Psychological Injury Claims in Australian Workplaces

Psychological injury is now one of the most significant legal and financial risks facing Australian employers. In 2023–24 there were 17,600 workplace mental health claims nationally up 161% over a decade, with the average worker taking 35.7 weeks off work. 

In NSW alone, psychological claims represent just 12% of claims but drive 38% of total scheme costs, with the average claim nearly doubling to $288,542 in five years.

New psychosocial hazard legislation is now in force across all states and territories including the commonwealth  jurisdiction, courts are expanding employer liability beyond the traditional workers' compensation system and regulators are now prosecuting. 

This is no longer an HR issue, but rather a governance and compliance priority with serious financial and criminal consequences.

This article covers the landmark cases shaping employer liability, the new legislative obligations in force across Australia and the practical steps every employer should be taking now.

What’s Changed 

The model WHS Regulations in relation to the management of psychosocial hazards, were amended in June 2022 and came into effect on 1April 2023. 

These amendments require employers to proactively identify, assess, control and review psychosocial hazards using the same systematic approach applied to physical risks. 

The Commonwealth, Managing Psychosocial Hazards at Work Code of Practice 2024 codifies 17 specific hazards, including the additional hazards of  job insecurity, fatigue and intrusive surveillance, bullying, harassment (including sexual harassment), violence and aggression, job demands and exposure to traumatic events are also included. 

Compliance with psychosocial hazard obligations goes beyond policy documents and Employee Assistance Programs (EAP). It requires the implementation of higher order controls such as changing systems of work and implementing structural changes to how work is designed, organised and managed. 

Reducing the risk by altering plant and the workplace environment, are also considered higher order controls. 

The courts have moved in unison with the regulators. The cases below illustrate exactly what that means for employers.

Psychological Injury Claims Case Examples

Elisha v Vision Australia Limited [2024] HCA 50 — $1.44 million awarded

A Vision Australia employee was stood down and investigated after a work trip incident, without being informed of all allegations against him,breaching the company's own disciplinary procedure. The High Court ruled this breach directly caused a serious psychiatric injury and upheld damages of $1.44 million.

Why it matters: Psychiatric injury is now recoverable as personal injury in an employment contract breach claim,opening a liability pathway entirely outside the workers' compensation system.

This decision overturns long-held legal principles, significantly expanding (potential) employer liability in cases involving psychiatric injuries to its workers. Employers must now consider the risks associated with disciplinary and termination processes, particularly where their employment contracts incorporate policies and procedures.

Employer lesson: Any breach of your employment contract, enterprise agreement or internal policies in a disciplinary context now exposes you to psychiatric injury claims. Settlement deeds must be drafted broadly.

Comcare v Department of Defence — $188,000 fine & adverse publicity order (December 2025)

A RAAF technician died by suicide in 2020 after being subjected to four performance management Work Plans over six months while showing clear signs of distress. Supervisors never referred him for support. Defence pleaded guilty under the Commonwealth WHS Act — the first criminal conviction of a Commonwealth employer for failing to manage psychosocial risks.

Why it matters: Defence had policies in place. However, they failed to provide the necessary training for supervisors involved in using the draft work plan procedure as a performance management tool. 

Employer lesson: Supervisors must be able to identify signs of stress and ill-health displayed by workers during the performance management process and be able to act upon them as soon as possible.  Including suspending performance management when a worker is struggling.

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WorkSafe v Court Services Victoria — $379,157 fine (October 2023)

Court Services Victoria pleaded guilty under the OHS Act 2004 (Vic) for failing to identify and address psychological risks at the Coroners Court, where a toxic workplace culture had developed over several years.

Why it matters: A toxic culture, not just discrete incidents, is a psychosocial risk employers are legally obligated to address. A formal complaint or reported injury is not required for a breach to be found.

Employer lesson: Having a toxic workplace culture is a psychosocial hazard. Regular audits, anonymous surveys and acting on results are legal obligations.

Teacher — Workplace Bullying, NSW — Over $400,000 by way of settlement

A teacher was subjected to sustained humiliating behaviour by a colleague. She reported it to her principal, who took no action. She developed Post-Traumatic Stress Disorder (PTSD) and was certified unfit to continue teaching. The claim was accepted and settled with a lump sum for permanent impairment.

Employer lesson: Failing to act on a bullying complaint is direct evidence of negligence. Document every complaint, investigate promptly and take appropriate and necessary action.

Child Welfare Worker — PTSD and Depression, NSW — Over $700,000 in damages

A child welfare worker in a complex, high-risk role repeatedly sought support from his employer. No support was provided. He was diagnosed with PTSD and depression and considered unfit for work. Compensation included weekly benefits, a $50,000 lump sum and a Work Injury Damages claim of approximately $500,000.

Employer lesson: Workers in high-trauma roles carry a foreseeable risk of psychological injury. Proactive support frameworks are required,not just reactive responses after a claim is lodged.

Workplace Bullying and Harassment — Over $500,000, NSW

An employee experienced sustained bullying from management, resulting in a psychological injury assessed above the 15% Whole Person Impairment threshold. A work injury damages claim followed, with total compensation exceeding $500,000.

Employer lesson: When employers know about bullying and fail to act, the negligence threshold is readily met. The cost of inaction far outweighs early intervention.

What these cases show

Liability is broader than most employers realise. It extends beyond WorkCover into common law and contract claims. It applies to cultures, not just incidents. It catches failures of processes and systems as much as failures of policy. 

And the costs in terms of financial, reputational and in the most serious cases criminal convictions, are substantial.

The common thread across every case is the same: the employer knew or ought to  have known about the risk, and failed to act.

High-Risk Areas Every Employer Must Address

Disciplinary and performance management. Post-Elisha, a flawed process is a psychiatric injury claim waiting to happen. Follow your own procedures precisely, disclose all allegations upfront and suspend performance management if a worker shows signs of distress and mental ill health.

Bullying and harassment. The largest single driver of claims. A policy is not enough, you must demonstrate active monitoring, investigation and action. When employers know and fail to act, negligence is readily established.

High-trauma roles. Courts accept that psychological injury risk is foreseeable for healthcare, community services andfirst responders as a distinct class of workers. You don't need a prior incident to be on notice. Employers must be aware of the inherent risks of certain roles within various industries. 

Organisational change. Poor organisational change including poor communication of restructures, is now an explicitly regulated hazard. Psychosocial risk management must be built into organisational change processes from the start.

Not sure where to start?

Achieving compliance with psychosocial risk management, and doing it well, demands more than revised policies alone. 

It calls for robust systems, targeted training, work design, work redesign, systems change, altering plant, altering workplace environment, altering the management of work and having in place a culture of psychosocial safety that leaders and management actively bring to life in their day-to-day practice.  

Foremind partners with organisations to evaluate psychosocial risk, develop actionable management frameworks and equip those responsible with the skills to put them into practice.

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