Cause and Consequence: Show Cause Letters in the Landscape of the Workplace

Show cause letters, while a legitimate tool for ensuring procedural fairness, can have significant psychological impacts on employees, especially when not handled with care. These letters are often used as part of the formal disciplinary process, and for many workers, receiving one can trigger anxiety, stress, and feelings of job insecurity. If the process lacks transparency, process or empathy, it can exacerbate existing mental health issues or even contribute to new psychological injuries.

Recent data from Safe Work Australia shows mental health conditions account for 9% of all serious workers’ compensation claims, with a nearly 37% increase since 2017–18. These claims also result in longer absences and higher compensation costs than physical injuries. A key factor? Workplace stressors like bullying, unreasonable workloads, and poor management practices - many of which can be linked to how disciplinary processes, including show cause letters, are conducted. 

The decision of Fell v Willoughby City Council [2024] NSWPIC 224 underscores how procedural missteps or perceptions of unfair treatment during disciplinary processes - like issuing a show cause letter - can trigger or exacerbate psychological injury claims. 

What happened in Fell? 

Mr Fell was employed by Willoughby City Council (Council) as a compliance ranger. He made a workers compensation claim for a psychological injury he said was caused by workplace bullying, harassment, and mistreatment following his involvement in enterprise bargaining negotiations from 2018 onwards. Notably, he pointed to a show cause letter issued in April 2023 and a physical assault by a member of the public in December 2022, after which he alleged inadequate employer support. His deemed date of injury was 26 April 2023 which was the date he received the show cause letter.  

The Council disputed liability under section 11A(1) on the basis the psychological injury was wholly or predominantly caused by reasonable actions taken by Council’s with respect to discipline.

Member Kerry Haddock heard the matter and concluded the worker had a psychological injury, which was wholly or predominantly caused by the disciplinary action taken against him. The question then became whether Council’s actions were reasonable. In considering the evidence, Member Haddock considered the Council’s processes by which the complaint against Mr Fell was investigated, the determination of the complaint, and the manner in which the result was communicated to Mr Fell. Ms Haddock particularly reviewed the letter advising Mr Fell of the show cause meeting. In that letter, Mr Fell was: 

• Notified that his conduct was unacceptable and in breach of Council policies

• Provided with an opportunity to show cause as to why the Council should not consider disciplinary action

• Given the opportunity to provide a written response at or prior to the meeting

• Invited to bring a support person

• Reminded of EAP services. 

Member Haddock concluded the entire disciplinary process (including the show cause letter), was reasonable and section 11A acted as a defence to the claim which meant Mr Fell was not entitled to receive workers compensation payments. 

Broader implications

While there has been an increase in claims by employees of psychological injury, employers should not be deterred from carrying out what is considered reasonable management action and what is in line with their workplace policies. 

Employers must be mindful to ensure they diligently follow their disciplinary procedures including any show cause process particularly in light of the recent decision of the High Court in Elisha v Vision Australia Limited [2024] HCA 50 where the High Court awarded contractual damages to an employee for a psychiatric injury because of a breach of an employment contract (where the employer failed to follow its disciplinary process). 

Is there such a thing as a perfect disciplinary process? 

It can be a sensitive and complex area as there are a number of factors that come into play when looking at an employer’s conduct and psychological injury e.g.

• Does the employee have a pre-existing condition which may or may not have been disclosed to the employer, and what if it only arises during the disciplinary process – how do you then manage this?

• Was the psychological injury caused by something else in that the employer’s action was not the whole or pre-dominant cause?

• How an employee reacts to a show cause process can be different to another – so what is the standard to be applied?

• Is it fair to assume an employer should be able to see every possible psychological risk? What does “reasonably contemplated” mean? 

The takeaways 

Section 11A is a hard defence to make out for employers and we often see the actions of the employer fail on the reasonableness test. 

Employers must ensure the disciplinary processes are not only legally compliant but are also psychologically safe. That means clear communication, support mechanisms and a genuine commitment to employee wellbeing. 

Employers are warned that failure to follow disciplinary processes can result in a contractual breach where those processes are contractual (policies and procedures have been incorporated into an employment contract). Where the employee suffers from a psychiatric injury as a result and where that injury is reasonably contemplated as a serious possibility, contractual damages may be awarded to the employee.   

Employers should follow their policies and procedures for potential workers' compensation claims. Documenting disciplinary processes helps demonstrate the process was reasonable, in the event an employee submits a claim.

Authors: Kate Nammour, Kristina Tato 

Contributing Partners: Kate Ralph, Linda Mackinlay