How a Toxic Workplace Culture Damages Employee Well-being—And How to Avoid It

Toxic workplace cultures don’t just cause stress—they can lead to lasting neurological damage. Drawing from the work of Dr. Susan Fraser and insights in her book The Toxicity of Work, research shows that bullying, harassment, and chronic stress at work may alter brain function, impacting memory, emotional regulation, and decision-making.

In this article, we explore how toxic work environments affect employee mental health, the warning signs leaders must recognize, and actionable steps organizations can take to foster a psychologically safe and healthy workplace.

What is a Toxic Workplace Culture?

A toxic workplace culture can be tough to define, but it is marked by an environment where employees’ mental (and maybe even physical) well-being isn’t prioritized. Some signs that your internal culture is toxic could include:

• Employees feel undervalued, overworked, or unappreciated.
• Harassment, bullying, and discrimination are common.
• The success of the company comes before employees’ health.
• Management models and/or encourages unethical behavior.
• Trust, respect, and communication are poor, especially from leadership down to employees.

READ MORE: How to Identify and Prevent a Hostile Work Environment: Your Complete Guide

How Bad Workplace Culture Impacts Mental and Brain Health

According to Dr. Fraser, the physical harms of a hostile work environment begin because the brain feels threatened. “If the brain worries about whether or not it is part of a community, a respected part of the team, a valued employee, then it is diverting precious resources that could be funneled into problem-solving, productivity, creativity, innovation, and service,” she explains. “If the brain is afraid it might get hurt or burned, it channels its resources into being alert for danger, scanning the environment for threats, and in toxic environments can develop hypervigilance. Ironically and sadly, all of this energy is being directed toward safety because we are failing to ensure psychological safety or brain safety is a human right at work.”

1. Neuroscience Behind Toxic Culture

Toxic workplace culture doesn’t just impact employee satisfaction—it rewires the brain. Prolonged exposure to stress, incivility, or fear-based leadership activates the amygdala, the brain’s threat-detection center, and diminishes the functioning of the prefrontal cortex, which governs reasoning, decision-making, and emotional regulation.

When employees consistently perceive their work environment as unsafe—whether due to micromanagement, exclusion, or bullying—their amygdala remains in a state of hyperarousal. This chronic “fight-or-flight” mode limits their ability to concentrate, collaborate, or innovate. Over time, the prefrontal cortex begins to shrink in activity, reducing cognitive flexibility and impairing strategic thinking.

In effect, a toxic culture conditions the brain to prioritize survival over performance, making it difficult for employees to stay engaged, creative, or connected to their work.

2. Psychological Side Effects

The neurological impact of toxic workplaces often translates into measurable psychological harm. Employees in high-stress or hostile environments report significantly higher rates of depression, anxiety, and burnout. The emotional toll is cumulative—each unresolved conflict, microaggression, or public reprimand contributes to a growing sense of helplessness and isolation.

These mental health effects don’t exist in a vacuum. They often lead to:

• Decreased morale, as employees lose faith in leadership and organizational values
• Withdrawal behaviors, such as absenteeism, presenteeism, and reduced collaboration
• Higher turnover, especially among top performers who are quickest to seek healthier environments

For HR teams, the stakes are high. Unaddressed psychological side effects don’t just hurt individuals—they undermine trust, damage the employer brand, and increase organizational risk. Early identification and intervention are essential to reverse the cycle.

Signs of a Toxic Workplace Culture

A toxic work environment doesn’t always announce itself—but it often leaves clues in employee behavior, morale, and turnover trends. Recognizing these early warning signs is the first step toward meaningful intervention.

1. High Employee Turnover

When employees consistently leave within short tenures, it’s often a sign that something deeper is driving them out. Constant churn undermines team cohesion and signals a potential leadership or culture issue.

2. Micromanagement

Excessive control over minor decisions can erode trust and stifle creativity. It often reflects a lack of confidence in employees and contributes to mental fatigue and disengagement.

3. Gossip and Blame Culture

When teams focus more on finger-pointing than solutions, trust breaks down. A culture of blame fosters anxiety, reduces collaboration, and keeps employees in survival mode.

4. Lack of Transparency

Ambiguity in decisions, policies, or expectations leads to confusion and resentment. Without clear communication, employees may assume the worst, damaging morale and productivity.

5. Fear of Speaking Up

When employees hesitate to report problems or suggest improvements, the organization loses critical insight. Silence in the workplace often masks deeper issues related to retaliation, favoritism, or leadership disconnect.

