A landmark High Court decision in Elisha v Vision Australia Ltd [2024] HCA 50 has changed the legal landscape for employers and employees. The Court confirmed that employers may now be liable for psychiatric injuries caused by disciplinary or termination processes that breach an employment contract.

What Was the Case About?

Mr Elisha, an employee of Vision Australia, was stood down and later terminated following allegations of misconduct during a work trip. His dismissal was based on a broader “pattern of aggression” that was not part of the initial allegation or stand-down notice.

Following his termination, Mr Elisha was diagnosed with major depressive and adjustment disorders. He sued Vision Australia, claiming it had breached his employment contract by failing to follow its own disciplinary procedures—procedures that the Court found had been incorporated into his contract.

The High Court’s Ruling

The High Court held that:

• Psychiatric injuries can be grounds for compensation if they result from a breach of contract—just like physical injuries.
• Employers cannot avoid liability merely because the injury relates to how a dismissal was handled.
• The test is whether the injury was reasonably foreseeable at the time the contract was formed—not whether the exact outcome was anticipated.
• Vision Australia’s failure to follow its own procedures rendered the dismissal process “a sham and a disgrace.”

This ruling overturns the long-held view that damages for psychiatric injuries were only available in rare contractual cases.

What About Negligence?

Mr Elisha also argued his employer owed him a duty of care to ensure a safe process for discipline and termination. However, because he succeeded on the contract claim, the High Court did not need to consider this alternative argument.

What This Means for Employers

The implications for employers are significant. You should:

• Follow disciplinary policies and procedures precisely—if they’re written into employment contracts, they are enforceable.
• Avoid surprises in dismissal processes. Give employees the chance to respond fully to all allegations.
• Provide support during investigations to minimise the risk of psychological harm.
• Review employment contracts and internal policies to clarify which procedures are binding.

This decision highlights that employers cannot treat disciplinary policies as discretionary if they have been incorporated into employment agreements.

What This Means for Employees

If your employer breaches your employment contract—especially during a disciplinary or termination process—and you suffer a psychiatric injury, you may now be entitled to compensation. The key is showing a connection between the breach and your injury, and that such harm was within the realm of what could reasonably be foreseen.

Final Thoughts

The Elisha decision underscores the importance of fair and transparent workplace processes. Employers must treat procedural fairness not just as good HR practice, but as a legal obligation with real consequences.

If you’re facing a workplace investigation, or if you’re managing one and want to minimise legal risk, contact Brenton Priestley or Sinisa Popovic for expert guidance.

This summary is general in nature and does not constitute legal advice.