In December, the High Court of Australia in Elisha v Vision Australia Ltd ruled in favour of the employee, finding that a defective disciplinary process and unfair dismissal caused him foreseeable psychiatric harm.
The court awarded $1,442,404.50 in damages for the resulting injury, noting that the employer, Vision Australia had also failed to follow its own internal procedures.
The case raised three key points for employers to be aware of:
> Company Policies & Procedures
> Termination Settlement Agreements
> Liability for Psychiatric harm and Injury
Mr. Elisha joined Vision Australia in 2006 as an adaptive technology consultant. His contract required compliance with company policies, with breaches potentially triggering discipline. Starting in December 2014, he received treatment for anxiety and depression but continued working, including travel. In March 2015, during a business trip, he allegedly acted aggressively toward a hotel owner in rural Victoria. After an investigation—later called a “sham and a disgrace” by a judge—Vision fired him in May 2015, citing misconduct but failing to disclose key allegations, like a supposed “pattern of aggression.” His mental health worsened post-dismissal.
> Company Policies & Procedures – Breach of Contract
The employment contract did not specifically exclude the company’s policies and procedures they were in effect incorporated into the contract.
The Policies were more than aspirational general commitments but specific with procedures and steps.
Vision did not follow them in the termination process and was in breach.
> Termination Settlement Agreements
Mr Elisha commenced an unfair dismissal claim which was settled by Vision paying the maximum compensation amount and a deed of settlement was executed.
BUT – as the wording of the deed was a release from all claims (broadly defined) “arising out of or incidental to his employment, proceedings and the termination.”
This (especially the word ‘and’) was narrowly interpreted to just the unfair dismissal proceeding and not a breach of employment contract (concerning Policies and Procedures) and negligence claims (psychiatric injury).
> Liability for Psychiatric harm and Injury
The High Court found that Mr. Elisha, a nearly decade-long employee, was dismissed in a process devoid of fairness. It ruled that psychiatric injury falls within the category of physical or personal injury, making it compensable in a breach of employment contract claim. This shifts from earlier legal precedent, which had denied recovery for such harm.
LESSONS AND ACTIONS FOR EMPLOYERS
THIS IS NOT ADVICE.
CONTACT US FOR HR LEGAL ADVICE – john@marvinhr.com – John Dasey
> Company Policies & Procedures
1. Audit Employment Contracts: Review contracts to ensure no terms or policies unintentionally open the door to psychiatric injury claims. Pay close attention to wording about policies or codes of conduct, clarifying they are not part of the contract but are instead lawful and reasonable directions. Include explicit statements in contracts and policy documents to prevent accidental incorporation of external rules.
2. Refine Disciplinary Policies: Update policies to use broad, aspirational language and guiding principles rather than strict procedures that could become binding obligations, reducing the risk of enforceable employee entitlements.
3. Maintain Robust Processes: Always conduct thorough investigations and fair show-cause processes before termination, regardless of unfair dismissal eligibility, to minimise legal exposure.
> Termination Settlement Agreements
4. Strengthen Settlement Agreements: Check template deeds or settlement agreements. In Elisha’s case, using “or” instead of “and” in the release might have blocked his later claim. Ensure releases in standard agreements, like those from the Fair Work Commission, fully bar future claims (except for workers’ compensation and superannuation, which can’t be waived). Assess Enterprise Agreements: Examine disciplinary procedures in enterprise agreements for potential legal risks under the Fair Work Act. Non-compliance could lead to compensation claims under section 545 FWA.
> Liability for Psychiatric harm and Injury
5. Ensure workplace behaviours are healthy: Employers must take effective steps to proactively create a safe workplace. Having good policies or even having employees sign off on them is no longer adequate. Fairness, Responsibility, and ultimately, Goodness require lived behaviours for a healthy work environment
