The recent High Court of Australia decision in Elisha v Vision Australia Limited [2024] HCA 50 has created a compelling precedent in employment law, awarding for the first time damages in favour of an employee for psychiatric injury caused by wrongful termination arising from unfair disciplinary processes.  This ruling broadens employer responsibilities, developing a stronger emphasis on procedural fairness and adherence to established workplace policies.

In this case, the High Court reinstated the trial judge’s decision and awarded damages of approximately $1.4 million to Mr Elisha for psychiatric injury suffered by him as a result of his employer, Vision Australia Limited, terminating his employment in breach of its own policies, which the Court determined where incorporated into Mr Elisha’s employment contract.  The Court concluded that the injury and its general manner of occurrence were within the parties’ contemplation when entering the employment contract, and that the terms of a Deed of Release entered into between the parties to settle Mr Elisha’s unfair dismissal dispute shortly after the dismissal years earlier did not preclude Mr Elisha from bringing a new claim for damages for psychiatric injury for breach of his employment contract.

The decision represents a significant shift on how Australian employers must approach disciplinary actions or investigations that may lead to termination, demonstrating the importance of protecting employees’ mental health throughout such processes.  Employers must adhere to procedural fairness in disciplinary actions, and strictly comply with workplace policies that are incorporated into the employment contract.

Recommended actions

Employers should adopt several crucial actions after the Elisha ruling to minimise the risk of claims by employees:

  1. Review Employment Contracts:  The wording used in employment contracts regarding workplace policies or codes of conduct should specifically exclude these policies from being incorporated into the employment contract.  It is important to make it clear in employment contracts that workplace codes and policies are guidelines rather than a term of the contract itself.  Both the policy documents and the employment contracts should contain clear language saying this to avoid the workplace policies unintentionally binding the employer.
  2. Update Disciplinary Policies: Employers ought to consider updating their disciplinary procedures. Instead of laying down strict procedures that could result in legally binding contractual obligations, the language used should be aspirational and concentrate on guiding principles. Employers can lessen the possibility of establishing legal obligations that can result in further claims if breached by doing this.
  3. Review template settlement agreements: It’s important to carefully review any template settlement agreements or deeds used by the business. For example, in the Elisha case, the use of “or” instead of “and” in the release clause may have effectively barred the claim. Employers should ensure that settlement agreements contain clear and precise language that fully bars any future claims, while keeping in mind that workers’ compensation and superannuation claims cannot be waived.  Seek legal advice before a settlement agreement is presented to an employee to resolve a dispute.
  4. Conduct Thorough Investigations: Prior to deciding whether to terminate an employee due to a complaint or concerns about the employee’s conduct, employers should conduct a thorough investigation that is in line with the employer’s own guidelines.  Employers should consider whether an employee could be eligible to bring an unfair dismissal claim or not, and ensure that any matters leading up to the termination are clearly documented and the employee is provided with adequate opportunity to respond before a decision to terminate their employment is made.

By taking these precautions, employers can better navigate the potential legal implications of the Elisha decision and reduce the likelihood of future claims.

If you or someone you know needs assistance, please contact us by calling our Sutherland office at 9525 8688 – or emailing your enquiries to wmd@wmdlaw.com.au

Sources

Elisha v Vision Australia Limited [2024] HCA 50