NSW workers’ compensation being used to ‘escalate workplace grievances’

With NSW workers’ compensation reforms on the horizon, reiteration on why the changes are needed has been presented – highlighting that the “pendulum” has swung too far, leading to exploitation of the scheme.

Proposed reforms to workers’ compensation in NSW were presented back in March, aiming to address rising costs, particularly related to psychological claims, by establishing a new bullying and harassment jurisdiction with the NSW Industrial Relations Commission.

The reforms seek to establish statutory definitions of “psychological injury” and “reasonable management action”.

As reported by The Australian Financial Review, the reforms could raise the threshold for whole-person impairment from 15 per cent to 30 per cent for psych claims – cutting down on lump-sum payments to workers with injuries.

According to Daniel Hunter, chief executive at Business NSW, the reforms are necessary to better protect both workers and businesses.

“We fully support the rights of injured workers to receive care, rehabilitation and fair compensation – that’s why Business NSW helped establish the workers’ compensation scheme more than a century ago,” said Hunter.

“But today the system is being misused – and it’s hurting both workers and businesses.

“Time away from work is a bad outcome for everyone – it is costly and leaves a business under-resourced. The evidence shows, however, that it can be very bad for a worker and their mental health to be disconnected from their workplace.”

Despite detractors arguing that the reforms will hinder workers’ ability to attain compensation for psychological injuries, Hunter believes the current system isn’t sustainable.

“We need this reform to make sure future generations of workers are protected and continue to have support of this critical scheme, and it has to be sustainable. The scheme was originally designed for physical injuries.

“Over time, that came to include many more circumstances reflecting the modern office. But the pendulum has swung a bit too far one way. It is simply too easy for people – even those who are being reasonably performance managed – to get workers’ compensation. There needs to be more quality control to ensure people are not put on the scheme when they should not be there,” said Hunter.

Hunter believes that immediate intervention is needed, especially oversight of the scheme and how the claims are managed. According to Business NSW, last year, the scheme ran a $1.8 billion deficit – about $5 million every day, with psychological injury claims having risen by 65 per cent since 2021-22 – to now exceed 11,000 claims a year.

“Many of our members report the scheme being used to escalate workplace grievances and performance issues,” said Hunter.

“There needs to be improvement in oversight of the scheme and the way claims are managed. We are hoping that both those features will be part of these reforms. The most immediate thing the government can do is reinsert section 11A (of the Workers’ Compensation Act 1987) into the workers’ compensation guidelines as a reasonable excuse.”

“That would mean that workers who are being performance managed would be excluded from receiving the interim income support payments, which are provided on a without prejudice basis.”

“The State Insurance Regulatory Authority (SIRA) controls what is in the guidelines. They can change that part of the act, setting out an employer’s liability by changing its own guidelines.”