On Friday, 9 May 2025, the NSW Government released an exposure draft outlining proposed amendments to the NSW workers compensation scheme. While recent media coverage has largely focused on the rising number of psychological claims, the exposure draft includes significant changes that affect all injured workers across the state. The proposed reforms have been referred to the Standing Committee on Law and Justice, which is scheduled to conduct a hearing on 16 May 2025.
KEY REFORMS IMPACTING PSYCHOLOGICAL INJURY CLAIMS
New Definitions and Employer Defences
- The exposure draft introduces stricter definitions and employer defences that will limit the scope of psychological injury claims eligible for compensation. These new parameters are likely to reduce the number of successful psychological injury claims made by workers.
WPI Threshold of 31% for Weekly Payments Beyond 130 Weeks
- Under the proposed changes, workers with psychological injuries will cease receiving weekly payments after 130 weeks unless their condition meets a Whole Person Impairment (WPI) threshold of at least 31%. This is a significant departure from current arrangements, where many workers with psychological injuries continue to receive benefits past the 130-week mark.
No Permanent Impairment or Work Injury Damages Without 31% WPI
- Permanent impairment compensation and access to work injury damages will be barred for psychological injury workers unless they meet the 31% WPI threshold. This sets an extremely high bar for eligibility, effectively excluding many seriously affected individuals from seeking redress through lump-sum payments or common law damages.
New ‘Work Pressure’ Treatment Entitlement
- A new treatment stream is being introduced for psychological injuries arising from ‘work pressure’ as defined in the draft legislation. This would allow for a once-off entitlement to medical and related treatment lasting up to 8 weeks.
Six-Month Limitation Period for Psychological Claims
- The draft also introduces a 6-month time limit to commence a psychological injury compensation claim after a finding by a Court, Tribunal, or Commission that the injury was caused by a ‘relevant event.’ This creates a strict timeline that may disadvantage workers who are unaware of the procedural requirement or experience delays in seeking legal advice.
REFORMS IMPACTING THE ENTIRE WORKERS COMPENSATION SCHEME
Shift from ‘Reasonably Necessary’ to ‘Reasonable and Necessary’ Treatment Test
- The current ‘reasonably necessary’ test used to determine entitlement to treatment and domestic assistance will be replaced with the ‘reasonable and necessary’ test used in the NSW CTP scheme.
Mandatory Legal Advice Before Permanent Impairment Assessment
- All injured workers must now obtain legal advice before proceeding to a permanent impairment assessment. While intended to ensure workers are properly informed, this requirement may delay access to compensation and create access barriers—particularly in regional or disadvantaged communities.
Mandatory Joint Medico-Legal Examination
- One of the most significant ‘whole of scheme’ structural changes proposed is the introduction of a mandatory joint medico-legal examination process. Where an injured worker and insurer cannot agree on an assessor, SIRA will appoint one from its list of approved providers. This removes the current right of each party to obtain their own expert medical evidence, which has been a longstanding principle in NSW personal injury law.
This change is likely to cause practical difficulties, especially where there is mistrust of insurer-appointed assessors or disputes over injuries and causation. The joint process may also generate increased friction, delay claims resolution, and heighten the likelihood of disputes proceeding to the Personal Injury Commission.
SUMMARY OF IMPLICATIONS
In summary, the proposed reforms significantly curtail the rights of injured workers in NSW, particularly those suffering from psychological injuries. The introduction of the 31% WPI threshold will mean many workers with genuine and debilitating conditions will no longer be entitled to weekly payments beyond 130 weeks or any lump sum compensation.
The joint medico-legal process removes a fundamental right of both workers and insurers to select independent medical experts. This shift is expected to increase administrative complexity and disputes, rather than simplify or streamline the compensation process.
LOOKING FOR MORE DETAIL?
- Exposure Draft (PDF) – https://rebrand.ly/WC-Exp-Draft
- Explanatory Note – https://rebrand.ly/Exp-Note
- Standing Committee Terms of Reference – https://rebrand.ly/WC-TOR
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This article is for educational purposes only and should not be relied upon as legal or financial advice. Readers should be aware that the exposure draft referred to in this article is not yet law in NSW, remains subject to parliamentary approval and may change following a review by the Standing Committee into Law & Justice. The views expressed in this article are current as at 11 May 2025, are based on the experience of Advantage Legal employees and are not directed at any particular individual, business or corporation. Any person relying on the information contained within this article does so at their own risk.