12 Sep 2025A Workers Compensation Bill before the NSW Parliament would significantly change workers compensation laws, in particular the way psychological injury in the workplace is assessed and dealt with by authorities.
New Workers Compensation Bill aims to keep scheme sustainable
The original Workers Compensation Exposure Draft included provisions requiring people who experience sexual harassment or racial vilification in the workplace to prove it to the Industrial Relations Commission (IRC) before claiming compensation. (Please see Workers Compensation Legislation Amendment Bill 2025.)
When introduced to parliament, the Bill increased the psychological impairment threshold needed to access lump-sum payments from 20 to 31 per cent, and cut off benefits for psychological injuries after two and a half years.
The government said the move was necessary, as psychological workers compensation claims had doubled in six years, and the cost of the workers compensation scheme was unsustainable. (Please see Protecting workers compensation for future generations, NSW Government, 27 May 2025.)
Workers Compensation Bill amended following backlash
Business NSW welcomed the move, but unionists, medical experts and many MPs were outraged. Some predicted more suicides.
The higher threshold would make it almost impossible to make a claim for workplace psychological injury. (Please see NSW workers comp reform: compensation for psychological injuries will be almost impossible, Australian Lawyers Alliance, 29 May 2025.)
The government abandoned plans to force workers seeking compensation to appear before the IRC, but refused to lower the threshold. An amended Bill which was passed by the lower house to the Legislative Council included vicarious trauma and excessive work demands as relevant considerations.
The amended Bill was sent to a parliamentary committee for assessment and it invited submissions.
My 22-page submission to parliament’s Public Accountability and Works Committee offered several ways to improve the proposed legislation. (Please see Submission 143 Krystal Parisis – Workers Compensation Legislation Amendment Bill 2025, Parliament of NSW.)
Workers Compensation Bill inconsistent with other legislation
There are a number of points in the Bill that are not consistent with other legislation, including definitions of events that may lead to psychological injury.
For instance, the Bill allows for sexual harassment as a relevant event, but does not consider discrimination on the basis of age, gender, sexual orientation or disability.
The Bill also describes vicarious trauma as the impact of repeated exposure in the course of work to traumatic experiences, even though just one incident at work can cause psychological injury.
The Bill lists the traumatic incidents that can lead to psychological injury as acts of violence, criminal conduct, natural disasters, fire or explosion, vehicle or other accident, suicide or attempted suicide.
But there are many other circumstances that can lead to trauma. The Bill’s definition may preclude psychological injuries sustained by nurses, medical professionals, support workers, case workers, youth workers and teachers. It is also submitted that this will likely disproportionately affect women.
Proposed 31% impairment threshold too high
The proposed 31 per cent impairment threshold would exclude nearly all workers from making a lump sum claim, unless they were so unwell that they would be unable to function in society at all. It is submitted that the proposed 31% threshold is too high based on the existing Psychiatric Impairment Rating Scale (PIRS).
Dr Julian Parmegiani, creator of the PIRS, said of the increase to 31 per cent: “You might as well euthanise the entire scheme and just say: ‘We’re not paying out any claims for any psychological injury’ because that is the effect… they might as well come clean and say that is what they are going to do.”
Workers Compensations Bill changes too complex for vulnerable people
The amended Bill introduces a “principal assessment”. Its application is vague and unclear and should be removed.
It does not allow for injured workers to obtain medical advice about their claims, allows impairment claims to be decided by a regulator, rather than an independent commission, and has no rights to appeal. It does not allow a further impairment assessment unless the person’s condition worsens by more than 10 per cent, which is a very high bar.
My submission highlights the unfairness of introducing complex changes for vulnerable people while restricting their access to legal advice.
“The government has proposed a suite of significant changes to the current workers compensation landscape in their Amendment Bill,” the submission states.
“Despite this, they are also attempting to reduce access to legal advice about an incredibly complex scheme, which centres around multiple pieces of legislation and over fifty guidelines, regulations, practice notes, standards of practice, assessment scales and other such documents.
“This might include preventing advice concerning matters such as how to lodge a workers compensation claim (for people who are psychologically unwell, disabled, dyslexic or live with other underlying conditions, this might prohibit them from making a claim), the investigation of a claim and the complex claims process.
“In an area with ever-changing case law and repeated legislative changes, it is submitted that this is fundamentally unfair. It would, in operation, prevent access to justice.”
I call for an independent review of the operational cost of the scheme, as well as the effectiveness and efficiency of scheme agents, case managers and their methods.
