If Nick Leeson's superiors had taken more notice when he complained of stress, they might have intervened earlier and the fate of Barings Bank might have been different.

Although the price Barings paid exceeds anything other companies will face, stress in the workplace is costing an estimated £1,104 per employee per annum, according to speakers at the recent stress seminar hosted by law firm Davies Lavery.

Delegates from insurance companies, brokers, loss adjusters and private sector firms were there to look at how companies should approach the issue.

Philip West, partner at Davies Lavery, said: “Stress is affecting more and more lives. The workplace has changed in the last few years as we work in a performance-driven society.”

The seminar looked at what stress is, its causes and effects. It also examined the legal implications and risk management.

Ron Scott from the Lancaster Group, a firm that specialises in stress consultancy, said 50 years of research has indicated that stress can use premature death in employees.

But he added that this would also be affected by other social, economic and emotional factors.

“The biological link between social, emotional and status factors and disease is now established as stress. This stress can contribute to range of illnesses such as cancer, asthma, heart disease, diabetes and thyroid problems.”

The connection between the psychological and the physiological effects of stress, he said, are caused as a result of the body preparing for action when faced with any perception of threat.

He described how the heart beats quicker and harder, circulation increases, the liver releases extra sugar and bloodclotting ability increases. Digestion slows down or stops, sphincter muscles close and kidneys, large intestines and bladder reduce activity. In addition blood vessels in salivary glands constrict -– making the mouth go dry – and the immune response decreases.

He says: “This is the alarm reaction, and for people under stress this can be triggered far more than it needs to be. The body tries to adapt to the pressure till it reaches a stage of resistance.

If the stressor is still there, the person's ability to adapt is exhausted and collapse occurs. This frequently results in serious illness and death.”

Stressed people, he said, become tired, irritable and withdrawn.

They are also likely to have minor injuries and sickness, and companies should look out for behavioural changes.

This could save companies thousands of pounds each year.

The Confederation of British Industry (CBI), in its Focus on Absence 1999 and 2000, found that the direct cost of sickness per employee per year is £438, and the hidden cost is £666 per year.

With an estimated 30-35% of all sickness absence being stress-related, the cost to a company for 1,000 people is about £386,400 per year.

Scott adds: “There are three types of stressors: personal (relationships with parents and friends); work-related and operational ( the bits of a job you can't get take out. For example, some jobs may mean you have to deal with abused children.

“We need a culture change in organisations and employees must get the opportunity to talk about the things that are putting them under pressure so something can be done about it.”

Auditing stress

It is important for companies to find out what exactly is stressing their employees, which people are being stressed and where exactly to put resources, says Ron Scott of the Lancaster Group.

He adds that stress audits have to be simple to do and anonymous so that more people will be willing to take part. “There is a tendency, especially on the part of local government to do the stress audits themselves but these have to be based on research.

“Audits should provide usable data and reports which include recommendations for action,” he said. Referring to a 50-year research project called the Roseto Study, Scott said three US towns – Roseto, Bangor and Nazareth had the same hospital facilities, same doctors, same water supply and same risk factors, yet Roseto had a strikingly low rate of coronary heart disease. Social and emotional support networks in Roseto were much stronger than in the other towns. When, over time, those networks broke up, coronary heart disease in Roseto became the same as in other towns.

Scott said the provision of social and emotional support reduces illness and premature death.

Employers, therefore, should run stress training, workshops and alternative therapies. This will help the employee to feel recognised, cared for and supported.

Clare Hirst, a partner at Davies Lavery added that good stress risk management should include a sound management structure with definite roles and written procedures for disciplinary and grievance. There should also be practical management skills and good recruitment procedure to ensure the right person with the right skills gets the right job.

The legal implications

The duties of the employer to the employee are covered by three different areas: the common law duty of care, statutory duties of care and duties owed under the employment protection legislation.

Claire McKinney, partner at Davies Lavery's Birmingham office, explained the common law duty of care means that a employer has a duty to take reasonable care of both the physical and mental well being of the employee.

She said: “Where there is a foreseeable risk of injury to the employee, there is a duty on the employer to do all that is reasonably practicable to reduce the risk to as low as possible.”

McKinney says that of the publicised stress cases, most have been settled out of court, or are cases where liability has been admitted. Therefore the law is really confined to two cases: Petch v Customs & Excise Commissioners (1993) and Walker v Northumberland County Council (1995).

In the Petch case the claimant failed in a claim for damages for negligence against his employers for allegedly causing him to suffer from a nervous breakdown because of the volume and stressful nature of his work. It was found that unless senior management in the relevant department were aware or ought to have been aware that the claimant was showing signs of impending breakdown and his workload carried a real risk that he world have a breakdown then the defendants were not negligent.

In the other case, Mr Walker was a middle manager in the Social Services department of Northumberland County Council who suffered a nervous breakdown in 1986 after dealing with a large number of child abuse claims. After time off work he returned, having been promised support. This did not materialise and he suffered a second breakdown in September 1987 and was retired on ill health grounds in February 1988.

The court found the defendant not responsible for the first breakdown but liable for the second as it was foreseeable that if no steps were taken to remedy the work positions the claimant would once again be placed under undue stress which could lead to mental illness.

She says when defending a claim it is important to build up a picture of the employee covering aspects such as work history, previous employment and medical history. Also she believes it is helpful to interview the employee's colleagues who may know about any competing causes such as marital problems.

She said: “Once evidence has been gathered it will be necessary to obtain expert evidence on the claimant's psychiatric condition. It is better to instruct the expert after lay investigations have been conducted so that the psychiatrist can obtain a true and proper picture rather than just working on the basis that everything the claimant says is true.”

Stress claims could also come from tribunals, said Simon Judd another partner at Davies Lavery. He said: “Strangely perhaps there is no specific law against stress and it is not by itself a prescribed disease; however there has clearly been a steady increase in work related stress claims. One way in which such claims may be expressed is in terms of statutory tort of discrimination. For tribunal claims the key pieces of legislation relied upon by employees are; Sex Discrimination Act 1975; Race Relations Act 1976 and Disability Discrimination Act 1995.

“While one can see how stress may be claimed to be the product of discrimination, the link is more obvious perhaps where it is alleged to result from the breach of direct employment relationships, In this respect the Working Time Regulations 1998 and Employment Rights Act 1996 (as amended by the Employment Relations Act 1998 should be considered.”