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From Bullying to Management Processes: The Cases Defining the Next Phase of Psychosocial Regulation

By Felicity Menzies15 min read
From Bullying to Management Processes: The Cases Defining the Next Phase of Psychosocial Regulation

Content note: This article includes a reference to a workplace death by suicide.

This is the second article in a three-part series on psychosocial hazard regulation in Australia. Article 1 sets out the current legal framework. Article 3, to be published week beginning 8 June, covers the most common compliance gaps and how to close them.

Most employers think they understand psychosocial hazards. Bullying is on the list. Harassment is on the list. Exposure to traumatic events is on the list. What fewer have grappled with is that the standard management processes used every day across Australian workplaces — performance management plans, restructures, investigations, grievance procedures and disciplinary processes — can themselves create psychosocial risks.

A series of enforcement actions in 2025 and 2026 has significantly expanded the practical understanding of what constitutes a psychosocial hazard. One resulted in a criminal conviction. Another required a major university to pause an active restructuring process. Others have imposed liability through workers' compensation, employment and contractual frameworks where investigation and disciplinary processes were found to have been conducted unreasonably.

Taken together, these developments reveal a common theme. The next wave of psychosocial enforcement is not primarily focused on bullying, harassment or overt misconduct. It is increasingly focused on how organisations design, communicate and administer ordinary workplace processes — performance management frameworks, investigation procedures and restructures. The issue is whether those processes are psychologically safe.

The scale of what regulators are now dealing with

Before looking at the enforcement cases themselves, it is worth understanding what regulators are seeing across the country. Many employers still view psychosocial hazards as a relatively new or emerging area of workplace regulation. Regulators do not. Across Australia, psychological injury claims, psychosocial complaints and regulatory interventions have increased significantly over recent years, prompting a substantial expansion in enforcement capability and oversight.

The shift is important because it marks a fundamental change in how psychological health is being treated under work health and safety laws. Historically, issues such as workplace stress, bullying, conflict, workload pressures and organisational change were often managed primarily through HR, employee relations or wellbeing frameworks. Today, regulators increasingly view these issues through a safety lens. The expectation is no longer simply that employers respond when harm occurs. The expectation is that employers identify psychosocial hazards, assess the risks they create and implement controls before harm occurs, in the same way they would manage any physical workplace risk.

New South Wales has moved furthest and fastest. SafeWork NSW data shows psychosocial hazards now account for almost one in five workplace complaints, making them as common a source of regulatory concern as many traditional safety risks. Between July and December 2025 alone, the regulator received 1,476 requests for service relating to psychosocial harms. The comparison to physical safety hazards is not incidental. It reflects the deliberate position adopted by regulators and legislators that psychological health is a work health and safety issue requiring the same level of prevention, oversight and enforcement as physical health.

The regulatory response has been significant. In March 2026, the NSW Government announced the deployment of 20 dedicated psychosocial inspectors as part of the largest increase in SafeWork NSW inspector numbers in the agency's history. These inspectors have the authority to conduct workplace inspections, issue notices and enforce compliance in relation to psychosocial risks including excessive workload, bullying, harassment, poor job design and organisational change. SafeWork NSW's Psychological Health and Safety Strategy 2024–2026 identifies large employers, government agencies and high-risk sectors including healthcare, education and social assistance as priority areas for regulatory attention. Inspectors are also required to undertake psychosocial WHS checks during visits to workplaces with more than 200 workers.

Importantly, regulators are not relying solely on enforcement. The NSW Government has also established a dedicated Psychosocial Advisory Service to provide workers and employers with practical guidance on managing psychosocial risks. While the service is intended to support prevention and early intervention, it also reflects a broader regulatory expectation: employers can no longer argue that the requirements are unclear or that guidance is unavailable.

The trend is not confined to New South Wales. Victoria's psychosocial hazard regulations commenced in December 2025 following several years of preparation by WorkSafe Victoria. During 2024–25 alone, the regulator responded to more than 7,100 inquiries relating to psychosocial hazards. Early enforcement activity has included workplace inspections, worker complaints and the issuing of notices requiring employers to address identified risks. WorkSafe Victoria has made clear that psychosocial hazards will be managed through the same graduated enforcement model applied to physical safety risks, ranging from education and improvement notices through to prosecution for serious or persistent breaches.

Queensland's experience tells a similar story. WorkSafe Queensland reported 3,633 accepted primary mental injury claims in 2024–25, representing an increase from the previous year. The financial impact is substantial. Psychological injury claims are significantly more expensive than physical injury claims on average and typically involve longer recovery periods, greater treatment costs and more complex return-to-work pathways.

At the national level, enforcement powers are also expanding. Since 1 March 2026, registered industrial organisations, including unions, have been able to initiate civil penalty proceedings for alleged work health and safety breaches on behalf of workers. Historically, this role was largely confined to regulators. The practical effect is that employers now face a broader range of parties capable of initiating legal action in relation to psychosocial hazards and failures to manage psychological risks.

