NSW workers compensation changes: what does it mean for you?

Psychological injuries 

• Primary psychological injury is now defined separately from secondary psychological injury as a mental or psychiatric disorder that causes behavioural, cognitive or psychological dysfunction.
• The changes clarify ‘reasonable management action’ as a defence to claims for psychological injury, requiring employment to be a ‘significant factor’ rather than the predominant one. They also define ‘reasonable management action’ to expand on the eight categories currently contained in section 11(A) to provide clearer definitions of the scope.
• Compensation for primary psychological injuries is only payable if:
  • the injury is caused by a ‘relevant event’ (eg bullying, excessive work demands, racial and sexual harassment, vicarious trauma);
  • there is a real and direct connection between the event and the worker’s employment; and
  • employment is the main contributing factor.
• For claims involving bullying, excessive work demands, racial or sexual harassment, insurers must accept or dispute the claim within 42 days with workers being entitled to interim weekly payments and medical expenses during the determination period.
• Disputes may be referred to the Industrial Relations Commission before proceeding to the Personal Injury Commission; however, this is not mandatory.
• Workers with a primary psychological injury will be required to meet a 25 per cent permanent impairment threshold to be entitled to lump sum compensation, work injury damages, weekly compensation beyond 130 weeks, or medical expenses beyond one year. This threshold is intended to come into effect in October 2025 and increase to 31 per cent in July 2026.

Permanent impairment assessments

• A new Part 6 outlines a structured process for assessing permanent impairment. There is now one Principal Assessment of impairment permitted unless there is a 10 per cent or greater deterioration from the initial assessment (meaning an increase of 10 per cent WPI or greater), in which case a worker can have one further assessment.
• Assessments must be conducted by a SIRA-approved assessor who is agreed by the insurer and the worker. If they are unable to reach an agreement on which assessor is to conduct the Principal Assessment, SIRA is to appoint the assessor. The Principal Assessment process is then managed by SIRA, with the worker and insurer being required to agree on the body system to be assessed and the documents to be provided.
• Legal advice is mandatory for workers before assessment and must address the full legal implications of the assessment, including any entitlements a worker may have for workers compensation or other benefits and to encourage workers to obtain independent financial advice.

Commutations

• Regulations may now allow voluntary commutations for broader classes of claims, subject to PIC approval rather than SIRA approval as is currently the case.
• The President of the Commission must be satisfied the lump sum is not inadequate or excessive, and can take into account factors such as any liability disputes, the worker’s age and general health, their ability to compete in an open labour market and benefits from another source that a worker may be entitled to. 

General 

• In circumstances where a worker’s entitlements to weekly compensation ceased under section 39 of the 1987 Act, however it is later established that they have an entitlement based on their degree of whole person impairment, they are precluded from claiming a back payment of weekly compensation from their date of cessation to the date of the assessment. This amendment effectively reverses the decision of Hochbaum v RSM Building Services Pty Ltd; Whitton v Technical and Further Education Commission t/as TAFE NSW [2020] NSWCA 113.
• Indexation of weekly compensation will now be limited to once per year on 1 April rather than biannually as is currently the case.
• A new Division 1A allows for settlement of disputed lump sum death benefit claims through the PIC, provided that all dependants agree and the PIC is satisfied the settlement is reasonable and liability is genuinely disputed. This enables insurers to resolve complex disputes without protracted litigation.
• We anticipate that the Workers Compensation Guidelines and the Workers Compensation Regulation 2016 will be amended to address a number of the proposed changes and will provide greater clarity around the processes to be implemented, particularly related to permanent impairment assessments.