NSW Psychosocial Safety, WHS and Workers Compensation Law Changes
NSW Psychosocial Safety, WHS and Workers Compensation Law Changes: What They Mean for Your Workplace
In this Psychosocial Safety Briefing, Institute CEO Nicole Turnbull sits down with David Newey, Partner at Newey Bond Lawyers, to unpack the NSW psychosocial safety, WHS and workers compensation changes that took effect on 1 July 2026. Here's what employers need to take away.
Watch the briefing below:
The scheme has become a two tier system
Workers compensation claims for psychological injury now split into two categories.
Relevant conduct claims (bullying, sexual harassment, racial harassment and excessive work demands) go through a fast track process and fall under the exclusive jurisdiction of the Industrial Relations Commission to determine whether the conduct occurred.
Other relevant events, such as exposure to a traumatic incident or vicarious trauma, follow the existing Personal Injury Commission process. A worker with a genuine traumatic incident claim does not get the fast track. Only relevant conduct claims do.
Entitlements have also been reduced. The whole person impairment threshold for work injury damages has risen to 25 per cent, climbing further to 31 per cent over the next couple of years. As David put it, "I'm yet to see a 25 per cent whole person impairment" in his years running these disputes, and he expects work injury damages claims for psychological injury to become rare.
The Code of Practice is now enforceable
Section 26A of the Work Health and Safety Act now creates a duty to comply with codes of practice, including the Managing Psychosocial Hazards at Work Code. A breach can result in improvement notices, prohibition notices and prosecutions. Separately, new digital work systems obligations sit in section 21A, covering monitoring technology and requiring employers to manage access for union representatives investigating suspected breaches.
Defences have tightened, but so has the test
The reasonable management action defence still exists, but a worker's perception of an action is now largely excluded as a basis for a claim, unless that perception is found to be reasonable. Employers need to satisfy a two limb test: the action must fall within a defined list (performance management, discipline, training and similar) and it must be reasonable in the circumstances in how it was carried out.
Claim timeframes catch employers out fast
Insurers now have 42 days to decide a claim, and missing that deadline by even a day means the claim is deemed accepted. Workers can then request a review with a further 14 day turnaround before any dispute proceeds to the IRC. Incomplete claim forms must be rejected within 3 days or the right to reject is lost, and the new claim form requires detailed specifics including dates, locations and witnesses.
What employers should do now
Review return to work plans and suitable duties processes, with particular attention to bullying, harassment and excessive work demand scenarios.
Document performance management processes thoroughly. This is central to establishing the reasonable management action defence.
Check WHS systems for gaps around psychosocial hazards, particularly if the system was purchased off the shelf some time ago.
Think carefully about who conducts workplace investigations. David flagged that lawyers who conduct investigations can become material witnesses and are then unable to act in the resulting dispute.
David also flagged where to find reliable information on these reforms, warning that AI generated summaries and outdated articles are often wrong. Rather than working through the amending legislation itself, he recommended going straight to the source.
Amended Legislation
Workers Compensation Act 1987
Work Health Safety Act 2011
Industrial Relations Act 1996
IRC
ILARS
Workers Compensation Act
SIRA
The pdf of David's presentation can be found here.
Members also get access to the Legal Advice Line with Newey Bond Lawyers, plus additional resources to help you navigate these changes with confidence.
Not yet a member? Join the Institute today.
Connect with David
For legal advice specific to your situation, contact David Newey at Newey Bond Lawyers.
02 9394 1111
