The NSW Labor Government introduced the Workers Compensation Legislation Amendment Bill 2025 on 27th May as part of its plan to reduce the cost of psychological injuries claims. The Bill would make it harder for employees who suffered an injury with non-physical impairments from accessing support, which can also include victims of sexual harassment and/or assault.
As part of the Government’s proposed changes to the NSW workers compensation system, the most central and controversial amendment is the Government’s plan to more than double the threshold in which long-term support for psychological injuries can be sought, lifting the ‘whole-of-person impairment’ (WPI) requirement from 15 per cent to 31 per cent from 1st July 2026. Whilst expressing serious concerns to the changes, President of the Law Society of NSW Jennifer Ball stated in order to reach the 31 per cent threshold people had to “demonstrate they’re unable to live alone, care for dependants, or to function in society”.
The NSW Parliamentary Labor Party’s proposal to lift the impairment threshold in particular has been almost universally condemned by the wider labour movement and many legal experts, as the requirement of 31 per cent WPI would effectively disqualify more than 95 per cent of current workers with psychological injuries according to Unions NSW Secretary Mark Morey. To draw a clearer raw picture, representatives of Insurance and Care NSW (icare) and NSW Treasury respectively informed a parliamentary inquiry hearing into the changes that only 27 psychologically injured workers in NSW would be able to qualify under the proposed 31 per cent WPI threshold.
Beyond lifting the threshold, the Government has also sought to change the lodgement and assessment process for psychological injuries. Initially, the Government’s plans required victims of bullying and harassment to undergo a potentially litigious compulsory process, through the Industrial Relations Commission (IRC), under a new proposed bullying and harassment jurisdiction before they can even lodge a claim and access support for their injury.
Stakeholders and experts warned that if introduced, the procedural changes would clog up the state’s industrial relations system with unnecessary procedure and litigation as well as drastically slow down the facilitation of return to work programs. Due to the militant campaigning of unions, Labor Party elements opposed to the State Government’s changes, and broader activists, the Government has since scrapped the proposal to force injured workers to undergo a litigious process before a claim can be lodged. The bill now proposes workers undergo “an expedited eight-week claims assessment process for psychological injuries” instead of requiring a finding in an adversarial forum.
Any additional procedures on top of already existing assessment and dispute mechanisms available to insurers would ultimately raise the hurdle for injured workers and increase the time it takes for victims to return to work. Nonetheless, the Government dropping their initial plans to require a finding in an industrial body is a celebrated win for the wider labour movement as bullying and harassment matters are notoriously more complicated and traumatic, with decisions in favour of applicants also less common.
The NSW Parliamentary Labor Party received rather muted media attention and inactive organised opposition initially as the proposed changes were first publicly flagged before March 2025, during the middle of a heated federal election campaign. Perhaps a strategically calculated decision by the Minns Government, the practical result was that the NSW Labor Government benefited from little media scrutiny and the wider labour movement being distracted by the federal election campaign.
Despite having floated the proposed amendments to the workers compensation system in March, a parliamentary inquiry into the matter was not established until 9th May and only given until 23rd May to produce a report. The Committee Chair, the Hon. Greg Donnelly MLC described the time frame as insufficient for “the committee to undertake detailed examination and analysis… let alone prepare thorough and considered commentary, findings and recommendations.” The report itself only urged the Government “to take note of the evidence received throughout the course of the inquiry” when drafting the final bill without offering any substantive findings.
The organised labour movement was busy supporting the Albanese Government’s bid at re-election, with a key focus on preventing the Americanisation of health policy in Australia, spearheaded by Peter Dutton at the helm of the Coalition and urged on by the Trump administration during tariff negotiations. It is ironic that the NSW Labor Government would pursue changes to mental health support for workers entirely motivated by a goal to reduce the cost of payments made to injured workers under the Government’s self insurance scheme, the Treasury Managed Fund (TMF). This was made abundantly clear by the Treasurer’s threats to withhold authorisation of further cash injections into the TMF should the bill not pass, and the Treasurer’s constant citing of the many billions previously injected into the TMF to keep it solvent as his evidence the current system is unsustainable.
It should be noted despite the Government’s primary desire being to reduce the expenses to the TMF, the legislative changes would affect the entire workers compensation system in NSW, including employees of the private sector. Which according to Unions NSW, only represent 20 per cent of all active claims, in contrast to 44 per cent of active claims within the State Government’s self-insurance scheme.
On reflection, this reveals two sides to the mental health crisis in NSW. The first is that the working conditions and culture within the NSW public sector is abnormally toxic. This is the true unsustainable element, not the current system for accessing mental health support. The growing public financial burden of psychological injuries is simply a symptom of worsening working conditions, and increasing the hurdles to access support from the workers compensation system will do nothing to address the growing mental health crisis in this state.
The second side, as evident by the fact the Government conceived the essence of the reforms before any inquiry could conduct a detailed review and present informed findings, is that the public purse is at breaking point and can no longer subsidise the social cost of our liberal market economy. Along with all economies focused on profit optimisation and accumulation, social and ecological outcomes are deteriorating alongside the rise in wealth for a select class. Increasingly more of the damages caused by capitalism is being socialised, in this case the deterioration of the mental health of workers.
Simultaneously the state apparatus struggles with generating revenue to bear these social costs, as major components of public budgets depend on taxation that disproportionately drains working people, such as income tax and GST for Commonwealth and State Governments respectively. The limits of attempted equity within a capitalist economy have been reached, and any pro-social solution cannot just be legislative tweaks and ought to be transformative in nature.
Although the NSW Labor Government antagonising the organised labour movement has become a common phenomenon in recent years, a constructive campaign to seek more pro-worker amendments to the bill is ongoing, with more amendments expected as the bill proceeds to the Legislative Council.
In the meantime, if the Minns Labor Government had any sense they would be prudent to consider the views of the rank-and-file and the union movement. Rank-and-file groups in Labor have recently adopted a resolution calling on the Government to take alternative measures, including “address[ing] the root causes of psychological injuries” and legislating “worker protections that would prevent psychological injuries occurring opposed to legislation that seeks to prevent psychological injuries claims from being lodged.”
Most rank-and-file members of the Labor Party firmly believe budget bottom lines must not be the primary driver behind policy changes that affect people’s health, as doing so would be against the very core of Labor values.
Editor’s Note: William Yang is a member of the Australian Labor Party, NSW Branch, and the President of the Sydney University Labor Club.
