The recent High Court decision in Elisha v Vision Australia Ltd [2024] HCA 50, demonstrates the potential risks surrounding disciplinary processes, especially when workplace policies form part of employment contracts. The case also highlights the importance of having and following fair procedures and the potential for claims, such as psychiatric injury, when not followed.
Case Summary
In 2015, Mr Adam Elisha (Mr Elisha) was dismissed from Vision Australia after allegations that he displayed 'aggressive behaviour' towards the owner of the hotel on a business trip.
Despite Mr Elisha having ongoing anxiety and depression, Vision Australia put him through a problematic disciplinary process in handling these allegations including by relying on the unverified version of events from the hotel owner rather than Mr Elisha's own response to the allegations. Furthermore, Vision Australia placed reliance on Mr Elisha having had an apparent history of past aggressive behaviour.
Despite Vision Australia's reliance on Mr Elisha's alleged past aggressive behaviour, no past incidents or behavioural concerns were put to Mr Elisha throughout the disciplinary process nor was he given a chance to respond in respect of same prior to his dismissal on 29 May 2015.
Following the Dismissal, Mr Elisha's mental health significantly worsened, and he was diagnosed with a major depressive disorder and adjustment disorder (the Injury) with no capacity for work.
Supreme Court of Victoria (Trial Division)
Mr Elisha subsequently brought a common law action for damages for both pain and suffering and economic loss and alleged that both negligence and a breach of contract by Vision Australia caused the Injury.
The Supreme Court of Victoria held that the disciplinary process was a 'sham and disgrace' and that the procedure Vision Australia had to follow was a term in Mr Elisha's employment contract. Therefore, the non-compliance to the disciplinary process (by failing to provide him with a letter prior to the disciplinary meeting where the allegations were put to him, including the allegation relating to him having a pattern of aggressive behaviour) was held to amount to a breach of contract. The Supreme Court found in Mr Elisha's favour and held that his dismissal was based on unverified information about his history and that he was not provided with a chance to respond to the allegations. Furthermore, it was held that Vision Australia failed to follow its own procedures and that it was reasonably foreseeable that the dismissal could cause distress or psychiatric injury to Mr Elisha and subsequently awarded him $1.5 million in damages.
Supreme Court of Victoria (Court of Appeal)
Vision Australia then filed an appeal against the Supreme Court (trial division) ruling. The Supreme Court (Court of Appeal) agreed that the procedure formed part of Mr Elisha's employment contract and that there was a breach of contract by Vision Australia in not following due process. However, it overturned the decision regarding damages for psychiatric injury and instead held that they were not available for the breach of contract by Vision Australia, including for reasons of remoteness and it being beyond the scope of contractual duty of care during the termination process.
High Court of Australia
On 11 December 2024 the High Court allowed an appeal from the judgment in the Supreme Court (Court of Appeal). Summarily, the High Court upheld and reinstated the original decision of the Supreme Court (Trial Division) and awarded Mr Elisha $1.5 million.
Notably, Mr Elisha had already entered into a deed of release and signed a settlement agreement for the related unfair dismissal claim but was allowed to pursue these matters in court as the dismissal process violated the terms of his employment contract and the argument regarding a breach of contract and negligence fell outside the scope of the release in the deed.
Key takeaways and findings from the High Court decision:
- The High Court rejected Vision Australia's argument that relevant policies were just guidelines and instead ruled that the policies formed part of Mr Elisha's employment contract, and that Vision Australia was therefore legally bound to follow the relevant disciplinary procedures outlined in said policies.
- The High Court ruled that psychiatric injury is an injury that can result in damages being awarded to employees for a breach of contract. This is a shift from the prior legal position that such injury would not attract compensation.
- The High Court found that despite the exact nature of his psychiatric condition potentially not having been foreseeable, it was reasonable to expect that the manner of Mr Elisha's dismissal would cause him to suffer serious psychological harm, particularly given his pre-existing mental health conditions.
- The High Court also considered whether Mr Elisha's loss was 'too remote' and whether such loss could be reasonably expected from breaching the contract and found that it was not too remote as the parties could have contemplated the serious possibility of the distress and subsequent psychiatric injury.
Takeaways for employers:
- Employers must make it clear in an employment contract whether workplace policies are binding and enforceable and if not, specify that they do not form part of the employment contract.
- Employers must follow a fair disciplinary procedure and provide employees with the chance to respond to all allegations without having a predetermined outcome.
Takeaways for employees:
- Employees must understand that their employment contract may also incorporate the employer's policies and procedures as enforceable terms, and that if a disciplinary problem arises, the specified processes must be followed; and
- Employees are now able to seek compensation for a psychiatric injury caused by an employer's breach of the contract of employment.
Conclusion
The Elisha v Vision Australia decision serves as a timely reminder of the need to follow procedures, and the potential consequences in failing to do so. For employers, this case highlights the need for clarity in contracts and policies, as well as the importance of fair processes. For employees, the case reinforces the need to be aware of their rights and seek legal advice where rights are violated, particularly if they have a pre-existing mental health condition which was aggravated by a mishandled disciplinary procedure or termination.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
