A managing director who was subject to a claim made by her former employer concerning her depression has won her defence.
Christine Laird took on her role at Cheltenham borough council in 2002.
However, she left the post in 2005 on an ill-health pension after taking sick leave for depression.
The local authority subsequently took legal action against her, saying she withheld her diagnosis of the mental health problem in her job application.
Although Ms Laird has suffered three episodes of depression between 1997 and 2001, she saw it as a stress-related illness and not linked to non-specific, non-recurrent events.
As a result of its failure during a recent hearing, the council will be forced to pay the majority of the costs of the case.
However, chief executive of the organisation Andrew North was not apologetic after the ruling, saying: "Had the council known Ms Laird's medical history it would most probably not have employed her."
According to a report in the Guardian, this kind of discrimination is not uncommon among employers.
It said: "[Mr] North is ... probably telling the truth: [Ms] Laird's application would have ended up in the bin, the discrimination would never have been recorded and the case would never have come to light."
Julie Morris, employment lawyer at Russell Jones and Walker, commented: "Although things have improved, there is still a lot of misunderstanding and stigma attached to mental health conditions.
"Yet one in four people are affected at some point in their lives and almost everybody will be close to someone with a condition such as depression, sometimes without even knowing it.
"Employers who routinely require job applicants to disclose such information on medical questionnaires help to perpetuate this state of affairs and may even discourage some candidates from continuing with their application.
"We warmly welcome this verdict, which is a victory for those who have campaigned so hard on this issue and underlines the discriminatory attitudes that many job applicants and employees face."