Webinar Summary: Workplace Stress Claims Are Rising: What Employers Need to Get Right

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On this page

• Agenda
• Why Workplace Stress Claims Matter
• The Legal Framework for Workplace Stress
• The PCBU’s Duties
• Officers’ Duties
• Workers’ Duties
• Why Compliance Matters
• What Are Psychosocial Hazards?
• What Can Lead to Psychosocial Injuries?
• Preventing Workplace Stress Through Risk Management
• Practical Steps for Employers and People Leaders
• Responding to Workplace Stress Claims
• Workers’ Compensation Insurance
• What to Do When a Complaint or Claim Arises
• Regulator Investigations and Legal Professional Privilege
• Key Takeaways
• Further Resources
• Q&A
• Closing

Emma: Good morning, and welcome to LegalVision’s webinar, Workplace Stress Claims Are Rising: What Employers Need to Get Right.

My name is Emma Bucholtz, and I am a Senior Lawyer in LegalVision’s Employment and Work Health and Safety team. It is a pleasure to be here this morning.

Before we begin, a few quick housekeeping items. You will receive the recording and slides by email after the webinar, so while we encourage note-taking today, you will also have a copy to refer back to.

Please submit your questions in the Q&A box during the webinar. We will do our best to answer them at the end of the session. We will also share a short feedback survey at the end, and we would really appreciate your feedback on how you found the webinar.

Finally, please stay until the end of the webinar. We have a monthly draw to win Apple AirPods.

By viewing this webinar, you also qualify for a complimentary consultation with LegalVision to discuss how we can help your business. To claim the consultation, please leave your contact details in the survey that appears at the end of the webinar, or contact us via our website.

Guide to Psychosocial Hazards in the Workplace

Ensure your workplace is meeting its psychosocial legal obligations with this free guide, offering practical steps, legal insights, and effective risk management strategies.

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Agenda

Emma: To get us started, I will walk through the agenda and what we will cover today.

First, we will start with an introduction to workplace stress claims. You may already understand what these claims are and what they look like, but it is helpful to set the scene.

We will then move into the legal framework under work health and safety laws in Australia.

After that, we will look more closely at psychosocial hazards, including what they are, what can lead to them, and how employers can manage and prevent workplace stress. This includes proactive steps to reduce the risk of stress claims, as well as how to respond when they arise, such as through workers’ compensation claims or other employment-related disputes.

We will then wrap up with a few key takeaways before moving into Q&A.

Why Workplace Stress Claims Matter

Workplace stress claims are on the rise in Australia. While regulators and many employers are trying to address the issue proactively, the data is becoming increasingly concerning. It is something businesses need to address properly.

In our experience as employment and work health and safety lawyers, work-related psychological injuries often have longer recovery times, higher management costs and longer periods away from work than many physical injuries.

Safe Work Australia, the Commonwealth regulator, publishes reports and data on physical and psychosocial claims in Australia. Its 2021 to 2022 report on psychological health and safety in the workplace found that mental health conditions accounted for around 9% of all serious workers’ compensation claims during that period. This represented an increase of almost 37% since the 2017 to 2018 period.

The same report found that the median time lost for mental health conditions was more than four times greater than for all physical injuries. It also found that the median compensation paid for mental health conditions was more than three times greater than for all physical injuries and illnesses.

For employers, this means the landscape is changing. Businesses need to take proactive steps to prevent and reduce the risk of psychological harm in the workplace.

Broadly, under Australian work health and safety laws, employers must protect workers from psychosocial hazards as well as physical hazards. Today’s focus is on the psychosocial and psychological side of that obligation.

This means your business needs to take proactive and focused measures to ensure psychological and mental health safety, as well as physical safety.

Some clients are surprised to learn that work health and safety laws cover psychological safety and that employers have positive duties to act. Psychosocial risks have always been covered by work health and safety laws because, broadly speaking, they are risks to health and safety like any physical hazard.

More recently, regulators have amended state and territory regulations to expressly reference psychosocial risks as something businesses need to address.

