for lost wages under s123(1)(b) of the Act;
(b) $45,000 without deductions under s123(1)(c)(i) of the Act;
(c) $25,000 for costs incurred in Employment Relations Authorities investigation; and
(d) $35,000 for costs incurred in hearing of the challenge of the Employment Court.
Learning
What does this decision mean? If an employer is aware of mental health issues that an employee may be facing, it has a positive obligation to obtain all the information before commencing a formal process. Failing to seek this information, and a subsequent negative reaction by the employee risks liability for an unjustified disadvantage claim.
FGH v RST [2022] [2]
Following FGH’s successful claim for unjustified disadvantage in 2018, FGH remained employed with RST. However, from March 2020 until June 2021 FGH suffered multiple medical complications, which meant she was unfit to work on two separate occasions. From March 2021 until Mid-August 2021, three concerns were raised with FGH which could have amounted to a disciplinary process commencing. These allegations were that in:
- March 2021, FGH had made posts on social media which were considered to be spitefully critical of RST’s legal counsel, and a manger’s work;
- June 2021, FGH was involved in a physical incident between herself and another staff member; and
- August 2021, FGH raised concerns to an employee that her role at work indicated she was in a “13 reasons why”[3] scenario.
RST raised concerns regarding the March 2021 incident in a letter inviting FGH to a formal meeting in April 2021 and proposed to suspend FGH. At this point, FGH’s father got involved and provided RST with a detailed account of FGH’s medical history, specifically in 2020. This information indicated that FGH had suffered a “serious relapse” which was related to her suffering from deep depression.
RST, learning from its shortfalls in the 2018 proceedings withdrew the proposal to suspend, and pressed pause on the disciplinary process. At this point FGH returned to work on special conditions and was working under those conditions when the incident of June 2021 occurred. At this point, RST considered whether they should seek medical evidence from FGH before investigating the matter further. RST considered treating this as a “medical management” issue, on the condition that the medical information requested in May 2021 was received. However, due to there being a problem in receiving this information, RST’s lawyers advised FGH that she needed to obtain an independent assessment.
In August 2021, when FGH made the 13 reasons’ why comment to a fellow staff member, FGH was immediately placed on discretionary paid sick leave, meaning no entitlement was used. At this point RST had still not received the medical information requested. This medical information was eventually provided in December 2021. The information stated FGH could return to work, and that she was fit to participate in a disciplinary process.
RST then issued a letter setting out their concerns from March, June, and August 2021. In response FGH raised three causes of action against RST related to:
- RST commencing a disciplinary process regarding the social media posts;
- RST forcing FGH to take sick leave; and
- RST proceeding with a new disciplinary process in April 2022.
The Court ultimately ruled in favour of RST in the second proceedings. While the factual situations between the 2018 and 2022 proceedings were similar, in the later proceedings, RST, once becoming aware of any possible “red flags” halted the disciplinary process until they had obtained all relevant medical information from FGH. The Court ruled that on all three causes of actions raised, RST had acted as a fair and reasonable employer in the circumstances, and FGH’s claims for unjustified disadvantage were dismissed.
Learning
The main takeaway from this case is that if you are aware of known mental health issues, these must be considered in the context of the employment relationship. While the FGH cases involved performance/disciplinary proceedings, we consider that the principles in those cases would equally apply to investigations. If you, as an employer, are aware of an employee suffering from mental health issues, you should seek independent advice on how they might be impacted by an employment process and set up any additional support needed.
If you become aware of any mental health issues (new or old) during a performance or disciplinary process, best practice is to press pause and seek further, relevant information. Failing to do this may lead to the employee successfully arguing unjustified disadvantage, and/or dismissal in the event they are dismissed.
If you require advice around how to manage mental health during a performance or disciplinary process, then please contact one of our specialists in the Employment team including, Alexandria Till or Brett Edwards.
[1] NZEmpC 60.
[2] NZEmpC 223
[3] This is in reference to the infamous Netflix original show which depicted a graphic suicide scene.
This article is current as at the date of publication and is only intended to provide general comments about the law. Harkness Henry accepts no responsibility for reliance by any person or organisation on the content of the article. Please contact the author of the article if you require specific advice about how the law applies to you.