Psychological and psychiatric injuries account for a growing proportion of workers compensation claims in NSW, driven by greater recognition of workplace stress, bullying, harassment, and trauma as genuine sources of compensable injury. Despite this growing recognition, psychological injury claims in NSW face specific legal rules and practical challenges that do not apply in the same way to physical injury claims. Many injured workers find that their claim is disputed in ways that a physical injury claim would not be, or that the process is significantly longer and more demanding. At McDonnell Schroder, we have extensive experience representing workers with psychological injuries, including as an Accredited Specialist in workers compensation law.
How Psychological Injuries Are Defined Under NSW Workers Compensation Law
The Workers Compensation Act 1987 provides compensation for injuries arising out of or in the course of employment. A psychological or psychiatric injury qualifies as a work injury if it arises out of the employment and the employment was a substantial contributing factor to the injury. The word ‘substantial’ is critical here – it creates a higher threshold than the standard for physical injuries, where employment merely needs to be a contributing factor rather than a substantial one.
This distinction affects claims where a worker has a pre-existing mental health condition that is aggravated by work factors. The legislation requires that employment be a substantial contributing factor to the aggravation, not merely one of many factors. Where a worker has a complex pre-existing history, establishing that work was a substantial contributing factor rather than just another stressor requires carefully prepared medical evidence that addresses this specific legal test.
The Reasonable Administrative Action Exclusion
Behind every property transaction is a series of searches and certificates that confirm what you are really buying or selling. These caOne of the most significant differences between psychological and physical injury claims in NSW is the reasonable administrative action exclusion under Section 11A of the Workers Compensation Act. This provision excludes compensation for psychological injury where the injury results wholly or predominantly from reasonable action taken or proposed to be taken by the employer with respect to transfer, demotion, promotion, performance appraisal, discipline, retrenchment, or dismissal.
This exclusion is frequently raised by insurers and employers to dispute psychological injury claims arising from workplace disciplinary processes, performance management, restructuring, and termination. The key word is ‘reasonable’ – action that is unreasonable, procedurally unfair, disproportionate, or conducted in bad faith does not attract the exclusion even if it falls into one of the listed categories. Determining whether employer action was reasonable in the particular circumstances, and adducing evidence of how the process was conducted, is frequently the central issue in disputed psychological injury claims.
Medical Evidence Requirements
Medical evidence in psychological injury claims needs to address specific legal requirements that go beyond the standard clinical assessment. A treating psychiatrist or psychologist report that documents diagnosis, treatment, and prognosis is the starting point – but it also needs to address the causal link between employment and the psychological condition, the concept of ‘substantial contributing factor,’ and where relevant the question of pre-existing conditions and the degree to which employment aggravated them.
Insurers will typically arrange an independent medical examination by a psychiatrist of their choosing. These examinations are part of the standard claims process, and the report produced by the insurer’s doctor frequently disputes the severity of the injury, the causal link to employment, or the treatment required. Managing the medical evidence – ensuring your treating specialists respond comprehensively to the issues raised by the insurer’s medical examination – is an important part of the legal strategy in a contested psychological injury claim.
Permanent Impairment Claims for Psychological Injuries
Where a psychological injury results in a permanent impairment, a lump sum permanent impairment claim may be available. However, the threshold for accessing a permanent impairment payment for psychological injuries in NSW is higher than for physical injuries – a minimum of 15 percent whole person impairment is required. This threshold excludes many genuine psychological injuries from the permanent impairment pathway, even where the person’s function is significantly and lastingly affected.
Where the permanent impairment threshold is met, the impairment is assessed by an approved medical specialist under a specific assessment process, and disputes about the assessment can be referred to a Medical Appeal Panel. Legal representation in the impairment assessment process, and in any appeal from that assessment, significantly affects the outcome.
Common Law Claims for Psychological Injuries
Workers who sustain psychological injuries through employer negligence may also have a common law negligence claim available in addition to the statutory workers compensation entitlements. These claims are available where the employer’s failure to take reasonable steps to prevent foreseeable psychological harm caused or contributed to the injury. Workplace bullying, sexual harassment, and failure to address known workplace risks are circumstances where common law claims have succeeded in NSW courts.
Contact McDonnell Schroder
If you are dealing with a psychological injury arising from your employment, the complexity of the legal framework makes specialist legal advice important from the outset. McDonnell Schroder’s Anthony McDonnell is an Accredited Specialist in workers compensation law and has represented many workers with psychological injuries across Blacktown and Western Sydney.
Contact us for a free first consultation on (02) 9622 1155 or call our Blacktown office directly.
