Government guidelines for work-related psychological injury claims have been developed to provide a best practice framework to help business owners and employers manage these risks, directed by research and insights published by Safe Work Australia1.

Psychological health conditions are now the fastest growing cause of illness in Australia, making work-related psychological injuries a major concern for businesses. Psychological injuries tend to involve more time off work and can be more complex to resolve as multiple factors generally contribute to the employee's condition.

The Safe Work report is aimed at helping insurers and claims managers support workers experiencing psychological distress and to also help the individuals at risk.

Addressing mental health stigma with psychological injuries in the workplace

Although psychological illness is more prevalent than most people might realise, with 45% of people aged 15 to 44 experiencing a psychological illness in their lifetime, according to Safe Work Australia data2, there is also stigma associated with these conditions.

Considerations around the stigma and perceptions of mental health must be made while dealing with cases where the employee has applied for workers compensation for a work-related condition involving psychological factors. The employee may be hesitant about disclosing the extent of their condition and may elect not to speak up, they may claim less than they are entitled to, and either return to work too early or take excess leave.

Their manager and colleagues may lack sensitivity in responding to them, or have limited understanding of their experience, which can lead to escalation of compensation-related claim costs, as these situations often lead to delayed reporting of cases, or perceptions of inauthentic illness, ultimately causing premature and/or delayed return to work.

However, the Safe Work Australia findings report that many organisations are integrating stigma reduction initiatives into other employee management activities such as diversity and inclusion, mental health and wellbeing and general organisational culture development.

Employers are recommended to have a formalised policy in managing mental health-related psychological injuries in the workplace to help set clear expectations about workplace behaviour and the expected behaviour and processes for colleagues, supervisors and managers to follow in dealing with a person suffering a psychological injury or illness.

The legal basis for psychological injury claims by employees in the workplace

Employees can apply for workers compensation for a psychological injury such as post-traumatic stress disorder (PTSD), provided they meet three criteria:

  • they meet the definition of worker or deemed worker (such as unpaid family member)
  • they are deemed to have a diagnosable condition as determined by an appropriate treating practitioner
  • work is a significant contributing factor to the psychological injury.

This means that their employment must be the main or a major contributing factor to the injury or illness. If the psychological injury occurred in response to a reasonable decision or action taken by their employer, the worker may not be eligible for workers compensation, since their response is not rational under the circumstances.

The legal obligations for employers managing psychological injury compensation claims

If an employee makes a compensation claim on a psychological basis the employer is obliged to undertake the following actions:

  • consulting with the worker and other involved parties, including treating practitioners and rehabilitation providers
  • developing a return to work plan (RTWP) aimed at achieving the timely, safe and lasting return to work of the employee concerned
  • providing meaningful duties which must relate to the employee's capabilities and status.

Some workers compensation schemes offer provisional liability that allows payments to be paid to the affected employee before a decision has been made about the employer's liability in the case.

This gives the employee access to medical treatment and reduces the stress they might experience while waiting for the decision of liability to be determined.

How Gallagher can help

The Gallagher Workplace Risk team can provide support and advice to businesses dealing with psychological injury and related workers compensation claims. Our service offering encompasses everything from incident management and investigation, safety mentoring and training through to health and wellness programs, injury management and assessment services, hazard and risk profiling or highly configurable online safety management systems.

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1 Taking Action: A Best Practice Framework For The Management Of Psychological Claims In The Australian Workers' Compensation Sector, SuperFriend, Safe Work Australia, accessed 15 Dec, 2023.

2 Psychological Response to Injury: Research to support workers' psychological responses to injury and successful return to work accessed 15 Dec, 2023.


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