Elisha v Vision Australia Ltd: a High Court landmark decision on psychiatric injuries and employment contracts
Published on May 13, 2025 by Charles Harrison
The recent High Court decision in Elisha v Vision Australia Ltd [2024] HCA 50 has fundamentally reshaped the legal landscape for Australian employers, especially concerning psychiatric injuries arising from breaches of employment contracts. For decades, the position on such claims was overall restrictive, but this landmark ruling opens a new avenue for employees to seek redress.
Background
In March 2015, Mr Elisha, a Vision Australia Ltd (Vision Australia) employee, was accused of being aggressive and intimidating toward a hotel owner during a work-related trip. Subsequently, Vision Australia stood him down, issuing a letter that outlined the allegations related solely to this incident.
A disciplinary meeting followed, at which Mr Elisha denied the allegations. However, Vision Australia preferred the hotel owner’s account and terminated Mr Elisha’s employment, citing serious misconduct. The company also factored in a purported “pattern of aggression” during Mr Elisha’s employment, a matter that was not raised in the stand-down letter nor disclosed to him for his response.
This procedural oversight proved pivotal. Diagnosed with major depressive and adjustment disorders following his termination, Mr Elisha claimed damages for pain, suffering, and economic loss, alleging negligence and breach of contract.
Victorian Supreme court findings
At trial, the Supreme Court of Victoria found Vision Australia’s disciplinary process to be a “sham and disgrace.”[1] The Court concluded that the employer’s policies, including its disciplinary procedure, were incorporated into Mr Elisha’s employment contract. By failing to follow these procedures, Vision Australia breached its contractual obligations. The trial court awarded Mr Elisha $1.4 million in damages.
The decision on appeal
The Victorian Court of Appeal overturned this decision, questioning both the incorporation of policies into the employment contract and the foreseeability of psychiatric injury.
High Court decision
The High Court reinstated the trial court’s decision, addressing three key issues:
- Incorporation of policies into the employment contract
The High Court found that Vision Australia’s employment contract explicitly referenced compliance with policies and procedures, stating that breaches could lead to disciplinary action. This language indicated an intention to create legally binding obligations. Consequently, the disciplinary procedure formed part of Mr Elisha’s contract, obligating Vision Australia to adhere to it.
- Psychiatric injury as a breach of contract
The Court held that psychiatric injury could constitute recoverable damages for a breach of contract. This marked a significant shift, as prior case law had generally excluded such injuries from contractual claims.
The Court also rejected the argument that Mr. Elisha’s psychiatric injury was “too remote.” It ruled that, at the time of contracting, it was reasonably foreseeable that a breach of the disciplinary procedure—especially one resulting in termination—could cause serious psychological harm.
- Negligence and duty of care
Although Mr Elisha argued that Vision Australia owed him a duty of care to provide a safe system of disciplinary investigation and decision-making, the High Court did not address this issue. Since the breach of contract claim succeeded, the negligence argument was deemed unnecessary to resolve.
What are the implications?
This decision overturns long-held legal principles, significantly expanding (potential) employer liability in cases involving psychiatric injuries to its workers. Employers must now consider the risks associated with disciplinary and termination processes, particularly where their employment contracts incorporate policies and procedures.
Moving forward, employers will need to look at:
- Adhering to policies and procedures – employers must ensure compliance with their own policies and procedures if they are incorporated into employment contracts. Courts will scrutinise procedural fairness and adherence.
- Updating contracts and policies – to avoid inadvertently incorporating policies, employers should carefully review and revise employment contracts to clarify the contractual status of procedures.
- Addressing employee vulnerabilities – employers need to be mindful of employees’ psychological well-being during investigations or disciplinary proceedings. Offering appropriate support and mitigating stressors could reduce the risk of psychiatric injury claims.
- Adopting fair disciplinary practices – a thorough and transparent approach to disciplinary processes is essential. Employers should avoid raising allegations at the decision stage that employees have not had an opportunity to address.
This ruling signals a shift toward greater accountability for employers in managing workplace disputes. It also reflects an evolving judicial recognition of the psychological vulnerabilities of employees. Employers need to be aligning disciplinary processes with contractual and procedural obligations, to safeguard against both legal liability and reputational harm.
The High Court’s ruling in Elisha v Vision Australia Ltd represents a milestone in Australian employment law. It underscores the importance of fairness, transparency, and contractual compliance in disciplinary and termination processes. As this precedent reshapes employer responsibilities, proactive legal and operational strategies will be essential to mitigate risks and ensure compliance with this new standard.
Please note that this article does not constitute legal advice. If you are seeking professional advice on any legal matters, you can contact Carroll & O’Dea Lawyers on 1800 059 278 or via our Contact Page and one of our lawyers will be able to assist you.
Disclosure and important note: This article is based on our own legal research and thinking. Some of its content has been generated with the assistance of artificial intelligence. The authors have checked and approved this article, including the AI generated content, for publication.
[1] Elisha v Vision Australia Ltd [2022] VSC 754 at [226], [236].