A 2023 study by the American Psychological Association found that 76% of employees in toxic work environments reported that their workplace has had negative impacts on their mental health.

How to Prevent a Toxic Corporate Culture and Rebuild Trust

So, how can you protect your employees while promoting an ethical corporate culture? Take the three steps below.

 1. Set up a Whistleblower Hotline and Ethics Reporting System

First, you need to find a way to nip harassment and bullying in the bud. Providing a safe place where employees can report incidents (such as a whistleblower hotline) helps you resolve issues before they have time to escalate.

Set up multiple reporting avenues (e.g. phone hotline, dedicated email, webform, physical forms) so employees can choose their preferred option when reporting. Everyone has different comfort levels and communication styles, so offering numerous options empowers employees to speak up.

Then, make sure to include information on how to report during your annual harassment training. Teach employees how to report harassment as the victim, but also on another person’s behalf. Sometimes employees fear retaliation or just don’t want to cause drama, so they won’t report for themselves; when coworkers learn how to stand up for one another, you’re well on your way to an ethical internal culture where bullying isn’t tolerated.

2. Provide Ongoing Mental Health Support

When an employee experiences harassment, it’s often part of a broader pattern of toxic workplace behaviors that damage mental health. While you obviously want to prevent as much of this behavior as possible, it’s also important to offer resources to those employees who do fall victim to bullying.

Some ways to promote a mentally healthy work environment include:

• Covering mental health services/treatments in your benefits plan
• Training managers in supporting employees’ mental well-being
• Encouraging managers to schedule one-on-one check-ins with their remote employees
• Allowing flexible working hours
• Sending bi-annual surveys to employees to assess the organization’s overall mental state
• Sharing mental health resources such as educational content and contact information for helplines and treatment centers
• Encouraging strong work/life balance
• Creating a transparent, open culture where honest communication is standard

Show employees that you care about them as people, not just workers. Doing so will not only protect their mental health, but also promote ethical behavior, decrease harassment incidents, and reduce turnover.

3. Build a Culture of Civility and Psychological Safety

Catherine Mattice, founder of Civility Partners, explains that negative behavior begins when unprofessionalism, microaggressions, and incivility are allowed to slide between employees. For example, an employee might take a rude tone with their coworker, or a manager “plays favorites” with their staff. As a result, bad actors might move on to more intense bullying and harassment, and, finally, workplace violence.

The more disruptive behaviors are harder to stop and do more damage, both to the victim and to the organization. That’s why you need to start small when creating an ethical workplace culture. Promote civil behavior and take a zero-tolerance stance on harassing behaviors. To do so, Mattice suggests:

• Building empathy and respect into everyday communications
• Creating equity in your hiring, firing, and promotion processes
• Offering “allyship” training that teaches employees how to step in when they see a coworker being victimized

A workplace culture focused on civility builds a strong sense of community amongst employees and reduces the risk of uncivl behavior escalating into something more serious.

READ MORE: Psychological Safety in the Workplace: Your Top 8 Questions Answered

Long-Term Effects of an Unhealthy Workplace Culture

An unhealthy workplace culture doesn’t just hinder productivity—it impacts employee well-being, company stability, and overall organizational performance. When left unaddressed, the effects compound over time, leading to costly outcomes.

Studies have shown a direct correlation between toxic workplace dynamics and mental health issues such as anxiety, depression, and burnout, as mentioned above.

Key long-term effects include:

• Burnout and chronic stress – Persistent pressure without support leads to emotional and physical exhaustion.
• Cognitive fatigue and memory loss – Stress impairs focus, decision-making, and even memory over time.
• Increased absenteeism and disengagement – Employees may call in sick more often or mentally check out while at work.
• Loss of top talent and brand reputation – Toxicity can drive high performers out and damage how the company is viewed externally.

Differences Between a Healthy and Toxic Workplace Culture

Real-World Examples of Toxic Corporate Culture

Understanding the tangible impacts of toxic workplace environments is crucial for organizations aiming to foster healthier cultures. The following cases highlight how detrimental practices can lead to significant repercussions.

