the brief.

employer liability for the psychiatric harm experienced by disciplined employees.

tyson brennan. 06 november 2025.

employer liability for the psychiatric harm experienced by disciplined employees.

Following the overturning of a principle that was 115 years old, workers who were unfairly sacked and deprived of the proper disciplinary and termination processes that are incorporated into employment contract may be entitled to damages for a psychiatric injury resulting from a contractual breach. Employers should take note of this significant decision, and appropriately review and update the policies and contractual obligations around its termination and disciplinary procedures. This judgement – which saw the employee be awarded nearly $1.5 million in damages – should be treated as a reminder on the risk of incorporating workplace policies into employment contracts and the significant consequences of failing to comply with them.

historical position.

The existing precedent in this area came from Addis v Gramophone, an English contract and labour law case which effectively restricted damages for non-pecuniary loss for breach of contract. In particular, the House of Lords in this matter held that wrongful dismissal has occurred, damages for this cannot include financial compensation for the way the dismissal was handled, or injured feelings which arose from it, or the loss that the employee may sustain from the fact that the dismissal increases the difficulty of finding new employment.

Recent high court matter: Elisha v Vision Australia ltd [2024] HCA 50

As discussed, the principles from Addis were significantly overturned by the High Court in the matter of Elisha v Vision Australia, which involved a claim by a former technology consultant for Vision Australia, Mr Elisha. This matter consisted of the following circumstances:

  • During a business trip, Mr Elisha was involved in an incident at a hotel. Eventually, it was alleged that Mr Elisha conducted himself aggressively towards a hotel employee and engaged in extremely intimidating behaviour.
  • Mr Elisha was subsequently stood down by VA and a formal disciplinary procedure congruent with the relevant enterprise agreement began, along with a separate procedure. The procedure established by VA indicated that employees will be given a written outline of the allegations and will be afforded an opportunity to respond to allegations.
  • Mr Elisha was not provided with an outline of the allegations nor was he given a chance to address them.
  • VA terminated Mr Elisha’s employment, citing the behaviour of Mr Elisha during the incident with the hotel worker and other allegations of past actions that were unknown to Mr Elisha.
  • Shortly after VA terminated his employment, Mr Elisha was diagnosed with serious psychiatric illnesses such as major depressive disorder
  • Subsequently, Mr Elisha initiated proceedings in August 2020 and asserted that the disciplinary procedure VA failed to deliver was incorporated into his employment contract, and thus a contractual breach had occurred, for which damages should be awarded.
  • Mr Elisha succeeded in the Supreme Court of Victoria, after which VA successfully appealed, prompting Mr Elisha’s appeal to the High Court of Australia.


the high court decision.

In its December 2024 judgement, the High Court determined that VA’s disciplinary procedure was a term that was incorporated into the employment contract. In coming to this conclusion, the Court held that while the procedure was drafted in language that was not binding in some parts, the portion which provided for the employees to be notified about allegations represented a specific assurance about the procedure that was to be followed by VA.

VA’s reliance on the historical position in Addis was rejected by the High Court for the following reasons:

  • Addis did not decide on whether damages could be recovered from an employee’s psychiatric injury sustained from the way they were terminated.
  • Addis no longer reflects the social context and case law developments in Australia.
  • Mr Elisha’s injury was not too remote and 612could be imputed as having occurred in the ordinary things. It could reasonably be said to been contemplated as a serious possibility upon signing.

There was no indication from case law that employment contracts were exempt from the principle that damages for psychiatric injury were available for contractual breaches.

what employers must learn and how they must adapt.

These findings evidently have significant implications for the way employers are constructing and executing their disciplinary and termination processes. Following this determination by the High Court, employers firstly must be aware of their disciplinary and termination procedures and ensure that they are appropriate in how they treat the employee. Company practices, whether they are contractual terms or broad policy outlooks, should seek to provide all employees with ample opportunity to respond to the fundamental issues, allegations and concern, and a verdict should not be finalised prior to the consideration of the response by the employee.


Furthermore, employers must understand whether these procedures are based on company policies and subsequently non-contractual, or whether they are incorporated contractual terms that ought to be followed. Finally, where employment contracts have incorporated such terms in relation to the disciplinary and termination process of the company, employers must ensure that their conduct is consistent.


In other circumstances, employers may choose to divert from having their policies in relation to discipline and termination expressly written, instead favouring an approach that manages matters on an ad hoc basis.


The passage below from this judgement encapsulates the High Court’s views on the incorporation of disciplinary procedures into employment contracts:


“The existence of clear language with sufficient emphasis upon the need for compliance with the terms of a company policy indicates an intention that such terms will be contractually binding”.

Contact us today to discuss your needs. 
Tyson Brennan, Principal Solicitor.