The NSW Government has released a draft amendment to the Workers Compensation Act, aimed at modernising the system and tackling some of the big challenges workplaces are facing — especially the increase in psychological injury claims. At HR in Health, we’re committed to keeping members up to date on legislative developments like this, particularly when they could impact your responsibilities as an employer in medical practice.

Key Changes Being Proposed

1. A Stronger Focus on Early Support and Prevention
The proposed changes place greater emphasis on preventing workplace injuries in the first place and offering early support when something does go wrong. There’s a clear shift towards helping injured workers recover and return to work sooner — which can benefit both employees and employers in the long run.

2. Psychological Injury: Clarifying What Counts
Right now, a psychological injury (like anxiety or PTSD) can be covered by workers compensation if it arises from work. But there’s a catch: if the injury is due to things like performance reviews or disciplinary action — and those actions were reasonable — then it’s not considered a compensable injury.
The draft legislation aims to clarify this further. If implemented, the changes would introduce a more structured definition of psychological injury and reinforce that reasonable management action won’t generally give rise to a claim. There’s also a proposed requirement that bullying or harassment claims be handled through the NSW Industrial Relations Commission first, before they can be considered under workers compensation.

3. Departure from Established Definitions of Bullying and Sexual Harassment
A significant and contentious element of the draft bill is the departure from existing definitions of bullying and sexual harassment for the purposes of workers compensation. Unlike the established workplace health and safety standards, the new definitions proposed in the bill do not require that the behaviour creates a risk to health and safety. In addition, the “reasonable person” test — which assesses conduct based on how a reasonable person would view it in the same circumstances — has been removed. These changes may broaden the types of behaviour that could be considered bullying or harassment under workers compensation, potentially increasing uncertainty for employers.

4. Tighter Entitlements and Impairment Assessment Changes
The draft bill proposes that workers with psychological injuries lose access to weekly compensation after 130 weeks, unless their injury is assessed as causing at least 31% permanent impairment. Access to lump sum payments and Work Injury Damages claims would also be limited to those meeting this threshold. Additionally, the government is seeking a more consistent, joint approach to assessing permanent impairment to reduce delays and disputes.

What’s Next?

These proposed changes are still in draft form and are being reviewed by a parliamentary committee. The government is inviting feedback from stakeholders, including employer groups and unions, before any laws are finalised.

What This Means for Your Practice

While these changes haven’t been passed yet, they point to a bigger shift in how workplace injuries — especially psychological ones — are being managed in NSW. As a practice manager, now’s a good time to:

• Review how your team supports staff mental health and responds to early signs of stress or burnout.
• Make sure your HR processes like performance management are clear, consistent, and well-documented.
• Keep an eye on the progress of this legislation so you’re prepared for any adjustments.

HR in Health will continue monitoring the situation and will keep members informed as things develop. Don’t forget, HR in Health members have access to a wide range of templates, tools, and resources to help you manage your HR obligations with confidence.