The recent High Court (‘HCA’) decision in the case of Elisha v Vision Australia Limited[1] has important implications for employers, particularly in the areas of employment contracts and workplace policies.
Facts:
In 2006, Elisha entered into an employment contract with Vision Australia. In 2020, after being dismissed for alleged misconduct during a work trip, Elisha developed a major depressive disorder. He initially settled an unfair dismissal claim, but the settlement didn’t protect Vision Australia from future common law claims. Elisha then filed a claim in the Supreme Court of Victoria, alleging psychiatric injury caused by Vision Australia’s failure to follow its own disciplinary procedures.
Elisha argued that the company was obligated to follow due process under its 2015 Disciplinary Procedure, which he claimed was part of his employment contract. Vision Australia defended that the policies were not part of the contract and that the injury was too remote to be compensable. This led to an appeal to the HCA.
The HCA upheld the original damages and found in Elisha’s favour, awarding him nearly $1.5 million. The Court ruled that the 2015 Disciplinary Procedure was incorporated into his contract and that the psychiatric injury was not too remote, as it was foreseeable that a serious breach could lead to harm.
Implications for Clients Moving Forward:
The case highlights the need for careful consideration of workplace policies and their relationship to employment contracts. To mitigate risk, employers should:
- Align Contracts with Workplace Policies: Employers must ensure that employment contracts and workplace policies are consistent with each other, especially concerning disciplinary procedures. Any discrepancy could expose employers to legal risk.
- Review Policy Incorporation: Employers should assess whether workplace policies are incorporated into their employment contracts. If they are, it is important to evaluate whether this approach remains suitable or if modifications are necessary to mitigate risk.
- Comply with Contractual Obligations in Disciplinary Procedures: Where workplace policies are incorporated into employment contracts, they become contractual obligations. Employers must ensure compliance with these policies during disciplinary procedures, particularly when dismissal is a potential outcome.
- Draft Comprehensive Settlement and Release Deeds: It is critical that settlement and release deeds are drafted broadly enough to cover any potential future claims, including common law claims by the employee against the employer. This will help to avoid the risk of further litigation.
Employers must give careful attention to the details of their employment contracts, disciplinary policies, and the potential legal ramifications of failing to adhere to them. By addressing these elements proactively, employers can reduce the risk of facing significant claims like the one in Elisha v Vision Australia.
To better understand how this judgment might affect your business and to ensure compliance with all relevant laws and regulations, reach out to Daniel Morgan (daniel@morganenglish.com.au) and our Workplace & Conduct team at M+E today.
[1] [2024] HCA 50
