Elisha v Vision Australia Ltd [2024] HCA 50
A decision of the High Court of Australia has overturned a longstanding position regarding psychiatric injuries in an employment context. Employees will now be able to seek compensation for a psychiatric injury caused by an employer's breach of the contract of employment.
Background
On 11 December 2024, the High Court of Australia allowed an appeal from a judgment in the Court of Appeal of the Supreme Court of Victoria, in the case of Elisha v Vision Australia Ltd [2024] HCA 50.
Mr Elisha, a former employee of Vision Australia Ltd (Vision Australia), was on a work-related trip in March 2015 where it was alleged that he was aggressive and intimidating towards the owner of the hotel.
Vision Australia subsequently stood down Mr Elisha. The allegations in the stand down letter only related to the hotel incident. The letter invited Mr Elisha to a meeting so he could provide his response to the allegations. The letter stated that the meeting would be conducted in accordance with Vision Australia's enterprise agreement and its Disciplinary Procedure.
During the meeting, Mr Elisha denied the allegations in the stand down letter. In its deliberations, Vision Australia preferred the evidence of the hotel owner over that of Mr Elisha. Vision Australia considered the fact that Mr Elisha had displayed a "pattern of aggression" during his employment, and then terminated his employment due to serious misconduct. In terminating his employment, Mr Elisha was never given an opportunity to respond to issues regarding his prior conduct or pattern of aggression.
After this, Mr Elisha was diagnosed with a major depressive disorder and adjustment disorder and had no capacity for work. He brought a common law action for damages for pain and suffering and economic loss, alleging negligence and breach of contract by Vision Australia had caused the injury.
At trial, the Supreme Court of Victoria found the disciplinary process was a "sham and disgrace" and that the disciplinary procedure was incorporated as a term into Mr Elisha's employment contract. Further, the disciplinary procedure had not been complied with in that Mr Elisha had not been provided with a letter prior to the disciplinary meeting containing the allegations made against him, including the allegation of a pattern of aggressive behaviour. As the disciplinary procedure had not been complied with, Mr Elisha was awarded damages for breach of contract.
This decision at first instance was overturned by the Victorian Court of Appeal.
Decision
The matter argued before the High Court involved a contractual claim as well as claim for negligence.
The High Court reinstated the trial judge's award of $1.4 million in damages to Mr Elisha for breach of contract after finding in his favour. There were several important matters that the High Court considered as part of its decision.
The employment contract and incorporation of policies and procedures
Mr Elisha's employment contract included a statement that his employment conditions will be in accordance with the employer's policies and procedures, and that a breach of the policies and procedures may result in disciplinary action.
The High Court determined that the wording of the contract of employment, including the emphasis upon the need for compliance, indicated an intention by the parties to create contractually binding obligations. As a consequence, the High Court found that the disciplinary procedure was incorporated into Mr Elisha's employment contract.
Psychiatric injury and remoteness
The High Court confirmed that psychiatric injury is a type of injury that can result in damages being awarded to employees for a breach of contract. This is a change from the previous position that such an injury did not attract compensation.
There was also a question as to whether Mr Elisha's loss was "too remote", which related to whether, at the time the contract was entered into by the parties, such a loss could have been reasonably expected to result from a breach of that contract. The High Court found that Mr Elisha's loss was not too remote because the psychiatric injury he suffered and the way that it occurred could have been reasonably contemplated by the parties as a serious possibility; in particular, it would have been reasonable to expect that Mr Elisha would have been so distressed by Vision Australia's actions that he would suffer from a serious psychiatric injury.
Duty of care - negligence
One of Mr Elisha's arguments before the High Court was that his employer also owed him a duty of care to provide a safe system of investigation and decision making with respect to discipline and termination of employment.
Since Mr Elisha was successful on his breach of contract claim, the High Court considered it was unnecessary to consider this ground of appeal.
The Court has previously declined to find that an employer's duty of care extends to investigation and termination of employment (as opposed to the tasks and duties of the employment). That position remains undisturbed by this decision as the High Court was not required to consider the matter.
What does this decision mean for employers?
This decision overturns a longstanding position regarding psychiatric injuries in an employment environment. In particular, employees will now be able to seek damages for a psychiatric injury arising from an employer's breach of their employment contract.
Courts will carefully consider whether employers have followed their own written procedures, and whether those procedures were intended to have contractual force. This question is asked at the time the contract was entered into. Employers must be cognisant of the risk of psychiatric injuries that may result when they are engaging in the disciplinary and termination process, particularly if a particular vulnerability relating to an employee is known.
Employers may consider:
- adopting a fair and careful approach to disciplining an employee or deciding to terminate their employment, and ensuring they are following correct process;
- being mindful of the impact that an investigation or termination can have on employees and offer support throughout;
- reviewing their disciplinary processes to ensure fairness to employees and that they are consistent with organisational policies and procedures; and
- considering their current employment contracts to ensure that policies and procedures are not inadvertently being incorporated.
For guidance on workplace investigations, disciplinary matters and issues relating to terminations of employment, please contact a member of our experienced Workplace Relations and Safety team.
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