E v Vision Australia Ltd [2024] HCA 50
KEY TAKEAWAYS:
The landmark High Court case on contractual damages centred on an employee suing his employer for damages for a psychiatric injury he sustained after his employment was unfairly terminated for misconduct. The Court relevantly held that:
- employees can potentially recover significant damages for psychiatric injuries caused by employers breaching the terms of their employment contract
- the employer breached the employment contract in this case by conducting a termination process that did not comply with the company’s disciplinary procedure – which was found in this case to be incorporated into the employment contract.
The case is novel because of the finding that damages for psychiatric injury arising from a flawed termination of employment were not too remote to be awarded for breach of contract. This hinged on the company’s disciplinary procedure being found to be incorporated into the employment contract – but this is not always the case and carefully drafted employment contracts can avoid this outcome.
The flawed termination was costly for the employer in this case – with the result of the High Court’s decision being that the employer has to pay damages of over $1.4 million, effectively for failing to follow its own disciplinary procedure.
Workplace investigation learnings
For workplace investigations and the disciplinary processes that may follow them, the High Court’s judgment underlines what we have long known – that if an employer relies on conduct as a reason for dismissal, it is only fair that the conduct be put to the employee as part of the disciplinary process so that they have an opportunity to respond before a final decision is made about their employment.
From the perspective of a procedurally fair workplace investigation, any finding of misconduct would necessarily require that the alleged misconduct has been put to the employee for response before a just finding could be made. In that regard, the decision does not herald any change.
Background
In 2015, the employee was involved in an incident while staying at a hotel for work-related travel.
A few months later, the employee’s manager advised him that a “serious” complaint of intimidating and aggressive behaviour had been made against him by the hotel proprietor.
He was given a “stand down letter” which outlined the allegations against him and directed him to attend a meeting in two days’ time. The letter stated that the meeting would be conducted in accordance with the employer’s enterprise agreement and disciplinary procedures.
The employee denied the allegations. However, his employer, Vision Australia, preferred the evidence of the hotel proprietor and terminated his employment. According to the evidence in court, the termination decision also took into account prior reports of the employee’s alleged aggressive behaviour – but these allegations were never put to the employee for response.
Shortly after the employee was dismissed, he was diagnosed with a major depressive disorder.
Legal proceedings
The employee’s initial unfair dismissal claim in the Fair Work Commission settled with the employee accepting a payment equivalent to 26 weeks’ worth of wages.
In August 2020, the employee lodged proceedings in the Supreme Court of Victoria claiming he suffered a psychiatric injury as a result of the process leading to, and resulting in, the termination of his employment. He alleged Vision Australia had breached his contract of employment, or alternatively, had been negligent in its duty of care related to the termination process.
At first instance the Court found in favour of the employee, describing the disciplinary process adopted by Vision Australia as “nothing short of a sham and a disgrace”.
The Court held that Vision Australia had breached the employment contract, including its disciplinary procedures which were part of the contract, relying on a process that was “unfair, unjust and wholly unreasonable” thereby causing the employee psychiatric injury. The Court ordered Vision Australia to pay the employee $1.44 million in damages.
The employee’s alternative claim for negligence – that Vision Australia owed him a duty of care with respect to the discipline and termination process – was dismissed with the Court concluding that such a duty of care “is not presently recognised by the common law”.
The appeal process
The case went through a lengthy appeals process that ended up in the High Court of Australia.
In December 2024, a majority of the High Court found the employee’s contract of employment, in this case, did incorporate Vision Australia’s disciplinary procedure which had not been followed, and his contract had therefore been breached.
The Court held that damages for a psychiatric injury caused by a breach of contract related to an employee’s dismissal were available to the employee and restored the orders of the Court in the first instance, that Vision Australia pay $1.44 million in damages to the employee.
No new duty of care
Despite a lot of fanfare surrounding the case, having found for the employee on the contract claim, the High Court majority did not need to consider the employee’s alternative claim in tort which relied on the Court finding a novel duty of care to provide “a safe system of investigation and decision-making with respect to discipline and termination of employment”.
The Court was careful to distinguish between its consideration about the remoteness of damages for psychiatric injury and a duty of care.
In his dissenting judgement, Justice Steward (who disagreed with the majority on remoteness) dispelled the notion that any new duty of care relating to investigations, disciplinary processes and termination could exist under Australian law based on the need for coherence of the law.
More information
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