Landmark High Court Case allows Employees to Claim Compensation for Psychiatric Injury Arising from Breach of Employment Contracts

Overview

In the recent case of Elisha v Vision Australia Ltd [2024] HCA 50, the High Court of Australia has ruled that workers unfairly dismissed in breach of their employment contract can now claim compensation for psychiatric injury resulting from the dismissal. In a 6-1 verdict, the High Court ordered that Vision Australia Ltd (Vision Australia) must pay dismissed employee Adam Elisha (Mr. Elisha) $1.4 million, inclusive of damages for psychiatric injury resulting from his wrongful termination. This decision overturns the 115-year-old precedent of Addis v Gramophone, which previously prevented claims for psychiatric harm arising from breach of employment contracts.

Background

Mr. Elisha’s employment with Vision Australia was terminated on 29 May 2015 following an incident occurring at a hotel during work travel, where it was alleged that Mr. Elisha engaged in aggressive and intimidating behaviour towards a hotel employee (the Hotel Incident).

Following the Hotel Incident Vision Australia commenced internal disciplinary proceedings, and Mr. Elisha was provided a Stand Down Letter (the Letter) containing allegations regarding the incident, was stood down, and required to attend a disciplinary meeting (the Meeting). During the Meeting, Mr. Elisha denied the allegations of aggressive behaviour contained in the Letter. Consequently, Vision Australia did not accept Mr. Elisha’s account of the Incident and terminated Mr. Elisha’s employment based off previous allegations of aggressive behaviour which were not raised with Mr. Elisha at the Meeting. Vision Australia’s Management staff, including Mr. Elisha’s manager made a recommendation to prefer the hotel proprietor’s account of the Incident over Mr Elisha’s account.

Following Mr. Elisha’s termination, he was subsequently diagnosed with major depressive disorder. Mr. Elisha commenced proceedings in August 2020, claiming injuries for his psychiatric injury.

Decision

The Supreme Court of Victoria (the Supreme Court) found that Mr. Elisha had been unfairly dismissed. The Supreme Court labelled the internal disciplinary process of Vision Australia “a sham and a disgrace”, finding that Vision Australia had breached its own Disciplinary Procedures, which were incorporated into Mr. Elisha’s contract of employment.

In their judgment, a 6-1 majority of the High Court recognised the psychological impact of wrongful termination, stating the importance of a person’s employment in modern society and the ability for unfair dismissal to severely impact a person’s livelihood, identity and sense of self-esteem. In reaching their decision the Court considered Mr. Elisha’s tenure at the company.

Key Takeaways

Employers and employees must be aware of processes, procedures and codes of conduct which are incorporated into an employee’s contract of employment.

If you have any questions about this case and how it may impact you as an employer or employee, please do not hesitate to contact Nick Stevens, Josh Hoggett, Evelyn Rivera or Ayla Hutchison.