1. Activision Blizzard: A Culture of Harassment and Discrimination

In July 2021, the California Department of Fair Employment and Housing filed a lawsuit against Activision Blizzard, alleging pervasive gender-based discrimination and sexual harassment. The lawsuit described a “frat boy” culture where female employees faced constant harassment, unequal pay, and limited opportunities for advancement. Specific incidents included inappropriate behavior during “cube crawls,” where male employees drank excessively and harassed female colleagues. The company’s initial dismissal of the allegations led to employee walkouts and widespread criticism. Eventually, Activision Blizzard agreed to pay $54 million to settle the claims and committed to implementing measures to ensure fair pay and promotion practices.

Lesson Learned: Ignoring or dismissing employee concerns can exacerbate issues, leading to legal action and reputational damage. Proactive measures and genuine commitment to addressing workplace misconduct are essential.

2. Wells Fargo: Sales Pressure Leading to Unethical Practices

Between 2011 and 2016, Wells Fargo employees opened millions of unauthorized bank accounts to meet aggressive sales targets set by the company. This practice was driven by a high-pressure sales culture that prioritized cross-selling. The scandal resulted in a $185 million fine and the resignation of CEO John Stumpf. Employees reported that the unrealistic sales goals and fear of job loss compelled them to engage in unethical behavior.

Lesson Learned: Unrealistic performance expectations and a lack of ethical oversight can lead to widespread misconduct. Organizations must balance performance goals with ethical standards and employee well-being.

How Case IQ Empowers Organizations to Prevent Toxic Culture

Case IQ empowers your employees to report incidents and concerns through the widest variety of channels, including the industry-leading hotline powered by WhistleBlower Security. Learn how you can help your employees feel safe speaking up here.

Frequently Asked Questions

1. How to fix a toxic work culture?

Fixing a toxic work culture requires leadership accountability, clear communication, and structural change. Start by identifying root issues through employee feedback or anonymous reporting tools. Then, enforce respectful behavior, provide management training, and foster psychological safety. Support systems like whistleblower hotlines and mental health resources can accelerate recovery and rebuild trust.

2. What are the 5 attributes of a toxic work culture?

A toxic work culture often includes:

• Lack of trust and transparency
• Micromanagement or poor leadership
• Bullying, gossip, or passive aggression
• No recognition or support for employees
• Fear of retaliation for speaking up

These traits erode morale and create long-term damage to team dynamics and mental health.

3. What is a red flag of a bad company culture?

A major red flag is when employees are afraid to voice concerns or offer feedback. Other warning signs include high turnover, leadership favoritism, unclear job roles, and widespread disengagement. If toxic behaviors are tolerated or normalized, the culture is likely unhealthy.

4. How to move on from a toxic work environment?

Start by acknowledging how the experience affected your mental well-being. Take time to rest, seek support, and reflect on what you value in a healthy workplace. When looking for new opportunities, research company culture, read reviews, and ask culture-related questions during interviews to avoid repeating the experience.

5. Who is most affected by toxic workplace behavior?

Employees who are new, marginalized, or lack power—such as entry-level staff, minorities, or remote workers—are often most affected. These individuals may have fewer support systems, fear retaliation, or face exclusion, making it harder to speak up or protect their well-being.

6. What are the root causes of bad workplace culture?

Common root causes include:

• Poor leadership or lack of ethical role models
• Inadequate accountability systems
• Tolerance of toxic behavior
• Weak HR policies or enforcement
• Absence of clear values or psychological safety

When these are unchecked, dysfunction spreads and culture deteriorates.

7. Can toxic workplace behavior be reversed?

Yes, but it requires intentional change. Leaders must acknowledge the issues, implement zero-tolerance policies for toxic behavior, and create safe channels for feedback. Regular culture assessments, transparent communication, and leadership training are essential for lasting improvement.

8. How can psychological safety reduce toxic team culture?

Psychological safety empowers employees to express concerns, share ideas, and ask questions without fear of humiliation or retaliation. It encourages honest dialogue, helps catch toxic patterns early, and promotes accountability. Teams with high psychological safety are more resilient, collaborative, and inclusive.

9. When should HR intervene in a toxic office culture?

HR should act immediately when signs of toxicity arise—such as increased complaints, low engagement, or patterns in exit interviews. Early intervention prevents long-term damage, improves retention, and signals to employees that their well-being and feedback matter.

10. How can poor organizational culture lead to harassment and bullying?

Organizational culture plays a crucial role in shaping workplace behavior. When it’s toxic or poorly managed, the environment can quickly deteriorate. Organizational culture side effects include harassment and bullying when there’s a lack of accountability, unclear policies, or tolerance for unethical conduct. These behaviors thrive in cultures where speaking up is discouraged and leadership fails to model respect and integrity.