Employee Dismissal and the Importance of Robust Employment Agreements
Dismissal and the Importance of Robust Employment Agreements
A Landmark Decision in Australian Employment Law
In a landmark decision, the High Court of Australia has ruled that an unfairly dismissed employee is entitled to $1.4 million in damages for psychiatric injury caused by a flawed disciplinary process. This case against Vision Australia sets a significant precedent in Australian employment law, highlighting the increasing recognition of employees’ mental health rights and reinforcing the duty of care that employers owe their staff.
The Case: What Happened?
The case involved an employee who had worked at Vision Australia for eight years before being dismissed following an incident during a work trip in 2015. A hotel manager lodged a complaint against the employee, leading to an internal disciplinary process. However, the employer:
- Accepted the hotel manager’s account without adequately considering the employee’s response.
- Relied on past allegations of aggressive behaviour that had not been put to the employee at the meeting.
- Terminated the employee without giving him a fair and reasonable opportunity to respond to all allegations considered.
A critical aspect of this case was that the employment agreement included the company’s policies and procedures as part of the contract. This meant that Vision Australia breached the contract by not following its own policies and ensuring procedural fairness. Following his dismissal, the employee was diagnosed with major depressive disorder. In 2020, he commenced legal proceedings for damages related to his psychiatric injury and ultimately won his case.
The High Court’s Decision and Its Impact
Historically, Australian employment law has not typically allowed compensation for psychiatric injury resulting from breaches of an employment contract. However, in this case, the High Court ruled that an employer can be held liable if their actions cause serious psychological harm due to a procedurally unfair dismissal.
Key Legal Takeaways from the Decision:
- Employment is more than just a job – The Court acknowledged that a person’s work provides not only financial stability but also a sense of identity and self-worth. An unfair dismissal process can severely impact all three aspects.
- Due process is critical – Employers must ensure their disciplinary and dismissal procedures are lawful, transparent, and fair.
- Employees must be informed of all allegations – It is unlawful for an employer to rely on undisclosed allegations when making a termination decision.
- Mental health matters in employment law – The ruling confirms that employers must consider the psychological impact of their disciplinary actions.
- Robust employment agreements are essential – The decision turned on the fact that the employment agreement was not adequately robustly drafted to specifically exclude the policies and procedures as a term and condition of the employment contract. This oversight allowed the employee to seek damages for breach of contract.
What This Means for Employers
This ruling serves as a wake-up call for Australian businesses. To mitigate risks, employers should:
- Follow proper investigative and disciplinary procedures – Ensure thorough, fair, and legally sound processes before making termination decisions.
- Communicate allegations transparently – Employees must be given a fair chance to respond to any accusations being considered.
- Seek legal advice before dismissal – Especially when misconduct allegations are involved, consulting an employment law specialist can help avoid costly litigation.
- Prioritise employee well-being – Employers must recognise the emotional and psychological impact of their decisions and act responsibly.
- Draft comprehensive employment agreements – Ensure that employment contracts are meticulously drafted to clearly define the inclusion or exclusion of company policies and procedures as terms and conditions of employment.
This landmark decision reaffirms the duty of care that Australian employers owe to their staff. It underscores that workplace decisions must be fair, lawful, and considerate of employees’ mental well-being. Employers who fail to conduct fair and lawful dismissals risk serious financial and reputational consequences. More importantly, this case highlights that workplace policies and actions should always be guided by fairness, transparency, and respect for employees.
Your Next Steps
To protect your business from similar legal challenges, consider the following steps:
- Review and Update Employment Agreements – Ensure that your employment contracts are clear, comprehensive, and specifically address the inclusion or exclusion of company policies and procedures.
- Implement Fair Disciplinary Procedures – Develop and follow fair, transparent, and legally compliant disciplinary processes.
- Provide Training for Managers – Train your management team on the importance of procedural fairness and the potential legal implications of unfair dismissal.
- Consult Legal Experts – Regularly seek advice from employment law specialists to ensure your policies and procedures comply with current laws and best practices.
- Prioritise Employee Mental Health – Recognise the importance of mental health in the workplace and take proactive steps to support your employees’ well-being.
By taking these steps, you can help safeguard your business against legal risks and foster a positive, fair, and supportive workplace environment.
Contact us today to discuss how we can assist you to protect your business.