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PHOTODISC -- Businessman overwhelmed by computer. Photo: Jules Frazier/PhotoDisc STRESS; FRUSTRATION; WORKPLACE; COMPUTERS; EMPLOYEES; BUSINESSPEOPLE;Jules Frazier/Getty Images

Sheila Dockerty found out by mass e-mail that she had been replaced while on medical leave for depression. Her office, if she had gone back to a lesser position at the hospice where she was once executive director, would have been in the basement. It was the final straw in what had become an increasingly toxic work environment, with snubs and hostile e-mails that, she says, exacerbated the mental illness she'd kept under control and private.

"I was treated like I was a problem," says Ms. Dockerty, 52, who resides in a community north of Toronto and has not returned to work since 2007. Once her illness was public, "they isolated me."

To prevent the isolation of employees like Ms. Dockerty in the future, the federal government announced Thursday that it will fund the creation of first-ever Canadian-wide standards to deal with workplace and mental health - a problem estimated to cost $20-billion a year in workplace losses alone.

The standards, which will be developed by a committee of health, labour and government experts and released in the summer of 2012, come at a time when incidences of depression and anxiety are increasing. More Canadian workers are reporting work-related stress and employers are facing rising legal claims related to mental-health issues.

The standards will be voluntary, which stops short of the legislated changes some mental-health advocates would have wanted. But Senator Michael Kirby, the chair of the Mental Health Commission, which has been pushing hard for standards, insist that companies will respond to peer pressure - and legal pressure - to adopt them.

"You have to have standards to begin to focus employers' and employees' attention on this issue," Mr. Kirby said. "A lot of them don't know what to do. It's never been discussed."

Mr. Kirby has been advocating for more specific standards, and a national mental-health strategy for Canada, since the commission was created in 2007 by the Conservative government. Mental health has become a higher profile issue over the past few years, with Ottawa committing millions to mental-health-related research on homelessness and addictions, and developing a strategy to prevent suicides among aboriginal youth. More recently, however, the Conservatives have been criticized for a prison policy that doesn't devote enough resources to mental illness and addiction treatment.

Workplace standards are a better policy fit for Stephen Harper's government; properly designed, they should clarify what has become a costly and confusing legal and human resources issue for Canadian companies.

Martin Shain, a public-health professor at the University of Toronto, says recent court decisions have created a legal obligation for employers to provide "psychologically safe" workplaces - which generally means being aware of the mental health of workers and having clear plans in place to address problems.

"Employers have been taken off guard," Dr. Shain says. "The rulebook is changing."

Ten years ago, he says, liability was focused on the most egregious cases of bullying, discrimination and harassment - now, while it varies among provinces, companies may be found liable if heavy workloads or bad managers cause undue mental stress on employees. "Many of the cases involve otherwise good employers who fail to notice what's going on in the dark corners."

Other cases are not so subtle. Robin Chapchuk, now an education specialist at the Centre for Addiction and Mental Health in Toronto, was working as a substitute teacher in 2000 when she was hospitalized with depression. While in treatment, a visiting colleague told her she'd been replaced - and handed her the school newsletter saying so.

"It was the last thing I needed to hear," she says. "Employment is really important to a person's recovery."

While she negotiated a new job with the same school board, she eventually moved on to a different teaching position. Five years later, when another bout of depression hit her, colleagues and managers checked in daily, maintained confidentiality and made it clear that she could take time off if she needed it - though, she says, they still wanted a firm return date, something she couldn't give them.

Any standards, she says, should require more education for employers on the nature of mental illness, and the flexibility to adjust to individual cases.

"You can't predict when all of a sudden everything is going to be okay. It's not like a broken arm."

Ms. Dockerty, in the end, chose to give up her "dream job" and has no plans to return to work - instead she edits the website for her husband's company.

"It has definitely traumatized me." she says. "It's taken a long, long time for me to get to the point where I am now."