On 11 December 2024, the High Court of Australia in Elisha v Vision Australia Ltd [2024] HCA 50 overturned a 115-year legal precedent by finding that an employee can recover damages for psychiatric injury arising from a breach of employment contract. The High Court upheld $1.44 million in damages awarded by the primary judge in the Supreme Court of Victoria.

The decision abandons the longstanding authority of Addis v Gramophone Co Ltd (1909), which had been applied in Australia for over a century to prevent employees from recovering damages for psychiatric injury in breach of contract claims. In a 6-1 decision, the majority held that psychiatric injury is part of a class of physical or personal injury for which damages are recoverable for breach of contract, and that there is no exception for employment contracts.

The facts

Mr Adam Elisha was employed by Vision Australia as an adaptive technology consultant from September 2006. His work involved visiting homes and workplaces across Australia to set up or assist with software and hardware systems for the vision impaired.

In March 2015, Mr Elisha was on a work-related trip in regional Victoria when an incident occurred at his hotel. A hotel proprietor alleged that Mr Elisha had been aggressive and intimidating during his stay. The allegation was subsequently reported to Mr Elisha's manager by two other Vision Australia employees who stayed at the hotel afterwards.

Vision Australia stood Mr Elisha down and issued a letter inviting him to a disciplinary meeting. The letter stated that the meeting would be conducted in accordance with Vision Australia's Enterprise Agreement and its 2015 Disciplinary Procedure. The letter set out allegations relating to the hotel incident only.

During the meeting, Mr Elisha denied the allegations. Vision Australia preferred the hotel proprietor's account and terminated Mr Elisha's employment on 29 May 2015 for serious misconduct. However, in reaching its decision, Vision Australia also relied upon previous allegations of a "pattern of aggressive behaviour" that had never been put to Mr Elisha and that he had no opportunity to address.

Following the termination, Mr Elisha was diagnosed with major depressive disorder and an adjustment disorder with depressed mood.

The legal proceedings

Mr Elisha initially filed an unfair dismissal claim in the Fair Work Commission, which was settled for $27,248.68 under a deed of settlement.

In August 2020, Mr Elisha commenced proceedings in the Supreme Court of Victoria, alleging that Vision Australia had breached his employment contract and was negligent in the show cause process, causing psychiatric injury. The primary judge found that the deed of settlement from the unfair dismissal proceedings did not bar the breach of contract claim.

At first instance, the Supreme Court found that both the Enterprise Agreement and the 2015 Disciplinary Procedure were incorporated into Mr Elisha's employment contract. By failing to follow these procedures — in particular, by failing to put all relevant allegations to Mr Elisha before making a termination decision — Vision Australia had breached the contract. The primary judge characterised the disciplinary process as "a sham and a disgrace" and awarded damages of $1,442,404.50, including for psychiatric injury.

The Victorian Court of Appeal overturned this decision, holding that damages for psychiatric injury were not available for breach of an employment contract and that Mr Elisha's psychiatric injury was too remote from the breach.

The High Court's decision

Mr Elisha appealed to the High Court of Australia and succeeded. In a joint judgment of Gageler CJ, Gordon, Edelman, Gleeson and Beech-Jones JJ, with a separate concurring judgment from Jagot J (Steward J dissenting), the High Court addressed three key issues.

Were the disciplinary policies part of the contract? Yes. The High Court found that Vision Australia's employment contract explicitly referenced compliance with policies and procedures, and that the 2015 Disciplinary Procedure was incorporated as a contractual term. This meant that failing to follow the procedure was a breach of contract, not merely a breach of policy.

Can damages for psychiatric injury be recovered for breach of contract? Yes. The High Court held that psychiatric injury is part of a class of physical or personal injury for which damages have always been recoverable in contract. There is no principled basis for excluding employment contracts from this rule. The Court noted that the 1909 Addis decision, which had been relied upon for over a century to exclude such claims, did not establish the broad exclusionary rule that had been attributed to it.

Was the psychiatric injury too remote? No. The High Court held that at the time the contract was entered into in 2006, it was within the reasonable contemplation of the parties that a failure to follow the disciplinary procedure, resulting in wrongful termination for alleged misconduct, could cause serious psychiatric injury. The Court noted that Vision Australia had itself anticipated this risk by providing access to counselling and support. The majority observed that a person's employment is usually one of the most important things in their life, providing not only a livelihood but an occupation, an identity and a sense of self-esteem.

The High Court restored the primary judge's orders, including the $1.44 million damages award.

What employers should do

The practical implications are significant.

Review employment contracts. The central risk exposed by this case is that workplace policies and procedures can become enforceable contractual terms. Gadens notes that the issue for Vision Australia was that its policies inadvertently became incorporated into the employment contract. Employers should review their employment contracts to ensure that policies and procedures are not given contractual force unless that is the intention. Contracts that state employees "will comply with" or "will be subject to" policies and procedures may be read as incorporating those policies as contractual terms.

Revise disciplinary policies. Sparke Helmore observes that the decision is an important reminder for employers to ensure their policies are not unintentionally incorporated into employment contracts. Disciplinary policies should allow for flexibility and discretion. They should not prescribe rigid procedural steps that, if not followed precisely, constitute a breach of contract.

Ensure thorough investigations. The conviction in this case turned on Vision Australia's failure to put all relevant allegations to Mr Elisha before making a termination decision. Previous allegations of aggressive behaviour were relied upon but never disclosed to him. A robust show-cause process requires that every allegation on which the employer intends to rely is put to the employee in writing, with a genuine opportunity to respond, before a decision is made.

Consider the psychological impact of disciplinary processes. The High Court stated that it was within reasonable contemplation that a wrongful termination for alleged misconduct could cause serious psychiatric injury. Employers conducting disciplinary processes should be mindful of the psychological wellbeing of employees throughout the process and should provide appropriate support.

The broader significance

This decision creates a new avenue for psychiatric injury claims that exists alongside existing pathways. Workers who suffer psychiatric injury from a breach of their employment contract can now seek damages through common law breach of contract proceedings, in addition to workers' compensation claims and any enforcement action by a WHS regulator.

For the psychosocial compliance landscape, the decision reinforces a consistent theme: the way organisations manage people — including how they investigate complaints, conduct disciplinary processes, and make termination decisions — has direct legal consequences for psychological health. A disciplinary process that is procedurally unfair, that fails to disclose allegations, or that departs from the employer's own stated procedures is not just an employment law risk. It is now also a potential source of substantial damages for psychiatric injury.

For the full state-by-state breakdown of psychosocial compliance requirements, see the compliance-by-state collection.

Disclaimer: This article provides general information on psychosocial compliance in Australian workplaces. It does not constitute legal advice. Case references are sourced from the High Court of Australia, Gadens, Clyde and Co, L&E Global, Sparke Helmore, and Thomson Geer and are current as of the date of publication.