Proposed Changes to Psychological Injury Claims Under NSW Workers Compensation Legislation

On the 9^th of May 2025, there have been some new changes announced to the NSW Workers Compensation scheme specifically to do with psychological injury claims. This blog will explore these proposed changes to psychological injury claims in NSW and explain how these will impact workers and employers.

These changes will now see the introduction of a new dispute procedure for any claims involving bullying and harassment that must be run before a worker can pursue a new workers compensation claim. A claim submitted by a worker must come with a decision from a Court or Tribunal for it to be considered a compensation claim.

From this decision, there will be 2 opportunities for employers to oppose psychological injury claims:

1. The Industrial Relations Commission (IRC) can defend claims of bullying or harassment and claim that sufficient management action was taken, or,
2. If the IRC defence does not prevail, the Personal Injury Commission can defend the claim based on a variety of factors, such as the actual cause of injury, the connection between the bullying or harassment and the worker’s employment, and whether reasonable management action was taken.

On the 16^th of May 2025, a parliamentary inquiry hearing will be held, and this legislation is most likely to pass soon after this inquiry.

An Exposure Draft has been created that lists the proposed reforms which will assist the NSW Government in finalising a full list of reforms. There are still possible changes and suggestions being considered to this list such as strengthening WHS enforcement.

To read the full exposure draft on the proposed changes to psychological injury claims in NSW, please click here.

Some of the key points and changes from the Exposure Draft include:

1. A 31% whole person threshold will apply for damages related to work injuries.
2. Before pursuing a workers compensation claim for bullying and harassment, there is a dispute process to undertake.
3. Employers will pay for medical treatment within a certain 8-week period, this will not be weekly compensation.
4. Workers may be entitled to a special work pressure payment; however, this is not considered compensation.
5. The worker must provide a copy of the finding of harassment or bullying that has been made by the tribunal, commission or court in order to make an official workers compensation claim. Notification of the injury will not suffice for an initial claim.
6. The Industrial Relations Commission dispute process will not be included in the workers compensation scheme; this will fall under separate legislation that has not been issued yet.
7. Under this act, a ‘relevant event’ has a highly detailed and specific definition under Section 8E of the Exposure Draft which can be found here.
8. There will also be an introduction of a variety of definitions around psychological injuries, including definitions for bullying, racial harassment, and sexual harassment.
9. Workers will not be eligible for compensation if their psychological injury was caused by reasonable management action taken, or a worker’s perception or expectation of this management action.
10. Changes to weekly payments for psychological injury will see the maximum period for these payments being 130 weeks. However, this does not apply for workers who have a 31% whole person impairment.