The High Court’s decision in Elisha v Vision Australia [2024] HCA 50 is a landmark decision that highlights how workplace policies can become legally binding, reshaping how they are viewed in the context of employment contracts and employer liability. This case serves as a cautionary tale for organisations, highlighting the potential legal consequences when workplace policies are not clearly defined or properly followed.

1. The Story Behind the Case

Mr. Elisha worked for Vision Australia as an adaptive technology consultant from 2006. His contract of employment required adherence to company policies, but did not clarify whether those policies were contractual terms. In 2015, after an incident at a hotel, Vision Australia initiated disciplinary action against Mr. Elisha. Following his dismissal, Mr. Elisha’s mental health deteriorated.

2. Contractual Incorporation of Policies

A central issue in the matter was whether Vision Australia’s workplace policies were incorporated into Mr. Elisha’s employment contract. The Court found that because the contract required compliance with company policies, those policies became binding terms. This means that if an employer disciplines or dismisses an employee based on such policies, the employer must also adhere to the procedures outlined within them. The distinction between aspirational guidelines and enforceable procedures is critical; only the latter, when clearly referenced in the contract, create legal obligations.

3. The Disciplinary Process and Its Flaws

The disciplinary process associated with Mr. Elisha’s dismissal appeared fundamentally flawed. Vision Australia relied on external accounts, failed to disclose prior allegations, and did not give Mr. Elisha an opportunity to respond. The primary judge described the process as “a sham and a disgrace,” and the lack of procedural fairness became a key factor in the subsequent legal proceedings. The case demonstrates that employers must ensure transparency, fairness, and proper documentation when handling disciplinary matters.

4. Settlement Agreements and Their Limits

After his termination, Mr. Elisha settled an unfair dismissal claim, signing a deed that released Vision Australia from claims related to his employment and termination. However, when he later initiated proceedings for psychiatric injury, the court interpreted the deed narrowly, finding that it only covered claims directly linked to the unfair dismissal proceedings. This allowed Mr. Elisha to pursue damages for breach of contract and negligence, illustrating that settlement agreements may not always provide comprehensive protection for employers.

5. Liability for Psychiatric Injury

The High Court’s decision is significant in recognising that breach of contract, specifically, failure to follow agreed dismissal procedures, can result in liability for psychiatric injury. The Court rejected the notion that damages for mental distress are automatically excluded in employment disputes. Instead, it held that psychiatric injury is treated similarly to physical injury when assessing damages, provided the risk was foreseeable at the time the contract was formed. In Mr. Elisha’s case, the risk of psychological harm was foreseeable, and Vision Australia’s breach directly contributed to his injury.

6. Negligence and Duty of Care

While Mr. Elisha also argued that Vision Australia owed him a duty of care in conducting disciplinary investigations, the High Court did not rule on this point, as the breach of contract claim was sufficient for his case. Nonetheless, the Court noted that any general duty of care would need to be consistent with broader statutory obligations, leaving open the possibility for future claims on similar grounds.

7. Practical Implications for Employers

Employers should specify whether workplace policies are intended to be binding or merely guidelines. Ambiguity can lead to unintended legal obligations.

Disciplinary and dismissal processes must be transparent, documented, and provide employees with an opportunity to respond.

Reasons for termination should be clearly communicated and recorded.

Employers should recognise that failure to follow contractual procedures can result in liability for psychological harm, not just physical injury.

8. Broader Context

The High Court emphasised that employment is more than a contractual relationship. It is a source of livelihood, identity, and self-esteem. Mishandling dismissals can have profound psychological effects, and employers may be held responsible if they fail to follow fair and contractual procedures. While the decision is fact-specific and does not create a universal duty for all employers, it sets an important precedent for damages related to the manner of termination.

Elisha v Vision Australia is a pivotal case that underscores the importance of clarity, fairness, and procedural rigor in employment relationships. Employers must carefully draft contracts, clearly define the status of workplace policies, and ensure that disciplinary actions are conducted with transparency and respect for employee rights. Failure to do so can result in significant legal liability, including damages for psychiatric injury. The case serves as a reminder that employment is a deeply social institution, and the law will protect employees from unfair treatment that undermines their wellbeing.