Psychosocial risk: a spiderweb of legal obligations for employers

The obligation to ensure workers' physical and psychological safety has been a feature of Australia’s workplace laws for some time. What's new, however, is the explicit naming of psychosocial risk in codes and regulations across most Australian states and territories, and the active enforcement that has followed. Regulators, unions, and workers are now viewing psychosocial risk as an integral part of safety. It's being given the same importance, legal scrutiny, and demand for action as traditional safety measures.

In our first article, we explored psychosocial risk as an interconnected system within organisations, shaped by the design, organisation, and leadership of work. Surrounding this system is a legal framework—a web of overlapping responsibilities. A single incident or behaviour pattern can now activate multiple obligations, with regulators, unions, and workers ready to respond. For directors, executives, and boards, the key question isn't just about compliance. It's about whether we're equipped to handle psychosocial risk effectively across all these responsibilities simultaneously.

Before we launch into a detailed outline of the changing risk landscape, we should highlight some important distinctions: 

• Psychosocial hazards are workplace factors/conditions that could cause harm (e.g. high job demands, poor work design, bullying). 

• Psychological harm is the potential outcome/injury (e.g. anxiety, depression, PTSD)

• Psychosocial hazards can also cause physical harm (e.g. musculoskeletal injuries, chronic disease, fatigue-related injuries).

• Psychosocial hazards can include matters that are also (and have been historically) covered by other employment laws (e.g. performance management in the context of unfair dismissal laws, or matters going to workplace flexibility in the context of protections in the Fair Work Act 2009 (Cth) (Fair Work Act) or under discrimination legislation). 

Most States and Territories have adopted model work health and safety (WHS) laws, with the exception of Victoria (which has its own WHS framework with different provisions). We’ll explore these in more detail shortly. 

Whilst WHS obligations extend to employees, workers, volunteers, and other people affected by an employer’s operations, this article focuses on employees. 

When it comes to psychosocial hazards in Australia, we’re seeing a rise in: 

• The incidence and cost of psychological injury claims in the workplace,

• Regulatory interest in employer policies and procedures and,

• Employee expectations and literacy about mental health at work. 

Research published by Safe Work Australia provides ample evidence of this. Over the ten years to 2023-24, serious claims for mental health conditions increased by 10,900 (161%) and mental health conditions now account for 12% of all serious claims in total.

The median work time lost for psychosocial injuries was 35.7 weeks (almost five times that of other injuries) in 2023-4, with median compensation of $67,400 (more than four times the median across all serious claims).

Regulators appear to be taking a more proactive posture in relation to psychosocial risk in white-collar workplaces. For example, SafeWork NSW issued a Notice to pause the restructure of a large Australian employer affecting about 800 staff citing ‘serious and imminent risk of psychological harm’ due to concerns over inadequate notice and consultation. The Notice was later lifted but nonetheless signals the willingness of a safety regulator to weigh into organisational change processes.

Meanwhile, unions have extended rights to investigate or bring proceedings under WHS legislation in some States. In New South Wales, for example, unions can prosecute an WHS offence after consulting with SafeWork NSW in certain circumstances. They also have expanded right of entry powers beyond rights of entry for industrial purposes under the Fair Work Act. 

For organisational leaders, the stakes are high and getting higher. Breach of WHS legislation carry serious consequences and regulators can pursue criminal convictions for breach. 

Officers (directors, senior managers, executives) have personal obligations under WHS legislation and penalties can include substantially higher fines or even imprisonment for serious breaches. Employees also have personal responsibilities under WHS legislation and can be prosecuted for breach on an individual basis. 

This extends directly to directors and boards. Psychosocial risk is now firmly a board-level priority, with clear expectations around oversight, due diligence and active governance. It’s no longer enough to have policies in place—directors are expected to monitor risk, interrogate data, and ensure meaningful action is taken. Effective oversight also requires staying close to the business, not just relying on reports, and treating psychosocial risk as a standing agenda item at the board table. As scrutiny rises, so does exposure, with personal and organisational consequences that can be significant, and in some cases, criminal.