Safety regulators are also turning their attention to these risks as they become increasingly prevalent. This may be due to several factors, including changes to working arrangements, the right to work from home and developments in workers’ compensation legislation.

One clear signal of this increased regulatory focus is SafeWork NSW’s appointment of 50 new inspectors last year, with 25 focused solely on psychological hazards.

Regulators also have broad powers to enforce compliance. This includes visiting workplaces, allowing employees to make complaints or inquiries, requesting and inspecting evidence and materials, and entering workplaces with limited or no notice.

Given the prevalence of psychosocial hazards and increasing employee awareness, it is more important than ever for businesses to be set up to comply. Broadly, this should begin with work health and safety compliance.

The Legal Framework for Workplace Stress

The model work health and safety laws were developed by Safe Work Australia in 2011 to improve the efficiency and consistency of work health and safety standards across Australia.

Every Australian state and territory has adopted the model work health and safety laws, except Victoria. Victoria has its own legislation, which refers to occupational health and safety. While there are differences, our usual position is that if you are compliant in one state or territory, you are typically compliant in Victoria as well. However, there are some differences to note, including around duty holders.

For today’s webinar, we are focusing on the model laws because most work health and safety legislation is centred around them. We also have helpful content and material on Victorian compliance specifically.

Work health and safety laws impose duties on three key duty holders:

• a person conducting a business or undertaking, known as a PCBU;
• officers, such as senior managers or executives; and
• workers.

Each duty holder has obligations concerning the elimination and management of psychosocial hazards.

The PCBU’s Duties

A PCBU is a person conducting a business or undertaking, either alone or with others. It sounds like a strange term, but it essentially covers any kind of business, including sole traders, companies, partnerships, unincorporated bodies and associations.

Put simply, if you are running a company, the company is the PCBU. If you are a sole trader, the sole trader business is the PCBU, with you acting as the agent.

The PCBU has the primary duty of care under work health and safety laws. It must ensure, as far as is reasonably practicable, the health and safety of workers and others in the workplace.

This obligation includes:

• providing and maintaining safe workplaces;
• ensuring the safe use, handling and storage of plant, structures and substances;
• providing adequate and accessible facilities for workers’ welfare, such as toilets, kitchens and sinks;
• providing information, training, instruction and supervision; and
• monitoring workers’ health and workplace conditions.

The obligation is broad-reaching. A critical part of understanding it is considering how far an employer must go to discharge the duty.

This is not always black and white. What is reasonably practicable for one business may look different for another. A very large corporation, for example, may be expected to do more than a very small business with only a few workers.

It also means that some risks may need to be fully eliminated, while others may need to be minimised.

The law identifies several factors relevant to determining what is reasonably practicable. These include:

• the likelihood of the hazard or risk occurring;
• the degree of harm that could result;
• what the business knows, or ought reasonably to know, about the hazard or risk and ways to manage it;
• the availability and suitability of ways to eliminate or minimise the risk; and
• the cost of eliminating or minimising the risk.

For physical risks, the issue may be obvious, such as a light that has gone out or an electrical issue that poses a safety risk. Psychosocial hazards may be less visible, but they include issues associated with stress, burnout, fatigue and interpersonal conflict at work.

Regulators do expect businesses to spend money on maintaining a safe workplace. However, this does not mean a business must spend all of its money doing so. Cost is taken into account if there is ever a dispute or issue.

Officers’ Duties

The second duty holder is officers. Officers are individuals within the PCBU who make decisions that affect the whole or a substantial part of the business. This may include senior managers, C-suite executives and, in some cases, legal counsel.

If you are legal counsel, it is important to be aware that you could be an officer under work health and safety laws.

Officers must exercise due diligence to ensure that the PCBU complies with its work health and safety duties.

Officers can typically meet their obligations by taking reasonable steps to keep their work health and safety knowledge up to date. This may involve reviewing safe work manuals, codes of conduct and other materials, attending training such as this webinar and understanding the hazards and risks associated with the business.

Officers should also ensure that suitable resources and processes are in place and being used to manage work health and safety risks in practice. In other words, policies, frameworks and guidelines should not be set and forgotten. They need to be actively used.