The significance of these developments extends beyond increased regulatory activity. Many of the psychosocial hazards attracting enforcement attention do not arise from workplace misconduct. They arise from management systems and organisational processes. Work allocation, restructuring, consultation, investigations, grievance handling and performance management are increasingly being scrutinised through a work health and safety lens rather than solely through an employment law or HR lens.

The key point is that psychosocial regulation is no longer in an education phase. Regulators now have dedicated strategies, specialist inspectors, targeted compliance programs, expanded enforcement powers and growing volumes of complaint and claims data. The question for employers is no longer whether psychosocial hazards will be regulated. The question is whether existing management practices will withstand regulatory scrutiny when they are.

The Defence conviction: what happened and why it matters

On 19 December 2025, the NSW Local Court convicted the Commonwealth Department of Defence for failing to manage psychosocial risks relating to the death of a worker. It was the first penalty of its kind for a Commonwealth employer and the first time a Commonwealth employer had been convicted of failing to manage psychosocial risks under federal work health and safety laws.

On 28 July 2020, a 34-year-old Royal Australian Air Force technician took his own life while on duty at RAAF Base Williamtown near Newcastle, NSW. Defence pleaded guilty to a single charge under section 33 of the Commonwealth WHS Act, admitting it did not take reasonably practicable measures to eliminate or minimise the health and safety risks to the worker.

The facts uncovered by Comcare's investigation are instructive. In the months prior to his death, the worker had displayed increasing signs of distress and ill-health during a performance management process, where he had been subject to four separate Work Plans over a six-month period. The Work Plan was a standard performance management tool. There was no suggestion it was used maliciously or that its use was outside normal HR practice. The problem was not the intent behind its use. The problem was that nobody had assessed it as a psychosocial hazard, and nobody had trained the supervisors administering it to recognise the risk it was creating.

Defence breached its primary health and safety duty by failing to provide the necessary training for supervisors involved in the use of the draft Work Plan procedure used as a performance management tool.

Risk controls available to Defence included training supervisors to understand how a Work Plan may be a psychosocial hazard, to identify psychosocial risks associated with workers subject to performance management, and to eliminate or minimise those risks.

Magistrate Brett Thomas convicted Defence and fined the department $188,000 in the NSW Local Court on 19 December 2025. An adverse publicity order was also made, requiring Defence to publicise details of the offence, its consequences, and the penalty imposed. The maximum penalty available to the court was $500,000 for a Category 3 criminal offence under the WHS Act.

What the conviction actually means for employers

The lessons for employers here are clear. This was not a case about a supervisor who bullied a worker. It was not a case about systemic harassment or a toxic culture. It was a case about a performance management process that created foreseeable psychological risk, in which the people administering that process had not been trained to identify or respond to that risk.

Every Australian employer uses performance management processes. Most have not assessed those processes for psychosocial hazard potential. The Defence conviction demonstrates that failures to identify and manage psychosocial risks arising from performance management processes can result in criminal WHS liability.

The adverse publicity order adds a further dimension. Organisations convicted under the WHS Act can be required to publicly disclose what they did wrong and what it cost. It is a reputational event.

The university sector: psychosocial risk during restructuring

The Defence case concerned a failure over time, in a relatively contained process. The SafeWork NSW actions against two universities in 2025 illustrate a different but equally important point: regulators will intervene in real time if they form the view that a restructuring process is creating imminent psychosocial harm.

In September 2025, SafeWork NSW issued a prohibition notice to the University of Technology Sydney, requiring a pause on staff reductions because of the risk of serious and imminent psychological harm to employees. The regulator stated explicitly that employers must manage psychosocial risks in the same manner as any other health and safety issue. The notice was subsequently lifted after UTS engaged with SafeWork NSW and agreed to extend consultation timelines and modify its communications approach. SafeWork NSW also issued improvement notices to two faculties at Macquarie University, directing them to consult workplace safety committees during restructuring processes.

The UTS prohibition notice is particularly significant because it required the university to stop an active business process. This is the equivalent of a regulator issuing a stop-work order on a construction site where there is a risk of physical harm. The fact that it was lifted after UTS engaged and modified its approach does not diminish the signal. Regulators now view poorly managed restructuring as an active safety risk.

For any organisation currently planning, or likely to plan, a restructuring, redundancy program, or significant change process, the UTS case is the most practically relevant enforcement action of 2025. The question is not only whether the process is legally compliant from an employment law perspective. It is also whether the process has been assessed as a psychosocial hazard event, and whether the controls applied to it are adequate.

The limits of enforcement: the "poor organisational justice" cases

Not every prosecution proceeds to conviction. Multiple cases in 2025 are instructive not just for what regulators attempted, but for what the outcomes reveal about where the legal boundaries currently sit and where they are still being tested.

In August 2020, two nurses at Western Sydney Local Health District were involved in an incident where a mental health patient who had absconded from a secure facility was placed in seclusion. Complaints were made about the nurses' conduct, triggering a clinical review investigation. Both nurses passed away in November 2020.

