High Court Decision Highlights Shift in How Terminations Must Be Handled

On 11 December 2024, the High Court of Australia in Elisha v Vision Australia [2024] HCA 50 confirmed that employers may be held liable for causing psychiatric harm to an employee resulting from an improper handling of the disciplinary process. This decision marks a significant shift in how workplace investigations and terminations must be handled.  

Legal Context 

Historically, Australian case law allowed damages for psychiatric injury resulting from breach of contract, with no special exception for employment contracts. The Elisha v Vision Australia decision expands on this by recognising psychiatric harm caused by unfair employment practices. 

Case Summary 

Adam Elisha, employed by Vision Australia Ltd since 2006, was accused of aggressive conduct during a work trip in March 2015. Despite disputed allegations, an internal investigation ensued, and Elisha was suspended on 19 May 2015. He was dismissed on 29 May 2015 based on the hotel proprietor’s account and prior misconduct reports. Elisha later developed a depressive disorder. 

On 27 August 2020, Elisha filed a claim in the Supreme Court of Victoria, seeking damages for psychiatric injury. His case was based on two key arguments: breach of contract and negligence due to an unfair disciplinary process. 

Justice O'Meara found Vision Australia’s process "unfair, unjust, and wholly unreasonable" and awarded Elisha $1.44 million for lost earnings and pain and suffering. However, he rejected the claim for negligence, stating damages for an unfair system of investigation weren’t recognised by common law. 

On appeal, the Court of Appeal ruled psychiatric injury was too remote from the breach of contract. However, the High Court disagreed, affirming that psychiatric harm could be reasonably foreseen and compensated under breach of contract. 

High Court Decision 

The High Court ruled that psychiatric injury qualifies as a form of personal injury eligible for contractual damages. It was determined that psychiatric harm was a foreseeable risk at the time of contract formation. It emphasised that unfair termination can deeply impact an employee’s identity, livelihood and self-esteem. 

Key Takeaways for Clubs 

This decision prompts employers to reassess their disciplinary processes and employment contracts. Member clubs are recommended to: 

• Avoid having disciplinary procedures form part of employment contracts;
• Clearly state that club policies and procedures do not form part of employment contracts; 
• Ensure termination clauses in contracts allow dismissal for any reason; and
• Include all relevant allegations in disciplinary letters to the employee if the club has a policy on this and the policy forms part of the employee's contract.

If clubs need any assistance in drafting allegations letters or assistance in the disciplinary process, please contact our Workplace Relations team via ClubASSIST on 1300 730 001.