Finally, officers should ensure that appropriate reporting processes are in place and followed for incidents, hazards and risks. Where an incident may amount to a notifiable incident under the regulations, officers should take charge and ensure compliance.

Workers’ Duties

The third duty holder is workers. Workers are defined broadly as people who carry out work in any capacity for the PCBU. This includes employees, contractors, apprentices, trainees and even volunteers.

Workers must take reasonable care of their own health and safety, and the health and safety of others who may be affected by their acts or omissions in the workplace.

Workers must also comply with reasonable instructions given by the PCBU, employer or engager. They must cooperate with workplace policies that have been notified to them or that they should reasonably have been aware of.

Why Compliance Matters

One obvious consequence of non-compliance is harm suffered by workers. Beyond that, there are also reputational risks. We have seen businesses named in media reports and regulator publications following investigations and prosecutions. This can cause significant reputational harm, particularly where a business is shown to be unsafe.

Significant penalties can also apply for breaches of work health and safety duties. These can apply to a PCBU and, in some cases, individuals who are involved in or reckless about compliance with work health and safety duties.

Monetary penalties vary between states and territories. For a Category 1 offence, penalties can reach up to $3 million for an individual in some states and up to $17 million for a corporation.

There can also be criminal proceedings against individuals involved in breaches of work health and safety laws. One of the primary risks is imprisonment of up to 25 years for industrial manslaughter.

While we often think of industrial manslaughter in the context of physical hazards and risks, I would not put it past a regulator to take steps to prosecute failures from a psychosocial perspective as well.

What Are Psychosocial Hazards?

Psychosocial hazards are, effectively, non-physical risks.

They are aspects of work and work-related situations that may cause a stress response from a worker or someone else in the workplace. That stress response can then lead to physical or psychological harm, such as stress, anxiety, depression, post-traumatic stress disorder, sleeping disorders and other conditions.

Some hazards cause stress when a worker is exposed to the risk of the hazard occurring, even if they are not directly exposed to the hazard again.

For example, workers exposed to workplace violence are likely to experience stress if they believe their employer or engaging entity has not controlled the risk, even if the violence does not happen again.

In that situation, even if the hazard occurs rarely, the stress itself may be prolonged. It may result in a workplace stress claim, which can become a workers’ compensation claim. These claims can be drawn-out for businesses and distressing for the worker involved.

Managing psychosocial hazards protects workers and reduces disruption. It can also help limit staff turnover and absenteeism, which in turn can improve broader organisational performance and productivity.

Common psychosocial hazards include:

• high job demands, workloads, time pressures and deadlines;
• lack of support from managers or colleagues;
• inadequate training or resourcing;
• lack of role clarity, including frequent role changes, restructures or unclear responsibilities;
• poor organisational change management, including inadequate consultation or communication;
• inadequate reward and recognition, including low positive feedback or high levels of unconstructive negative feedback;
• poor workplace relationships;
• interpersonal conflict;
• violence or aggression;
• bullying; and
• discrimination.

These are issues no one should experience in a workplace, and employers should take steps to prevent them.

What Can Lead to Psychosocial Injuries?

Many aspects of a business can create psychosocial risk. These risks often arise from specific behaviours, cultures or environments in the workplace.

This can include the design of work, job demands, tasks, systems and the way a workplace is structured or managed. Workflow can also create risk, particularly where work is disorganised or employees do not feel supported.

A lack of escalation pathways can also lead to psychological injuries. If workers do not have somewhere to raise concerns or seek support, the risk can increase.

Psychosocial risk may also arise from unpleasant or hazardous working environments, including workplaces that do not have appropriate safeguards for employees.

Workplace disagreements, interactions and behaviours can also create risk. Disparaging or rude comments, feedback or experiences between colleagues, or even from clients, can all contribute to psychological harm.

There may also be risks in workplaces with a lack of diversity, highly competitive cultures or other unlawful conduct, such as discrimination or sexual harassment.

