On 8 May 2025, the NSW Government released an Exposure Draft Amendment for Workers Compensation Legislation in NSW (the Draft Bill). This marks an important step in the consultation process between stakeholders and the Government – as we can now see the first iteration of the proposal. This article provides a follow-up to our earlier article and an important rundown of the key proposals.
The following proposals are expected to attract significant attention in the next phase of consultation:
Importantly, none of the above proposals represent the final version of the proposed reform. The Draft Bill has been released to ensure that the final iteration of the Bill that gets voted upon has been subject to stakeholder and community scrutiny.
The proposed definition of “psychological injury” is extracted below:
By inserting a singular definition at the outset of the legislation, this proposal seeks to clarify and simplify the task of determining what is a “psychological injury” for the purposes of workers compensation legislation.
The proposed definition would replace the current (and multiple) definitions of “psychological injury” that appear throughout workers compensation legislation. No express change is otherwise proposed to the existing definitions of “primary psychological injury” or “secondary psychological injury”. Aside from their scope being tied to the definition of “psychological injury”.
The Draft Bill sets out new criteria for establishing an entitlement to compensation for psychological injury. The most significant change arising from the proposal is that the cause of the injury must be “a relevant event” – currently, an exhaustively defined term.
Establishing eligibility to make a compensation claim for a psychological injury (that does not arise as a consequence of a physical injury) requires three conditions to be present:
Additional threshold requirements apply to claims relating to sexual harassment, bullying and racial harassment (see below).
This is a new defined term. The Draft Bill includes the following exhaustive list of what constitutes a “relevant event” for the purpose of the establishing an entitlement to compensation:
The Draft Bill proposes a separate pathway for seeking compensation in relation to a psychological injury caused by sexual harassment, bullying or racial harassment.
Most notably, an employee would be prevented from making a claim for workers compensation unless the worker provides “a copy of the finding of harassment or bullying made by the tribunal, commission or court”.
That requirement would operate in addition to the new criteria set out above.
The Draft Bill does not impose limitation on where a claimant must establish “the cause” of the injury meets the definitions of “harassment” or “bullying” as defined in the workers compensation legislation.
As such the operation of this provision is not contingent on the establishment of a new bullying jurisdiction in the NSW Industrial Relations Commission. Details regarding the nature of that new jurisdiction will be the subject of a separate bill, expected to be released within the coming months (if not weeks).
Interestingly, the Draft Bill departs from the established definitions for “bullying” and “sexual harassment” (see Fair Work Act 2009 (Cth), s 789FD; Sex Discrimination Act 1984 (Cth), s 28A; Anti-Discrimination Act 1977 (NSW), s 22A).
“Bullying” for the purposes of the workers compensation legislation means:
This does not include the threshold requirement that the behaviour must also create a risk to health and safety.
“Sexual harassment” for the purposes of the workers compensation legislation means:
The proposed definition removes the well-established reference to the “reasonable person” test recognised in both Federal and State anti-discrimination legislation. The reasonable person test is a critical third element of the current statutory definition that directs attention to the circumstance in which the conduct arose and whether a reasonable person, “having regard to all the circumstances, would have anticipated that the other person would be offended, humiliated or intimidated”.
This departure impacts the nature of the requisite “findings” that a tribunal, commission or court must make (to remove the bar to seeking workers compensation). For example, as proposed, the cause of the injury may not be sufficient to establish contravention of the Sex Discrimination Act 1984 (Cth) (see s 28A) or Anti-Discrimination Act 1977 (NSW) (see s 22A), but could establish a “relevant event” for the purposes of the workers compensation scheme.
The Draft Bill proposes amendment to an existing provision regarding “no compensation for psychological injury caused by reasonable actions of the employer”. The amendments would drastically simplify the existing provisions. However, the most significant change proposed is the insertion of a definition of “reasonable management action” into the Act.
The proposed amendment regarding reasonable management action is as follows:
“(1) No compensation is payable under this Act in relation to a psychological injury if a significant cause of the psychological injury was—
(a) reasonable management action taken or proposed to be taken by an employer in relation to a worker, or
(b) a worker’s expectation of reasonable management action being taken in relation to the worker, or
(c) a worker’s perception of reasonable management action taken or being taken in relation to the worker.”
The proposed amendment is further simplified by requiring the “reasonable management action” to be identified as the “significant cause” of the psychological injury. By contrast, the existing test states that “the injury was wholly or predominantly caused by reasonable action”.
The balance of the provision would remain unaffected. Importantly, this provision would continue to not affect any entitlement to compensation for an injury of a physical nature even it the injury is a physical symptom or effect of a psychological injury.
As proposed, reasonable management action means management action:
Accompanying this new definition is a non-exhaustive list of management action that may meet the definition if that action is taken “in a reasonable way and reasonable in all the circumstances”. Although slightly repetitive, the description makes clear that simply referring to the items listed in the provision will not be enough.
Examples include:
The accompanying explanatory notes suggest the proposed reform will not mark the end of a conversation about workers compensation and, relatedly, work health and safety in NSW. The Draft Bill is described as “the next step towards the NSW Government determining a final package of reforms”.
Another bill is expected to be released addressing further industrial relations reform in NSW – including a potential new bullying jurisdiction in the NSW Industrial Relations Commission.
Australian Business Lawyers & Advisors (ABLA) on behalf of Business NSW and Australian Business Industrial (BNSW/ABI) will be involved in the upcoming consultations and will seek to ensure that the intention of the reforms (lowering the incidence of injuries, claims and premiums) will be effectively achieved through the Draft Bill.
Should any ABLA clients or members of Business NSW and ABI wish to provide any feedback regarding the proposed reforms or the regime to be implemented in order to ensure psychological injury claims can be fairly and pragmatically handled, please feel free to contact us.
If these changes raise concerns or you need a second opinion, our team at Australian Business Lawyers & Advisors are ready to assist. For further guidance or to discuss your specific circumstances, please email info@ablawyers.com.au or call 1300 565 846.
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