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In a recent High Court ruling, Australian employers could now be held accountable for psychiatric injuries resulting from contract breaches. This places significant implications for HR practitioners and employers who regularly engage in disciplinary procedures with employees due to unsatisfactory performance or conduct.
While disciplinary processes usually involve counselling, formal warnings, or in severe cases, job termination, a precedent-setting case has outlined the potential for employees to claim damages for psychiatric injuries sustained from a disciplinary process.
Following a flawed dismissal process, a former employee was awarded $1.44 million in damages for a psychiatric injury caused by the employer’s breach of the employment contract. The employee, employed by an Australian charity since 2006, was dismissed after a hotel incident, where he was reportedly “aggressive and intimidating”.
The High Court’s ruling highlights the significant role of employment in a person’s life, influencing not only livelihood but also occupation, identity, and self-esteem. A dismissal process devoid of fairness could thus impact all these aspects adversely.
This case raises the question of an employer’s duty of care to provide a safe investigation and disciplinary system. However, the High Court did not address this issue within the case, but it may be a subject of future legal development.
The primary implications for employers from this case revolve around the possibility for employees to claim psychiatric injury due to breach of employment contract. Hence, future employee claims might include claims for psychiatric injuries as a result of a similar breach.
The case underscores the importance for HR and employers to carefully review their current investigation, disciplinary, and termination policies and procedures. Adhering strictly to these policies can protect both employers and employees, fostering a trusting and fair working environment.
Should you require assistance with overseeing employee investigations, disciplinary measures, or termination rules and processes, contact Preston HR today.