Other legal frameworks may also apply to those issues. For example, the Fair Work Act and discrimination laws specifically govern matters such as sexual harassment and discrimination in the workplace. They also impose separate positive duties on employers to prevent and mitigate those issues.

We do not have time today to address all of those legislative frameworks, but they are important. LegalVision has other webinars dealing with these topics, and I recommend reviewing those materials if you want a broader understanding of compliance.

Employers and legal counsel should also keep up to date with legal developments in this area, as they are frequent. Joining this webinar is a good step, but reading codes of practice, guidance material and relevant updates will also assist officers in discharging their duties.

Preventing Workplace Stress Through Risk Management

In light of the framework we have covered, the next question is what businesses can do to prevent workplace stress and other psychological harm.

A useful starting point is to review guidance and codes of practice published by safety regulators. These provide practical guidance on how to meet the standards required under work health and safety laws.

For example, Safe Work Australia has published a code of practice on managing psychosocial hazards at work. It has also published guidance on managing sexual and gender-based harassment and managing fatigue at work, both of which are particularly relevant to stress claims.

As with any work health and safety issue, businesses should have a framework for compliance. We recommend conducting a thorough assessment of your business for risks.

A typical risk management process involves four steps.

First, identify the hazards. This means finding out what could cause harm.

Second, assess the risks associated with those hazards. This means understanding the nature of the harm, how serious it could be and the likelihood of it occurring. Some risks will be obvious. Others may not become clear until a worker makes a disclosure.

Third, control the risk. This is often the most important step. It involves implementing the most effective control measures that are reasonably practicable in the circumstances and ensuring they remain effective over time. This should not be a set-and-forget process.

Fourth, review the control measures. A business may have a framework and policies in place, but if officers and workers are not reviewing them to ensure they remain sufficient and up to date, the business may fall short of its duties.

Practical Steps for Employers and People Leaders

When managing psychosocial risk, legal structures and frameworks matter. However, employers and people leaders should also take practical day-to-day steps to support their teams and identify issues as they arise.

One practical step is to inspect the workplace. This might involve observing workloads and team dynamics. If there is conflict between individuals, you need to be aware of it and know how to respond.

Absenteeism trends can also be a clear signal that something is going wrong in the workplace.

Another key consideration is maintaining a safe working environment. The only way to know whether the environment is safe, and whether the business is doing its job properly, is to observe it.

It can be easy for people leaders or senior management to sit away from the day-to-day operations of the business. However, you will not know what you do not know, so observing working environments is important.

Other practical steps include regularly checking risk registers and turnover rates, and consulting with workers. This might involve engagement surveys that invite employees and other workers to provide feedback on specific safety issues.

A business may also establish a work health and safety committee and use that committee to identify key issues and how they can be managed.

It is also important to consider whether stress is systemic. Is the issue related to role design or the broader structure of the business? Or is it more situational or individual, such as a specific team, work area or manager causing consistent issues for workers?

Finally, businesses should have clear escalation and support pathways for workers. These may be set out in internal policies, supported by dedicated internal support people or delivered through external providers such as an Employee Assistance Program, or EAP.

No system will be perfect. However, to mitigate risk and support psychological safety, businesses should at least carry out the processes discussed in this webinar. You may also have other solutions that suit the specific needs of your workplace.

Responding to Workplace Stress Claims

The topic of today’s webinar is workplace stress claims, so it is important to consider what to do when a claim arises.

Of course, no business wants workers to feel stressed, burnt out or psychologically injured. However, workplace stress claims are common. We speak with clients about this issue every week, so businesses should understand what to do when it happens.

A stress claim can trigger legal exposure for your business. This is not limited to work health and safety exposure, such as a regulator investigation or improvement or prohibition notices. It can also result in workers’ compensation claims, unfair dismissal claims, general protections claims, discrimination complaints or bullying complaints.

If an employee is dismissed, forced to resign, or treated adversely because of risks they were exposed to at work or because they made a complaint internally or to a regulator, this can create significant risk for the business.

Discrimination and bullying complaints can also go hand in hand with workplace stress claims, because workplace behaviour or misconduct may be what led to the stress claim in the first place.

