NSW has significantly raised the legal stakes for workplace health and safety compliance, including the management of psychosocial risks. Here’s what the changes mean in practice, and their implications for employers across Australia.

For NSW employers, managing psychosocial risks is no longer just about following best practice.

As of 1 July, an update to the Work Health and Safety Act 2011 (NSW) has given approved NSW WHS Codes of Practice – including the code for managing psychosocial hazards at work – much more legal significance.

Until now, the codes have served as guidance for managing a hazard. They could be referenced in legal claims or safety inspections to prove what an employer should have known about a hazard and the controls that were available, but, up until now, employers could not be prosecuted simply for failing to comply with them.

Now, compliance with approved NSW Codes of Practice will be a standalone duty, and failing to meet a code’s exact baseline will be considered a breach of the law – even if nobody is harmed.

“We will potentially see regulatory action in the form of prosecutions arising from a failure to comply with a code of practice outright,” says Adam Battagello, Partner at Lander & Rogers. “We may also see a combination of that offense with a broader breach of the employer’s primary duty of care.”

Penalties will be determined based on the seriousness of the breach and assigned to one of three categories of severity, with maximum penalties ranging from around $748,000 to $2.24 million.

This change has added another layer of accountability to psychosocial risk management, an area that has been the source of considerable uncertainty for many organisations. In a recent report from Citation Group, just one in four businesses strongly agreed they could confidently manage psychosocial risks.

Battagello spoke with AHRI to unpack what the changes will look like in practice, their implications in NSW and beyond, and how to respond to rising scrutiny around psychosocial safety.

What’s changed for NSW employers in practice?

While this change has attracted particular attention because of its implications for psychosocial safety, its reach extends much further.

“It applies to every Code of Practice that’s been approved by the Minister,” says Battagello. (See a list of the relevant codes here.)

“There are some general ones that will apply to a great many, if not all workplaces – [for example], first aid in the workplace… Then there are some very industry or work-specific ones, like managing asbestos risks.”

Persons conducting a business or undertaking (PCBUs) in NSW will now either need to follow the applicable approved code of practice to manage safety risks, or be able to demonstrate that any alternative approach delivers an equivalent or higher standard of health and safety. 

Queensland has operated under a similar model since 2018, and these two states are currently the only Australian jurisdictions where compliance with approved WHS Codes of Practice carries this additional legal obligation.

“A common question we’re likely to be asked now is, ‘Can you show me how you’ve complied with the code?’, or, ‘Can you show me how you’ve done better?,’” says Battagello.

He says the first step to prepare for this change is to conduct a gap analysis to understand what the code requires, whether the organisation is meeting it and how to close any gaps.

During this analysis, he says employers should cross-reference the code’s requirements with aspects such as: 

• How the business documents and monitors safety risks
• The controls already in place and their effectiveness
• The consultation process with employees
• How often controls and processes are reviewed.

If employers choose to take an alternative approach to risk management than the one outlined in the code, they should be prepared to clearly document the rationale for doing so, and maintain evidence that the alternative control measures provide at least the same level of protection as those set out in the code.

“It’s a question of, ‘This is our baseline now. How do we build on it to build something better?’”

“If we want to affect change within the business, we need to [consider] the potential impact on psychological health and safety – and that’s something that’s often overlooked.” – Adam Battagello, Partner, Lander & Rogers

Responding to increased scrutiny around psychosocial risks

The increased legislative focus on psychosocial safety in Australia comes at a time when the workforce is facing a raft of mental health challenges.

The most recent data from Safe Work Australia shows that claims for mental health conditions continued to increase in 2023-24, and now account for 12 per cent of all serious claims. This represents a 161 per cent increase in mental health claims over 10 years.

The pace of workplace change means employers are also navigating emerging and unexpected psychosocial risks arising from new ways of working. 

For example, many researchers and commentators have warned that the proliferation of AI may have unintended consequences for employee wellbeing and even workplace relationships. These risks are new and evolving fast, placing many employers in unfamiliar territory.

NSW employers in particular are under pressure to manage these emerging risks, with the recently passed NSW Digital Systems Bill placing new obligations on employers to manage the safety hazards associated with digital systems.

In this climate, Battagello suggests placing more focus on the mental health impacts of change management. Hazards such as conflict and bullying tend to be much easier for employers to spot, he explains, while the impact of transformation is often far more subtle.

“If we want to affect change within the business, we need to [consider] the potential impact on psychological health and safety – and that’s something that’s often overlooked,” he says.

What could this mean for employers in other Australian states?

While these compliance obligations currently only apply in NSW and Queensland, the underlying principles are relevant for employers everywhere.

According to Battagello, reviewing your organisation’s current practices against the approved Codes of Practice in your jurisdiction can help identify weaknesses before they become the focus of regulator scrutiny.

“Whether or not we see a specific duty implemented down the line in other jurisdictions to comply with a code of practice to the letter remains to be seen,” he says. 

“But the equivalent of section 275 is found in most, if not all, jurisdictions, which says that Codes of Practice are significant, and that you are expected to meet a particular standard because the codes are evidence of what’s known about a risk and what controls are available to address it.”

Given the pace at which expectations around psychosocial risk management are developing, organisations that take a proactive approach now will be better positioned to respond to future regulatory changes.

“The regulators have made it no secret that psychosocial risk is increasingly an area of interest for them from a regulatory perspective,” says Battagello.

“It’s an area that’s evolving, and our understanding of the risks and impact on mental health is just changing by the day. So that’s the one we really need to be [alert] to and thinking about.”

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