Further litigation likely for psychosocial risks in workplaces, despite withdrawn SafeWork prosecution

Issues pertaining to psychosocial injury and harm will “no doubt” result in future prosecutions despite SafeWork NSW having withdrawn proceedings against a Sydney-based health district.

Editor's note: This story has been updated to include a statement from SafeWork NSW, which had not been received by the time this story was initially published.

SafeWork NSW has withdrawn a landmark psychosocial risk prosecution against Western Sydney Local Health District (WSLHD) following three weeks of hearing and the calling of 20 witnesses by the state-based work health and safety (WHS) regulator.

The prosecution, which commenced in 2022 in the NSW District Court, saw SafeWork allege that it had failed to manage psychosocial risks when responding to and investigating complaints, concerns and grievances made about and by two nurses.

Global law firm Ashurst, which defended WSLHD in the proceedings, said that the matter was one of the first safety prosecutions considering alleged failures to manage psychosocial risks and arose at a time of increased regulatory scrutiny for psychosocial safety.

In a statement provided to Lawyers Weekly and HR Leader, a spokesperson for SafeWork NSW said that its prosecution alleged that WSLHD had failed to manage psychosocial risks when responding to and investigating complaints, concerns and grievances in the workplace.

In late March, the spokesperson went on, SafeWork NSW withdrew the prosecution proceedings, following the Health District "successfully objecting to an expert’s evidence regarding the alleged risk to workers from the Health District’s conduct being admitted as part of the prosecution case".

"SafeWork NSW works closely with the health care and social assistance sector to raise awareness, build capability and undertake targeted regulatory engagement through the Health Care and Social Assistance Sector Action Plan to 2025 and 2024-25 SafeWork NSW Regulatory Priorities," the spokesperson concluded.

According to Ashurst, the withdrawal of the prosecution signifies the difficulty in proving breaches of the Work Health and Safety Act 2011 (NSW) in the context of managing psychosocial risks.

“While it was acknowledged during the proceedings that complaint and grievance handling processes are inherently stressful, the court noted that the causing of stress through these processes is not a breach of the WHS Act,” the firm said.

“Due to the withdrawal of the proceedings by SafeWork, the court was not required to make any determination about the types of steps that should be taken by an employer to avoid stress becoming a risk of psychological injury.”

In conversation with HR Leader, Ashurst partner Scarlet Reid (pictured), who led the firm’s team representing WSLHD, said that as the matter was withdrawn, the NSW District Court was not required to determine what steps an employer should take to avoid stress becoming a risk of psychosocial injury or what level of psychological harm could amount to a breach of the WHS Act.

However, she added, “these remain live issues, which will no doubt be the subject of further litigation and are important threshold questions which will need to be determined”.

When asked how employers can ensure best practice to avoid such litigation moving forward, Reid said that the court has acknowledged that complaint handling and grievance processes “are inherently stressful”.

“As a necessary function of all businesses, HR professionals should be conscious of the impact of such processes on individual employees and ensure that their actions are reasonable and lawful,” she said.

The area of psychosocial risk management, Reid mused, is rapidly evolving.

“This case reinforces the need for employers to remain across guidance material prepared by regulators on how best to manage this type of risk in the changing landscape.”

Ashurst further pointed out that the SafeWork NSW Code of Practice on Managing Psychosocial Hazards at Work – which had not been published at the time of these proceedings – includes a section on reasonable management action.

In accordance with the code, the firm detailed, while managing psychosocial hazards and risks may require decisions that may be perceived as causing stress and, therefore, a WHS risk, “reasonable management action, when carried out lawfully and in a reasonable way, is a legitimate way to manage workplace behaviours”.