The point is not to scare businesses. It is to put employers on notice that several issues can flow from workplace stress claims. A compliant framework will help set your business up for success, and good advice and preparation will help you navigate claims if they arise.

A poorly handled claim can escalate quickly. It is prudent to be proactive, address issues as soon as they arise and avoid letting them sit unresolved. When you become aware of an issue, act on it.

When you become aware of a workers’ compensation claim, you also need to act appropriately because you may have obligations to notify your insurer. You should check your policy, but in our experience, notification timeframes are often between 48 hours and a few days, depending on the state or territory.

Workers’ Compensation Insurance

Workers’ compensation is state and territory based. The applicable scheme depends on where the worker is based, not necessarily where the employer is headquartered. This can create difficulties where workers are remote or based in interstate offices.

The prudent approach is to seek and obtain insurance in the relevant states and territories to ensure you are adequately covered, particularly where psychosocial or psychological injuries may occur. These injuries may affect remote workers who the business does not have much direct oversight over.

Most workers’ compensation schemes require employment to be a significant contributing factor to the psychological injury, although the threshold varies by jurisdiction.

Pre-existing conditions do not necessarily defeat a claim. If employment aggravates a pre-existing condition, a workers’ compensation claim may still succeed.

This also connects to pre-employment checks. Any checks should be reasonable and proportionate to the role the worker will perform. In some cases, it makes sense to consider these issues early. However, pre-employment checks will not be a complete defence if an employee later believes they have developed or aggravated an injury at work.

What to Do When a Complaint or Claim Arises

If you receive a complaint or workers’ compensation claim, act promptly. Do not ignore a complaint or disclosure.

Delayed responses are routinely cited in adverse findings and are not looked on favourably by regulators. Not every stress complaint will require a formal investigation, but every complaint requires a genuine response and, at the very least, an assessment of the nature and seriousness of the issue.

One of the most important things to do is document everything. Keep a record of what was reported, when it was reported, who reported it and what steps the business took to deal with or assist the employee in relation to the complaint or regulatory issue.

Documenting the steps taken will be critical to the business’ defence in any later proceedings or when disputing liability in a workers’ compensation claim. Ideally, this documentation should be contemporaneous, meaning it is created at the time.

Documentation also raises confidentiality considerations. You should maintain and protect the worker’s privacy throughout the process.

You should also avoid any adverse action. Do not do anything that could be characterised as penalising a worker for raising a work health and safety concern or making a workers’ compensation claim.

Workers have broad protections once they make, or are on, a workers’ compensation claim. If you need to take steps in relation to that worker, whether because of historical performance issues, conduct issues or the injury itself, we recommend seeking advice from an employment lawyer.

Receiving a workers’ compensation claim may feel daunting, but remember that workers’ compensation is a statutory scheme created for this reason. It is a no-fault scheme. A claim being accepted does not necessarily mean your business was negligent. It means a worker has, or believes they have, suffered a workplace injury, and the statutory scheme is designed to provide support for recovery and return to work.

If you are appropriately insured, which we recommend and which is required in most states and territories, your insurer should handle most of the claim.

However, like any insurance product, a claim may increase your premiums.

If you believe a stress claim or other workers’ compensation claim was unreasonably brought, or was retaliatory following reasonable performance management, you can dispute liability with your insurer.

The basis for the dispute may be that the action or behaviour leading to the alleged workplace stress injury was reasonable performance management, restructuring or disciplinary action. Ideally, you will have documentation showing that the business’ steps were reasonable and proportionate at the time.

If you dispute liability, the insurer will typically conduct a factual investigation. This may involve obtaining witness statements, inspecting documents or requesting production of documents. A strong performance improvement plan, warning letters or other employment documents showing that your process was reasonable, proportionate and necessary can assist.

The outcome is ultimately up to the insurer, but strong documentation will put the business in a better position.

Regulator Investigations and Legal Professional Privilege

Safety regulators have broad powers to enter workplaces, issue notices, commence investigations following complaints and prosecute for non-compliance.

