Proposed Overhaul of NSW Workers' Compensation Scheme
By Russ Baldwin
The New South Wales government has proposed major reforms to its workers' compensation system amid rising costs and a significant increase in psychological injury claims. With mental health-related claims now accounting for over a third of annual scheme expenses, the reforms aim to ensure the long-term sustainability of the system while promoting early intervention and return-to-work outcomes.
A key element of the proposal is the introduction of a pre-claim assessment process for psychological injuries. Workers alleging injuries such as stress, bullying, or harassment would need to have their claims reviewed by the NSW Industrial Relations Commission before compensation can be accessed. This change is intended to reduce delays and ensure only genuine claims progress through the system.
The government also intends to clarify what constitutes a valid psychological injury under the scheme. Under existing legislation, psychological injuries are not compensable if they result wholly or predominantly from "reasonable management action" taken in a reasonable manner. This includes actions such as performance appraisals, disciplinary processes, and workplace restructuring. The reforms seek to strengthen this definition to reduce ambiguity and ensure employers can manage workplaces without fear of unwarranted claims.
The NSW government has warned that, without intervention, employers could face up to a 36% increase in insurance premiums over the next three years. Critics, however, argue the changes may create barriers for genuinely injured workers, especially those suffering from less visible mental health conditions.
An exposure draft of the legislation has been released for public consultation. The government is inviting feedback to ensure the reforms strike a balance between protecting injured workers and maintaining a financially viable compensation scheme. These proposed changes mark a significant shift in how NSW handles mental health in the workplace—emphasizing both prevention and a clearer standard for evaluating psychological injury claims.
To allay any concerns that this article may have been produced entirely using chat GPT, it is the writer’s view that the proposed changes will require a substantial capital investment (and judicial appointments) to get the State IRC bullying jurisdiction fully operational given the potential flood of applications and the likely restrictive time frames for resolving them. To paraphrase JFK, 'a good idea has 1000 fathers, but failure is an orphan'. It will be interesting to see how this particular restructure plays out.​
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