Workers’ compensation reforms passed by the NSW parliament last week include updated definitions for psychological injuries and streamlined impairment assessments.

The government dropped a plan to reduce scheme expenses by lifting the whole person impairment (WPI) threshold for psychological claims to 31%, after failing to gain support in parliament.

But claims manager EML says the changes are still the largest to the scheme in more than a decade, and broker Lockton says implementation will probably involve staged starting dates, new regulations and potentially further legislative updates.

“While WPI thresholds remain unchanged, employers should anticipate heightened scrutiny of psychological injury claims and strengthen governance, risk management and employee support systems,” Lockton said.

Under new arrangements, the Industrial Relations Commission will handle bullying and harassment disputes and the Personal Injury Commission will continue to manage disputes related to issues such as permanent impairment and treatment.

Psychological injury claims will be covered if the injury was caused by a relevant event, there is a real and direct connection between the event and the employment, and work is the main contributing factor, claims handler EML says.

Relevant event examples could include bullying, excessive work demands, racial harassment, sexual harassment, violence, witnessing a traumatic incident and vicarious trauma.

A revised definition for “reasonable management action” will take effect, and weekly payments for psychological claims will be capped at 130 weeks, down from 260 unless the worker has a 21% whole person impairment.

The state’s legislative council will this week debate a compromise bill increasing the whole person impairment thresholds used to determine access to work injury damages and weekly payments beyond the 130-week maximum.

The changes would raise that threshold more slowly and to a lower maximum of 28% over the next few years. 

Parliament was told last week the amendments will not modify the impairment threshold that applies for permanent impairment lump sum compensation payments, which will remain at 15%.