If a regulator attends your workplace, you should act quickly and speak with lawyers.

Preserving legal professional privilege over investigation materials is critical. That privilege can be lost if it is not managed carefully from the outset.

This can be a complicated area, but employment and safety lawyers can assist. LegalVision has experience speaking with safety regulators and supporting businesses when regulators attend workplaces.

Key Takeaways

The data shows that mental health conditions at work are increasing. We are seeing more workers’ compensation claims arising from psychosocial hazards than ever before.

The median time lost for psychological injuries is more than four times that of physical injuries. Stress-related claims are often complex and costly to manage, so early intervention is essential.

To prevent and address these claims, businesses should have an appropriate work health and safety framework for psychosocial hazards, as well as physical hazards.

Businesses should also regularly monitor and maintain safe systems of work.

You should check in with workers regularly. If those check-ins need to be delegated, that is fine, but senior leaders should still oversee them. You should also provide regular opportunities for feedback and consultation with workers.

If things go south, speak with an experienced employment lawyer or workers’ compensation lawyer.

Further Resources

That wraps up the main part of our webinar.

You may find our guide to psychosocial hazards in the workplace useful. You can scan the QR code on the slides to download it for free.

You may also be interested in our next employment law webinar, The Cost Squeeze: What Employers Need to Know About Restructuring and Redundancies. We are hosting this webinar on Wednesday, 3 June, at 11 am Australian Eastern Standard Time. You can register using the link on the slides or via our website.

Please continue submitting your questions. I can see a few great questions coming through.

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While I answer your questions, you will see a poll question pop up. We would really appreciate it if you could answer it.

Q&A

Does this law apply to offshore employees?

Emma: It potentially can. There may be particular complexities with cross-jurisdictional issues if you employ workers overseas.

The practical answer is to assume that your work health and safety obligations apply to any worker you engage, whether they are overseas or in Australia.

Of course, what is reasonably practicable for overseas workers may look different from what is reasonably practicable for workers at your work sites, offices or onshore in Australia.

However, businesses should keep conducting check-ins, risk assessments and taking steps to ensure workers are happy, healthy and safe at work. If you need specific advice on local laws that may apply in the relevant state or country where the worker is located, seek advice from a lawyer who specialises in that area.

How are contractors covered under work health and safety laws?

Emma: The short answer is yes, contractors can be covered. The apportionment of responsibility will depend on the nature of the contract and the engagement.

In a typical situation where a business engages contractors under a contract for services, the business will be responsible for managing and ensuring safe work for those contractors.

If you engage a head contractor who then subcontracts other workers, including employees or their own contractors, it is likely to be a shared responsibility.

The existence of that engagement does not mean your obligation ends. All parties to the arrangement need to manage and consider their own obligations under work health and safety laws. Again, what is reasonably practicable may look different at each stage.

What is the additional exposure where the role has high psychosocial hazards or limited opportunity to mitigate?

Emma: This is a more circumstantial and specific question, so I recommend obtaining advice on structuring your specific safety framework and understanding your obligations in more detail.

The key exposure point is that your exposure may be higher if you are not taking reasonably practicable steps to prevent or mitigate harm.

This does not necessarily mean you will be scrutinised more than another business. However, where there is increased exposure and a greater likelihood of harm or injury occurring, the business should take more robust steps.

When dealing with interpersonal issues, difficult clients, participants or parents, you also need to consider external factors and risks to workers. It is not only risks associated with the design or management of work, or interpersonal relationships within the workplace. You should also consider clients, customers, visitors and others who may pose a risk.

For example, working with children with complex needs may create obvious psychological risks, including stress, burnout and exposure to difficult situations. At a minimum, you should have a sufficient work health and safety process, adequate escalation points and either an Employee Assistance Program or internal supports to deal with those risks.

The law is not different for those businesses, but what is reasonably practicable for a business with significant exposure may look different from what is required of another business.

Closing

We have run about a minute over. I am sorry if I did not get to your question, as we had several great questions come through.

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Thank you so much for joining us. We hope to see you at the next webinar.