In its recent decision, Elisha v Vision Australia Limited [2024] HCA 50, the High Court considered whether an employer may be liable to an employee for psychiatric injury caused by a flawed disciplinary process. The High Court found that the employer was liable and reinstated an award of $1.44 million to Mr Elisha.
Background
The employee worked for Vision Australia from 2006 and was required to travel extensively in his role. His employment was governed by a written employment contract. The employer’s disciplinary procedure set out what the employer must do if there were concerns about an employee’s conduct.
Following an incident at a hotel in March 2015 where the employee was staying for work, allegations of aggressive behaviour were made against the employee while he was on annual leave. On his return, the employee was given a “stand down letter”. The employee denied the allegations.
The employer dismissed the employee following what the Court described as a “sham” disciplinary process. In terminating Mr Elisha’s employment, the employer relied on unverified allegations from hotel staff and prior unsubstantiated complaints about Mr Elisha’s behaviour, which were not disclosed to Mr Elisha.
The employee was subsequently diagnosed with a major depressive disorder, caused by the “sham” disciplinary process and unlawful dismissal.
Key Issues and Findings
The High Court considered:
- Whether the employer’s disciplinary policies were incorporated into Mr. Elisha’s employment contract. The High Court found that they were. The employer had a contractual obligation to conduct the disciplinary process in accordance with its policy. It failed to do so, thereby breaching the employment contract.
- Whether the employee’s psychiatric injury resulting from the employer’s breach of contract was too remote. The High Court overturned long standing case law and found that the psychiatric harm suffered by the employee was sufficiently connected to the employer’s breach.
Key takeaways for employers
- Employment contracts should be drafted so as to avoid incorporating workplace policies.
- Employers should ensure that their disciplinary processes are impartial and procedurally fair. Employees must be given an opportunity to respond to allegations (which must be disclosed to the employee).
- Employers must comply with their own policies and processes.
It is essential that employers understand their obligations to employees, including during the disciplinary processes.
Is it time to review your employment contracts and workplace policies?
For advice regarding employment contracts, workplace policies and the disciplinary process, please contact Heather Richardson.
