High Court rules unfairly sacked worker entitled to damages for psychiatric injury
Wednesday, 11 December 2024
In a groundbreaking decision, the High Court of Australia has ordered Vision Australia to pay a former employee $1.4 million in damages for psychiatric injury arising after he was subjected to a “sham” internal disciplinary process and dismissed from his employment.
Key lessons
- Employers have a responsibility towards their employees’ mental health and wellbeing and must consider the psychological impact of unfair and unreasonable workplace actions, especially in connection with disciplinary and termination processes.
- Assumptions are dangerous and a valid reason for disciplinary action based on established facts is always key. It is crucial to follow proper and defensible investigative and disciplinary procedures to establish the relevant facts, and to give the employee a fair opportunity to respond, before making a decision about disciplinary action up to and including dismissal.
- Take expert employment law advice when investigating employee issues and proposing disciplinary action, especially in cases where termination of employment is proposed.
In March 2015, after eight years‘ employment, the employee was involved in an incident with a hotel manager during a work trip. A complaint was made, the employee was stood down and invited to a meeting to discuss the complaint. The employer decided to accept the hotel manager’s account of the alleged incident over the employee’s response, and further took into account previous allegations of aggressive behaviour by the employee that were not put to him at the meeting, in deciding to terminate the employment.
Following the dismissal, the employee was diagnosed with major depressive disorder. In 2020, he commenced proceedings for damages for psychiatric injury, which he won.
Historically, the general legal position has been that psychiatric injury caused by a breach of the employment contract could not be compensated. The High Court has now held that psychiatric injury caused by a breach of contract can be compensated.
In this case, the employer breached the employment contract by botching its own disciplinary procedures and not telling the employee of key allegations the employer ultimately considered in deciding to terminate the employment and so failed to give the employee an opportunity to respond to those undisclosed allegations or any real opportunity to respond to the allegations that were raised with him.
Critically, the High Court observed that a person’s employment is usually one of the most important things in his or her life – that it gives not only a livelihood but an occupation, an identify and a sense of self-esteem, whereby an unfair process of termination for alleged misconduct could affect all three of those interests. In the circumstances, it was reasonable to expect that the employee would have been so distressed by the manner in which the employer breached the employment contract and by the consequences of that breach, including his dismissal for the alleged misconduct. In the circumstances, there was a serious possibility that the employee would suffer a serious psychiatric injury.
The High Court’s decision highlights the evolving nature of employment law in Australia, the increasing recognition of workers’ mental and emotional wellbeing and the duty of care of an employer towards its employees.
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About the authors
Stephen Schoninger is a Partner and Head of the Employment & Workplace law practice at Avant Law, based in Sydney. Stephen has over 20 years’ experience practising exclusively in employment, industrial relations and discrimination laws. Stephen is called on for his ability to plainly advise on and pragmatically apply legal principles to manage and resolve complex issues arising in the workplace. Stephen advises employers and employees in the private and public sectors on all areas of workplace law and is an experienced litigator of work-related claims. Stephen also conducts workplace investigations and delivers workplace compliance training. He regularly presents seminars on topical employment and workplace law issues.
Natasha Prasad is an Associate in the employment and workplace law practice at Avant Law, based in Sydney. Natasha has experience advising employers and employees on all aspects of employment law areas including workplace discrimination, bullying and sexual harassment, contracts of employment, termination of employment and compliance with employment regulations across various industries. Natasha is dedicated to having an empathetic approach when helping clients navigate complex workplace issues. Natasha provides clear, actionable advice tailored to her client's specific needs.
Savanna Russo is an Senior Associate in the employment and workplace law practice at Avant Law, based in Sydney. Savanna has experience advising both employer and employee clients on all areas of employment law. She has particular experience advising small to medium businesses in a wide range of industries including allied health, banking and finance, professional services and construction. Savanna provides practical, solutions-focused advice and is known for her professional and empathetic approach.
Disclaimers
The information in this article does not constitute legal advice or other professional advice and should not be relied upon as such. It is intended only to provide a summary and general overview on matters of interest and it is not intended to be comprehensive. You should seek legal or other professional advice before acting or relying on any of this content. The information in this article is current to 12 December 2024. Liability limited by a scheme approved under Professional Standards Legislation. Legal practitioners employed by Avant Law Pty Limited are members of the scheme. © Avant Mutual Group Limited 2024.