In a recent High Court ruling in the case of Elisha v Vision Australia Ltd [2024], a significant monetary judgment of $1,442,404.50 was awarded to the Plaintiff, Mr. Elisha, a former employee of Vision Australia. This notable compensation award was granted as a result of psychiatric injuries sustained due to the employer’s failure to adhere to its established disciplinary procedures incorporated as terms of Mr Elisha’s employment contract. The High Court determined that the employer’s liability was not beyond the scope of the contractual obligations specified in Mr. Elisha’s Employment Contract.
Background of the Case
Mr. Elisha commenced his career with Vision Australia in 2006 as an adaptive technology consultant. The series of events leading up to his dismissal began in March 2015 when serious allegations of aggressive conduct were made against him by the proprietor of a hotel. This individual’s testimony characterised Mr. Elisha’s behaviour as “intimidating” and “humiliating,” prompting his supervisor to issue a stand-down letter while Mr Elisha was on annual leave.
In the context of these allegations, Vision Australia initiated disciplinary procedures, providing Mr. Elisha with a formal letter that outlined specific claims related exclusively to the hotel incident. The letter included an invitation to a meeting to discuss these allegations. Prior to the discipline meeting Mr Elisha provided a written response to the allegations in the stand down letter “vigorously” denying any of the alleged misconduct. Mr Elisha attended the meeting with a union representative, read out his written response and made further statements along the lines of he’s been here 9 years without any history of aggressive behaviour. A file note written by the employer of their observations of Mr Elisha at the meeting include “he presented very arrogantly and showed no remorse… he truly doesn’t think he has done anything wrong.” The employer subsequently terminated Mr Elisha’s employment, citing serious misconduct. It is important to note that the termination letter referred to an alleged “pattern of aggression,” which had never been communicated to Mr. Elisha prior to his dismissal.
Subsequent to his termination, Mr. Elisha encountered considerable mental health challenges, culminating in a diagnosis of major depressive disorder and an adjustment disorder characterised by a depressed mood. He initially sought remedy through a claim for unfair dismissal, eventually settling for $27,248.68, the maximum allowable compensation in that jurisdiction. Following this settlement, he initiated a more comprehensive pursuit of damages for psychiatric injury in the Supreme Court of Victoria, contending that Vision Australia had breached its contractual obligations by failing to adhere to the established disciplinary procedures as well as the Vision Enterprise Agreement, both of which were held to have been incorporated into Mr Elisha’s employment contract.
High Court Findings
The High Court based its decision on the basis of three compelling submissions presented by the Plaintiff.
- Incorporation of Disciplinary Procedures:
The High Court concluded that Vision Australia’s disciplinary policy was inherently incorporated within Mr. Elisha’s employment contract. This conclusion was reached based on specific clauses within the contract that mandated alignment of employment conditions with company policies and recognised that infractions could result in disciplinary action.
- Breach of Contract:
The Court determined that Vision Australia failed to provide Mr. Elisha with comprehensive information regarding all allegations against him, particularly the disputed “pattern of aggression,” prior to the disciplinary meeting. Consequently, the Court found that the principal justification for the dismissal hinged on this unsubstantiated pattern, which had never been communicated to Mr. Elisha, thereby constituting a clear violation of established disciplinary procedures.
- Causation and Remoteness:
The Court identified a direct link between Vision Australia’s breach and Mr. Elisha’s psychiatric injury, asserting that such an injury was a foreseeable consequence of the infraction. The judgment underscored the crucial role that employment plays in shaping an individual’s identity and livelihood, emphasising the detrimental impact that unfair termination processes can have on a person’s self-esteem and mental health.
Implications for Employers
This landmark ruling serves as a critical reminder for employers to consider several important factors when drafting employment contracts and ensuring compliance with both internal and external policies and procedures. Key observations include for employees to consider:
- Contractual Clarity:
Employers must clearly outline in employment contracts whether the company’s policies and procedures are integrated. Employment contract should never incorporate the company’s procedures or policies as clauses within the contract but remain in a separate document which can be referred to for compliance. Should such policies be deemed integrated compliance is obligatory (not merely advisable).
- Disciplinary Processes:
Employers are required to provide employees with all relevant allegations and supporting evidence prior to any disciplinary meetings, thereby providing them a fair opportunity to respond to the claims against them. Employers should further provide their employees with an adequate time to stipulate a response to any misconduct allegations where disciplinary management may result.
In this case, the court found the employer failed to follow its own disciplinary procedures by not informing Mr Elisha of the key allegations that the employer ultimately considered in deciding whether or not terminate his employment, and therefore failed to give him any opportunity to respond to those undisclosed allegations or a real opportunity to respond to the allegations in fact notified to him. In so doing, the employer breached terms of the employment contract.
- Mental Health Considerations:
Employers should acknowledge the potential psychological consequences of disciplinary actions and termination processes. Addressing these situations with fairness and transparency is vital to mitigate the risk of psychiatric injury claims. This consideration also addresses employer’s duty of care which has been commented by common law that employers need to provide a safe system of workplace investigation and decision-making with respect to discipline and termination of employment.
Conclusion
The decision highlights the legal responsibilities that employers who fail to comply with their own disciplinary procedures and the serious ramifications that may arise from failing to do so.
With a wealth of collective knowledge and over two decades experience providing insight and advice, Vocare Law is well equipped to provide our institutional clients with advice about Employment Law. Please do not hesitate to contact our office if you would like our office to assist your institution with drafting employment contracts or procedures and policies.
Contact us on 1300-VOC-LAW / 1300-862-529 or email: enquiry@vocarelaw.com.au
This article was written by Alistair Macpherson, Fran Keyes & Jack Macpherson.
The information contained herein does not, and is not intended to, constitute legal advice and is for general informational purposes only.
