Psychological injury claims are on the rise, creating financial and operational challenges for businesses. Unlike physical injuries, these claims often involve subjective experiences, making them harder to assess and defend.
In New South Wales (NSW), Section 11A of the Workers Compensation Act provides a defence if a psychological injury is wholly or predominantly caused by specific workplace actions such as:
- Transfer, demotion, or promotion
- Performance appraisal
- Discipline or retrenchment
- Dismissal
- Provision of employment benefits.
These claims can lead to significant increases in workers’ compensation premiums, making proactive management essential for protecting your business.
How employers can defend against claims
To successfully rely on Section 11A, employers must prove:
- The action taken by the employer falls within one of the listed categories set out above– general workplace stress or interpersonal conflicts do not qualify for a defence under Section 11A.
- The employers’ action was the main cause of the employee’s injury – if other workplace issues contributed, the defence may not hold.
- The employers’ action was reasonable and fair – if the employer has behaved in a heavy-handed manner, shown inconsistencies, or poorly handled matters, this can invalidate the defence.
Steps to reduce risk
1. Embed clear workplace policies
Employers should establish structured policies covering performance management, disciplinary procedures, and their promotion process. Employers should also ensure that all employees receive and acknowledge that they have reviewed these policies upon their commencement of employment.
2. Maintain strong documentation
Detailed records of performance discussions, warnings, and meetings are key in defending any workplace claim. Written communication such as emails, performance reviews, and meeting notes can help establish adequate procedural fairness should a dispute arise.
3. Communicate transparently
- Provide adequate notice before performance or disciplinary meetings.
- Allow employees to have a support person or witness present at performance or disciplinary meetings whose role is to listen and observe.
- Using a written agenda during meetings will ensure clarity and avoid disputes about the topics discussed.
4. Use structured performance management tools
- Implement Performance Improvement Plans (PIPs) to set clear expectations and track progress.
- Ensure employees understand what is required and how they can improve.
Case study: Westpac Banking Corporation v Mani (2019)
Westpac attempted to deny a psychological injury claim under Section 11A, arguing its disciplinary actions were reasonable. However, the claim was upheld because:
- The employee wasn’t properly informed about informal performance reviews.
- A warning was issued based on a plan the employee did not know existed.
- Poor documentation weakened the employer’s case.
This case highlights that even when an employer’s actions are justified, a lack of procedural fairness can still lead to a claim being accepted.
Protecting your business
To reduce the risk of psychological injury claims, employers should:
- Follow workplace policies and apply them consistently.
- Keep thorough records of all performance-related actions.
- Ensure communication is clear, fair, and well-documented.
- Manage psychological injury claims proactively to avoid premium increases.
A well-prepared Section 11A defence depends on procedural fairness and documentation, helping businesses mitigate risks while maintaining a fair and legally compliant workplace.
For further insights into national Workers’ Compensation legislation or strategies to reduce your workers’ compensation premium, please contact the Bellrock Benefits team.