Psychosocial hazards sit within a web of overlapping legal regimes, so the same conduct or incident can trigger concurrent duties and exposure under multiple laws, including both WHS laws, and also workers’ compensation legislation, the Fair Work Act, and antidiscrimination at both a State and Commonwealth level. For example, a failure to prevent or address bullying may constitute a WHS breach while also exposing the business to workers’ compensation claims for psychological injury, antibullying orders and other remedies under the Fair Work Act (including general protections and unfair dismissal risks), and potential antidiscrimination exposure where protected attributes or sex-based conduct are involved, including under the positive duty in the Sex Discrimination Act 1984 (Cth).

Different legal regimes may give rise to concurrent exposure (both for criminal and civil penalties), but with different remedies and other consequences. Whereas regulators and unions have rights to take action under WHS legislation, an affected employee has standing to seek compensation or other remedies under the different regimes described above, including worker’s compensation, damages and orders to prevent or compel conduct.

In practice, employers should adopt a holistic, proactive approach to work design, environment and behaviours to manage these interconnected obligations efficiently and consistently across the business.  

The first rule of legal work is to document everything, of course. And risk registers and compliance checks are essential parts of any employer’s approach to psychosocial risk. However, the spiderweb we’ve described is constantly being re-spun, both in terms of breadth and complexity. 

For example, NSW had several rounds of WHS Act amendments in 2025 alone and was the first Australian state to pass a digital work safety bill to cover AI risks in the workplace earlier this year. 

In our previous article, we emphasised the importance of taking a systemic approach to psychosocial risk. True protection from the complex web of obligations isn't found in expanding compliance files. It's about taking charge of the factors that lead to psychosocial harm including workload, control, support, role clarity, relationships, change, and recognition. This type of action puts employers on a stronger footing to rise to today and tomorrow’s legal requirements. It also creates a virtuous circle that raises productivity and performance in the wider organisation.

Needless to say, organisations can’t reach that future state without understanding where they are now. We recommend that leaders look at their organisation from the perspectives of organisational structure, data monitoring, and risk management. 

Organisational structure

• Are the people responsible for safety, workers' compensation, HR, and people leadership working as one connected function, or as separate silos that meet only when something has gone wrong?

• Does our governance structure put psychosocial risk at the same table as financial, operational and reputational risk, with the same cadence and the same rigour?

• Are we managing our extended workforce (contractors, labour hire, on-hired workers) under the same psychosocial risk lens as our employees, or treating procurement and people risk as separate problems?

Data monitoring

• Are we tracking quantitative and qualitative signals together (claims, complaints, incident reports, engagement and pulse data, exit interviews, whistleblower reports), and connecting them in a single view for the board?

• Are we monitoring leading indicators of psychosocial risk (workload, role clarity, change exposure, team stability, manager capability), or only the lagging ones (claims and complaints)?

• Are we asking 'what is going well, and why' as systematically as we investigate what has gone wrong?

Risk management

• When we identify a psychosocial risk, are we addressing the work design, role expectations or organisational system that created it—or are we simply layering wellbeing initiatives over conditions that remain unchanged?

• Where are our risk hotspots, and how recently have we revisited them? Hotspots that were named but not closed are evidence in any future regulator action.

• Are we training leaders and workers to identify, raise and act on psychosocial hazards with the same seriousness we apply to physical safety training?

Answering these questions honestly is always worthwhile, regardless of where you are on your psychosocial risk management journey. Your answers will uncover inherent strengths you may not have identified, as well as revealing gaps that need addressing. And most importantly, the answers will lead to one conclusion: it takes a systemic approach to sufficiently protect your organisation and your people.

In our next article, we’ll explore why managing psychosocial risk is only part of the story, and how good work design can unlock broader organisational value. We’ll also share lessons from PwC Australia’s Work Well, Stay Well program and the impact this approach is having across the firm.

In collaboration with Future of Work Institute, Curtin University