Employee Awarded 1.4 million in Damages following High Court Ruling

In a landmark decision in December 2024, the High Court ruled that an employee who suffered psychiatric injury due to an employer’s failure to follow a disciplinary process in their policy (leading to termination) was entitled to 1.4 million in damages, due to breach of contract.

The employer involved (Vision Australia) had a term in their contract of employment that incorporated provisions which specified that the employee would comply with Vision Australia’s policies and procedures. Specifically, it stated:

“In addition, employment conditions will be in accordance with regulatory requirements and Vision Australia’s policies and procedures. Breach of policies and procedures may result in disciplinary action”.

The decision found that a psychiatric injury is considered a class of personal injury, thereby giving access to recoverable damages for breach of contract. Historically this was not the case.

This case has highlighted some key learnings for employers:

  1. Be very clear what provisions are incorporated into a contract of employment. A review of your existing employment contract templates is recommended.
  2. If you do have policies and procedures in place related to disciplinary procedures and termination, ensure all managers have been trained in these policies and follow them.
  3. Ensure procedural fairness in accordance with the requirements of the Fair Work Act (2009) before terminating any employees. Seek advice if necessary.
The LMHR team is here to support you in mitigating any risk associated with performance management and/or termination.