The NSW Government is seeking to pursue legislative changes that would ultimately worsen mental health outcomes for working people.

The NSW Labor Government introduced the Workers Compensation Legislation Amendment Bill 2025 on 27 May 2025 as part of its plan to reduce the cost of psychological injuries by making it harder for employees who suffered an injury with non-physical impairments, including victims of sexual harassment and/or assault, to access support.

The most central and controversial amendment is the government’s plan to more than double the threshold during which long-term support for psychological injuries can be sought, lifting the “whole person impairment” requirement from 15% to 31% from 1 July 2026. While expressing serious concerns about the changes, the president of the Law Society of NSW, Jennifer Ball, said people had “to demonstrate they’re unable to live alone, care for dependents, or to function in society” to reach the threshold.

The proposal to lift the impairment threshold has been almost universally condemned by the labour movement and many legal experts, as the requirement of 31% WPI would disqualify more than 95% of current workers with psychological injuries according to Unions NSW secretary Mark Morey. In raw numbers, representatives of Insurance and Care NSW 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 threshold.

Beyond lifting the threshold, the government has also sought to change the lodgement and assessment process for psychological injuries. The amendments initially required victims of psychological harm to undergo a potentially litigious compulsory process through the Industrial Relations Commission heard 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 litigation and 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 procedural changes. 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 psychologically 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 labour movement, as bullying and harassment matters are notoriously more complicated and traumatic, with decisions in favour of applicants also less common.

The NSW Government received rather muted media attention and inactive organised opposition initially when the proposed changes were first publicly flagged before March 2025, during the middle of the federal election campaign. Perhaps a strategically calculated decision by the Minns Government, the practical result was that the NSW Labor Government benefited from media scrutiny and the wider labour movement being distracted by the federal election campaign.

Despite having floated the proposed amendments in March, a parliamentary inquiry into the matter was not established until 9 May, and only given until 23 May to produce a report. The committee chair, Greg Donnelly MLC (ALP) 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.

After running an energetic federal election campaign with the prevention of the Americanisation of our healthcare system central to it, ironically the NSW Labor Government’s reason behind the changes to our mental health support system is mainly to reduce the costs of the government’s self-insurance scheme, the Treasury Managed Fund. This is made abundantly clear by the treasurer’s threats to withhold authorisation of further 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.

Despite the government’s primary desire 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 represents 20% of all active claims, in contrast to 44% 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 the working conditions and culture within the NSW public sector is abnormally toxic and this fact will not be fixed by complicating the process for all workers to seek assistance for work-related mental health issues. 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 the liberal market economy.

Although the NSW Labor Government antagonising the organised labour movement has become a common phenomenon in recent years, a constructive campaign to seek more amendments to the bill is continuing across the movement. The government should consider a resolution unanimously adopted by the Sydney Young Labor Association, which calls on the government to take alternative measures, including “…address the root causes of psychological injuries” and legislate “worker protections that would prevent psychological injuries occurring opposed to legislation that seeks to prevent psychological injuries claims from being lodged”. Budget bottom lines must not be the primary driver behind policy changes that affect people’s health; implementing health policy only based on financial considerations would be against core Labor values.

The views expressed in this article may or may not reflect those of Pearls and Irritations.