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Huge Damages Award for Sham Disciplinary Process - Williamson Barwick
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Huge Damages Award for Sham Disciplinary Process Home > Huge Damages Award for Sham Disciplinary Process
Huge Damages Award for Sham Disciplinary Process Elisha v Vision Australia [2024] HCA 50 is a landmark case on Australian employees’ legal rights, overturning a precedent set by a century-old English case.
The High Court of Australia ordered an employer to pay over $1.4 million to a former employee who claimed psychiatric injury arising from a breach of employment contract.
This case marks a departure from long-standing precedent, providing significant implications for employers’ obligations toward employees’ mental health during disciplinary procedures.
Facts of the Case Adam Elisha, the appellant, had been employed as an adaptive technology consultant by Vision Australia since 2006. Following a disciplinary process in 2015, which was found to be fundamentally flawed and described as both a “sham” and “disgrace”, Mr Elisha was dismissed.
He was not properly informed of the allegations against him, nor was he given a fair opportunity to respond before his dismissal. A
s a result of the unfair disciplinary process, Mr Elisha developed severe psychiatric injuries, including anxiety and depression, which were treated between December 2014 and July 2015.
He subsequently sought damages in the Supreme Court of Victoria, claiming that the breach of disciplinary procedures caused him psychiatric injury. The primary judge ruled in his favour, awarding $1,442,404.50 in damages.
However, Vision Australia appealed this decision, and in November 2023, the Court of Appeal overturned the award, ruling that psychiatric injury was not recoverable for breach of contract in this context.
Despite acknowledging that the investigation did not allow Mr Elisha the opportunity to respond to the allegations, the Court of Appeal held that damages for psychiatric injury were not available for the breach of contract, for two reasons:
The Court of Appeal held that damages for psychiatric injury were unavailable for a breach of contract other than where the psychiatric injury was consequent upon physical injury caused by the breach of contract or where the very object of the contract was to provide enjoyment or relaxation. The Court of Appeal held that damages for Elisha’s psychiatric injury could not be recovered because the psychiatric injury was too remote from the breach of contract by Vision Australia. Mr Elisha obtained special leave to appeal to the High Court of Australia on the question of whether damages for psychiatric injury were recoverable for breach of employment contract. The High Court ultimately found in his favour and reinstated the primary judge’s award of damages.
Key Legal Findings The High Court examined the contractual relationship between the parties and whether the disciplinary procedure incorporated into the contract formed a binding obligation on Vision Australia.
Key legal findings include:
Incorporation of Disciplinary Procedures : The Court held that the disciplinary procedure, introduced in 2015, was incorporated into the 2006 employment contract. As such, the employer was contractually bound to follow the prescribed procedure when investigating and potentially terminating the employee’s employment to allow a fair and reasonable process.Damages for Psychiatric Injury : The High Court ruled that damages for psychiatric injury were recoverable as a result of the employer’s breach of contract, specifically because the breach involved a defective and unfair disciplinary process. The Court emphasised that both parties should have reasonably anticipated that a serious breach of these procedures could cause psychiatric injury to the employee.Causation and Remoteness : The High Court concluded that the psychiatric injury Elisha suffered was not too remote from the breach. The causal link between the breach of contract (i.e., the unfair dismissal process) and the injury was direct and foreseeable, given the nature of the breach and its potential impact on an employee’s mental health. The High Court ruled that whilst foreseeing the exact way Vision Australia’s breach caused Elisha’s psychiatric injury was not crucial, a key factor in the causal chain was that “without Vision Australia’s breach, Elisha would not have been dismissed for alleged misconduct.” The judgment emphasised that this causal link was “entirely predictable in light of the nature of Vision Australia’s breach”.
The Court recognised that “for many workers, dismissal is a disaster”, describing employment as often one of the most important aspects of a person’s life, providing not only a livelihood but affecting all three interests: “a person’s livelihood, identity, and self-esteem”.
Implications for the Employers’ Duty of Care The High Court’s decision in Elisha v Vision Australia [2024] HCA 50 has profound implications for Australian employment law. By affirming that damages for psychiatric injury are recoverable for breaches of employment contracts, the decision challenges long-standing common law precedent, which previously denied such claims in the absence of physical injury.
Employers are now more likely to face liability for psychiatric injuries caused by unfair disciplinary processes.
Therefore, the first critical lesson for employers is to review their disciplinary policies and procedures to determine if they are contractually binding. If so, great care will need to be taken in handling disciplinary processes to ensure that a breach of contract does not occur.
Second, the decision in Elisha also draws attention to the fact that a lack of organisational justice is a recognised psychosocial hazard that is required to be managed in accordance with work health and safety law.
It is important, therefore, for employers to ensure procedural fairness and provide mental health supports to an employee undergoing an investigation or disciplinary process, to mitigate the risk of psychological injury to an employee.
At WilliamsonBarwick, we combine our knowledge of the law of the contract of employment and work health and safety law to support our clients in this process.
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