SafeWork NSW commenced proceedings in 2022, alleging that WSLHD failed to manage psychosocial risks when responding to and investigating complaints, concerns and grievances made about and by the two nurses. The prosecution was one of the first safety prosecutions in Australia considering alleged failures to manage psychosocial risks, and centred on the concept of psychosocial risks arising from perceived deficiencies in organisational justice.

After three weeks of hearings and the calling of 20 witnesses, SafeWork withdrew the prosecution in March 2025, following WSLHD successfully objecting to expert evidence regarding the alleged risk. While it was acknowledged during the proceedings that complaint and grievance handling processes are inherently stressful, the court noted that the causing of stress through these processes is not a breach of the WHS Act.

That observation matters and should not be read as a green light. SafeWork's withdrawal signifies the real difficulty with proving breaches of the WHS Act in the context of managing psychosocial risks. The evidentiary threshold for establishing that a grievance or investigation process crossed from inherently stressful into a legally cognisable psychosocial hazard is genuinely difficult to meet. What remains unsettled is exactly where that line is drawn, and the concept of what constitutes unreasonable process is likely to be tested again in future prosecutions.

The cost of getting that process wrong is being made concrete in other forums simultaneously. In a 2025 decision of the Administrative Review Tribunal, Senior Member Simon Webb found that an employer had failed to account for a worker's experience of family and domestic violence when informing her she was being investigated for a code of conduct breach. The process itself caused her to suffer a psychological injury. Senior Member Webb found that "important aspects of [the worker's] case were not considered and taken into account when planning the investigation, and this failure meant that real risks were not identified or managed." The employer was held liable for the harm caused by how the investigation was conducted, not by any separate act of misconduct. The tribunal's finding establishes that psychosocial risk assessment must inform how investigations are initiated and structured, not merely how they conclude.

In Wright v Findex (Aust) Pty Ltd [2025], the NSW Workers' Compensation Commission reached a similar conclusion through a different route. The employer's reasonable management action defence failed because the investigation process was ad hoc, the employee was not given notice of the concerns against them, was not offered a support person, and was not advised of the process that would take place. The Commission found the employer's conduct was not reasonable and the employee was therefore entitled to compensation. Again, the problem was not malice. It was procedural deficiency.

The High Court's decision in Elisha v Vision Australia Limited [2024] HCA 50 extends this further still. The High Court found that an employer can be liable for psychiatric injury sustained by an employee as a consequence of breaching the employment contract during a disciplinary process, overturning a longstanding legal position regarding the unavailability of general damages for psychiatric injuries in employment contractual disputes. The damages upheld were nearly $1.5 million.

Taken together, these cases draw a consistent picture. Regulators may face a high evidentiary bar when prosecuting flawed investigation processes under the WHS Act, as the WSLHD withdrawal demonstrates. But the same conduct can attract liability through workers' compensation findings, breach of contract claims, and negligence, depending on how deficient the process was and how the claim is framed. The practical lesson for employers is the same across all three: the way investigations, grievances, and disciplinary processes are designed and administered carries real legal risk, and that risk is now being actively tested across multiple legal frameworks simultaneously. Having a process is not sufficient. Having a process that is fair, documented, consistent, and followed is what the law now demands.

The enforcement trajectory

Taken together, these cases, combined with the inspector uplift and the complaint volume data, sketch an enforcement landscape that is moving in one direction.

There is also a parallel tightening in the workers' compensation system that HR professionals managing claims need to understand. New workers' compensation laws commencing 1 July 2026 introduce tighter thresholds and stricter eligibility for psychological injury claims, along with clearer definitions of workplace conduct such as bullying and excessive workload. They also limit the duration of benefits and reinforce the reasonable management action defence. The shift is designed to lead the system toward more serious, clearly work-related claims while encouraging earlier intervention and return-to-work outcomes.

Read together, the WHS enforcement expansion and the workers' compensation reforms are moving in the same direction: toward a system that expects employers to have identified and managed psychosocial risk early, and that places less weight on claims management after the fact. The organisations best placed in both systems are those that have built the upstream risk management process that the law now requires.

What this means in practice

The broader lesson is that psychosocial risk management is evolving beyond the prevention of misconduct. It is becoming a discipline concerned with the design and operation of management systems themselves.

The emerging enforcement cases show that regulators, courts and tribunals are increasingly scrutinising the ordinary mechanisms through which organisations manage people and change. The expectation is that management processes are psychologically safe.

Performance management frameworks, investigations, restructures, consultation processes, grievance mechanisms and disciplinary procedures are no longer being assessed solely through an employment law or HR lens. They are increasingly being examined as potential sources of psychosocial harm.

For employers, the practical question is whether there is a documented and defensible record of having identified psychosocial hazards, assessed the risks they create, consulted with workers, implemented appropriate controls and reviewed those controls over time.

The next wave of enforcement is unlikely to focus only on whether employers responded appropriately after harm occurred. It will increasingly focus on whether foreseeable risks were built into everyday organisational processes.

Article 3 in this series sets out the most common compliance gaps and what good practice now looks like.

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