Law firm Lander & Rogers has underscored the implications of a recent High Court of Australia ruling that broadens employer liability for psychiatric injuries resulting from breaches of employment contracts.
The case, “Elisha v Vision Australia Ltd [2024] HCA 50,” represents a shift in the legal framework by enabling employees to claim damages for mental health conditions caused by such breaches.
The dispute arose after Vision Australia Ltd terminated the employment of Mr Elisha, following a 2015 workplace incident where he was accused of acting aggressively toward a hotel owner.
While the company’s initial allegations were related to this specific event, it later included claims of a broader “pattern of aggression” in its disciplinary process. Elisha was not given the opportunity to respond to these additional accusations.
Vision Australia’s employment policies outlined specific disciplinary procedures, which the High Court determined were incorporated into Elisha’s employment contract. By failing to follow these processes, the company was found to have breached the contract, leading to Elisha’s psychiatric injury, including depression and adjustment disorders.
The High Court reinstated the trial court’s original $1.4 million damages award, overturning the Victorian Court of Appeal’s decision to dismiss the claim.
The High Court’s decision rested on several significant findings:
The court declined to address a related claim of negligence, concluding that the breach of contract claim alone was sufficient to resolve the case.
Lander & Rogers said the ruling emphasises the importance of adhering to disciplinary procedures as set out in employment contracts. It advises employers to ensure that these processes are followed rigorously to avoid similar claims.
Key considerations include:
Lander & Rogers said that the ruling is likely to affect the demand for employment practices liability insurance (EPLI), as employers seek coverage for risks associated with breaches of contract leading to psychiatric injuries. Insurers and brokers may also need to adapt to emerging liability concerns in the workplace.
Last year, Gallagher released a guide to assist Australian businesses in managing psychosocial risks in the workplace.
The guidance aims to support compliance with the Work Health and Safety Act, which requires organisations to address workplace factors that may negatively affect mental health.
Psychosocial hazards, as defined by Safe Work Australia, include high job demands, unclear roles, inadequate support, and bullying. Gallagher’s guide emphasised proactive measures, such as employee consultations, risk assessments, and tools like the People at Work framework, to identify and mitigate these risks.
The guidance highlighted the importance of monitoring trends through incident reports and absenteeism data while encouraging clear communication channels for employees to raise concerns. Businesses are advised to evaluate the frequency and intensity of exposure to potential risks and implement strategies to address them.
