Psychological Injury Resulting From Unfair Dismissal? Compensation for Breaches of Investigation & Disciplinary Process
On 11 December 2024, the High Court of Australia allowed an appeal from the Court of Appeal of the Supreme Court of Victoria which concerned the availability of damages for psychological injury to an employee when the injury occurs due to the manner of their employment termination. The full decision can be found at this link (Decision). This Decision highlights the importance of organisations ensuring their investigations and disciplinary procedures comply with legal principles, including procedural fairness and natural justice.
Background
Mr Elisha (Appellant) was employed by Vision Australia Ltd (Vision Australia) in September 2006 as an adaptive technology consultant. Mr Elisha was subsequently involved in an incident in March 2015 while he was staying at a hotel in rural Victoria, when he was travelling for work. As part of his role, Mr Elisha visited homes and workplaces across Australia. The circumstances of the incident were disputed but involved allegations that Mr Elisha had been aggressive and intimidating towards one of the hotel proprietors, Ms Trech, when he telephoned reception of the hotel around 12:30am regarding a noise complaint and when he was checking out of the hotel.
The incident was reported to Mr Elisha’s manager, who then informed Vision Australia’s human resources staff and stated that she was unsurprised by the allegations due to previous aggressive behaviour.
On 19 May 2015, Mr Elisha met with his manager who informed him there was a “serious” complaint against him and gave him a “stand down letter” which required him to attend a meeting two days later. The letter stated the meeting would be conducted in accordance with Vision Australia’s enterprise agreement and enclosed the ‘Vision 2015 Disciplinary Procedure’ (2015 Disciplinary Procedure). The allegations in the letter were confined exclusively to the hotel incident. Mr Elisha denied the allegations in the meeting.
On 27th May 2015, during a meeting of Vision Australia management staff, it was decided that the account of the hotel proprietor should be taken over Mr Elisha’s account. This decision was informed by the previous allegations of aggressive behaviour that Mr Elisha’s manager had mentioned, but these allegations were never put to Mr Elisha.
On 29 May 2015, Mr Elisha’s employment was terminated. He was subsequently diagnosed with a major depressive disorder and commenced legal proceedings claiming damages for psychiatric injury in August 2020.
The High Court Decision
The High Court allowed the appeal and made orders restoring the primary judge’s orders for damages for the psychiatric injury suffered by Mr Elisha.
The primary judge labelled Vision Australia’s disciplinary process as “a sham and a disgrace” and held that Vision Australia breached the 2015 Disciplinary Procedure, which was determined to form part of his employment contract, by failing to provide Mr Elisha with the allegations which were relied upon for his dismissal. Vision Australia then appealed to the Court of Appeal.
On appeal to the High Court, the issues were relating to breaches of a contractual term concerning the conduct of the disciplinary hearing. The High Court decided that Mr Elisha’s employment contract incorporated Vison Australia’s disciplinary policies as terms of the contract. The High Court also ruled that liability for psychiatric injury is not beyond the scope of a contractual duty relating to the manner of dismissal. The Court held that psychiatric injury is part of a class of physical or personal injury for which damages are recoverable for breach of contract.
The High Court held, by majority, that Mr Elisha’s loss was not too remote because the harm suffered was within the reasonable contemplation of the parties at the time of contract as a serious possibility. However, the Court decided it was unnecessary to determine whether the employer is liable for psychiatric injury under the tort of negligence.
What does this mean for employers?
This decision increases the risk for employers and makes it very clear that they need to ensure their processes comply with their legal obligations, by way of:
- Reviewing all employment contracts, reviewing what has been incorporated into documents (i.e. policies and procedures) and ensuring internal processes comply with them.
- Ensuring all contractual obligations are followed when investigating workplace issues, especially if dismissal of an employee is a possible outcome.
- Ensuring that allegations are properly investigated in accordance with legal principles including natural justice and procedural fairness
How can Safe Space Legal Help?
The team at Safe Space Legal have extensive experience working with organisations to support and strengthen their safeguarding practices. We work with employers across Australia to ensure they are meeting their legal health and safety obligations and frequently conduct independent investigations, including workplace investigations. Safe Space Legal provides the following services to ensure employers meet their legal obligations:
- Drafting legally sound policies, procedures, and codes of conduct.
- Supporting employers to recognise gaps in policy and/or practice which put them at risk of non-compliance with legal obligations through thorough root cause and gap analyses
- Delivering training to ensure employers and employees are aware of their legal obligations
- Conducting safeguarding investigations which are compliant with relevant state and territory legislation and regulations
- Ensuring that complaints handling and reporting processes are compliant with legal obligations
- Assistance and support to respond to allegations of health and safety breaches
- Provide sound legal advice on risk mitigation
Contact office@safespacelegal.com.au or call (03) 9124 7321 to organise a complementary discussion in relation to your organisation’s child safety and safeguarding needs.