High Court Shakes Things Up for Employers: What Every Employer Needs to Know

On December 11 2024, the High Court of Australia handed down a decision that every employer must take seriously. In Elisha v Vision Australia [2024] HCA 50, the Court ruled that breaching your own employment contracts can lead to hefty payouts – this time a staggering $1.44 million.

What does this mean for you? It means that ignoring your employment contracts and internal policies can cost your business – not just financially but in terms of your reputation and employee trust. This case overturned a 115 year old precedent and established a new standard: Employers can now be held financially accountable for psychiatric injuries caused by breaches of the employment contract procedures.
 

A Hotel Complaint That Snowballed

Mr Elisha, a consultant for Vision Australia, made a complaint to a hotel one night after being frustrated by noise. After this he went on leave. His complaint was described as aggressive and intimidating and the hotel owner shared these claims with Mr Elisha’s colleagues.

When he returned from leave, Mr Elisha received a letter accusing him of intimidation and aggressive behaviour. He was suspended, denied the allegations, and participated in a disciplinary meeting. Ultimately, his employment was terminated for serious misconduct citing a “pattern of aggression” as part of the reason – despite this never being raised as an issue with Mr Elisha before or during the disciplinary process.

The aftermath? Mr Elisha’s mental health suffered and he sued Vision Australia for breach of contract, saying their failure to follow their own disciplinary procedures caused his psychiatric injury.
 

Policies and Procedures More Than Just Guidelines

Think your company policies and procedures are just suggestions? Think again. The High Court found that Vision Australia’s disciplinary procedures were legally binding. This was based on a clause indicating that employment conditions would align with company policies and procedures and that breaches could lead to disciplinary action.

Ignoring policies can be costly. It can lead to financial damage, but can also expose your business legal disputes that can last for an extended time. The emotional financial toll can be catastrophic for your business.
 

Transparency Matters: Details Can Make or Break You

The lack of transparency in disclosing all allegations was a key factor in the Court’s decisions. By failing to share all facts – particularly the claim of a “pattern of aggression” was found to be unfair and a clear violation of procedures.

Every detail matters in a disciplinary process. Even one missed step or lack of clarity can result in significant legal consequences – and potentially considerable financial liability.
 

Mental Health Matters More than Ever

The High Court recognised that the breach led to Mr Elisha’s psychiatric injury – and that the injury was a foreseeable consequence of their actions.

The Court highlighted that employment is not just a job for many people; it’s a key part of their identity and livelihood. When an employee is unfairly treated, the consequences can go beyond financial damages – they can cause lasting psychological harm.

For your business, this means how you handle termination and discipline is just as important as the decision to discipline and terminate. If you are not following your own procedures, you risk not only violating contracts but also damaging your employee’s well-being.
 

How Employers Can Protect Themselves

1. Audit Your Employment Contracts

Are your policies accidentally binding you? Check whether your policies are incorporated into your employment contracts. If they are, make sure sure your policies are clear, enforceable and up to date.

2. Train Your Leaders

Ensure managers and HR staff understand the legal and practical implications of disciplinary actions. Procedures must be followed carefully, as any deviations could result in breaches of contract and significant liability.

3. Consider Employee Well Being

Recognise the potential psychological impact of disciplinary and termination processes. Fairness, transparency and empathy go a long way in mitigating risk.

4. Review Your Policies

Outdated, vague or overly rigid policies are a liability. Now’s the time for a refresh!
 

Don’t be the next headline

The Elisha case is a wake up call for employers everywhere. Non-compliance is not just a technicality – it’s a risk to your entire business. Falling short doesn’t just risk financial loss – it can damage your reputation too.
 
Not sure if your business is ready? At O’Hearn Lawyers we are here to help you navigate the complexities of employment law. We don’t just advise – we partner with you to ensure your business is compliant, protected and ready for the challenges ahead. Whether you need a contract audit, policy updates, or guidelines on disciplinary procedures, we are here to help.
 

 

Proactive advice today can save you from reactive challenges tomorrow. Don’t wait until your business is at risk. Get in touch with us today and ensure your contracts, policies and procedures are fully compliant and effective. Call us at (02) 4951 8199 or click here to submit an enquiry.